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Falling off the Appraisal Cliff

April 8th, 2013 by Bill Collins Leave a reply »

Appraisal Bears: Precipitous Drop in Mortgage Appraisals Looming?

While low interest rates and expanded government finance programs have boosted refinance mortgages and increased home sales have added new mortgage originations, the “appraisal bears” are increasing in number.

On April 5th, CNBC’s Shanthi Bharatwaj discussed the recent comments made by Paul Miller, analyst at FBR Capital:
“We now believe that 1Q13 stands to be lower than we expected from an industry origination standpoint, largely driven by seasonal weakness with the most significant impact at larger originators and potentially driving near-term weakness across the group”.  Mr. Miller cited conversations he had with mortgage bankers that estimates of first quarter loan originations, originally projected to be $482 billion, were likely closer to $400 billion.  The market analyst lowered his earnings projections on five big banks (Bank of America, Fifth Third Bancorp, Sun Trust, Wells Fargo and U.S. Bancorp) as a result of these reduced loan originations.

FBR Capital still feels that refinances will keep the loan origination (and mortgage appraisal) business strong through the rest of the year and that the “refinance cliff” is not imminent.  Still, many appraisers who have become accustomed to a steady stream of mortgage appraisal business are advised to start planning now for next year. 

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Recent Real Estate Reports

Maybe those appraisers who don’t plan ahead businesswise should buy a vacation home now: the National Association of Realtors (NAR) reported last week that the median vacation home sold for $150,000 in 2012, compared with $121,300 in 2011.  The NAR release indicated that this increase reflected a possible change in the mix of sales with “more expensive recreational properties” sold in 2012.  The number of sales of vacation homes also increased by 10.1% over the previous year and made up 11% of all transactions.  The NAR report indicated that 46% of vacation home sales represented all cash transactions and that 35% were “distressed” sales.

We’ve all heard the mostly positive results of the recent Case-Shiller report but what does Robert Shiller say now? In a recent Bloomberg Radio interview with Tom Keane, Mr. Shiller commented that the housing market is getting “stronger and stronger…we have positive momentum right now…but I still have long term doubts”.  A link to the entire audio interview is found here: Bloomberg Radio Interview (Opens a .MP3 file)

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AppraiserNews is a FREE publication, supported by advertising and sales of products designed to help appraisers support and grow their businesses. Please consider supporting us today by seeing what we and our sponsors have to offer.


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McKissock Education, the official provider of the Appraisal Foundation’s online 2012-2013 USPAP courses, is now available in most states. Last year, the Appraisal Foundation and McKissock announced their partnership and the online course is now available in most states. See if courses are available in your area and save up to 20% on course fees by going to our Online McKissock Portal.


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Rates & Dates

Freddie Mac and the Mortgage Brokers Association (MBA) both reported declines in mortgage interest rates in their most recent surveys. 

On April 4th, Freddie Mac reported that 30-year fixed-rate mortgages were down to 3.54% from the previous week’s rate of 3.57%. They also noted that last year at this time the 30-year rate was 3.98%. 

The MBA in its most recent Weekly Mortgage Applications Survey released April 3rd, for the week ending  March 29th, reported that 30-year rates with conforming loan balances ($417,500 or less) decreased to 3.76% from the previous week’s rate of 3.79%.   The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) also declined to 3.85%, down from 3.90% one week earlier.  Rates for FHA backed mortgages fell to 3.48% from 3.51%.

In their press release of April 3rd, the MBA reported a decline of 4.0% in mortgage applications.  Refinance applications represented 74% of all applications, down from 75% the previous week.  Adjustable-rate mortgages remained constant at 5% of all applications and HARP applications represented 28% of all refinance applications.  Mike Fratantoni, the MBA’s Vice President of Research and Economics noted that: “Total purchase applications increased last week, due to an almost 7 percent increase in purchase applications for government loans.  This was likely driven by borrowers applying for loans prior to the scheduled increase in FHA premiums that took effect on April 1.  On a year over year basis, purchase applications are up about 4 percent, in line with the trend we are seeing in home sales volumes.”

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

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Ask Angie

We would first like to congratulate our most recent winner: Larry Kelly of Larry Kelly Appraisal Service in Connecticut. Larry was the first to answer correctly that Leo Tolstoy in Anna Karenina wrote that "Spring is the time of plans and projects”; Charles Dickens in Great Expectations wrote that “It was one of those March days when the sun shines hot and the wind blows cold: when it is summer in the light, and winter in the shade”; and Robin Williams exclaimed “Spring is nature’s way of saying, Let’s party!”

Today’s questions:

1. Who Said: "The housing market has been declining for six years now, it could go on, that’s my worry."

a) Robert Shiller, 9/22/11
b) Lawrence Yun, 4/1/13
c) Robert Shiller, 1/24/13
d) Edward Pinto, 4/1/13
e) None of the above

2. Who said: "I was married by a judge. I should have asked for a jury."

a) Harpo Marx
b) Chico Marx
c) Groucho Marx
d) Karl Marx
e) None of the above

The first person to respond with the correct answers wins a choice of one of the following:

One Free Regular Listing on AppraiserHelp.com

A Free Copy of the Directory of Appraisal Management Companies (Available to Members of AppraiserHelp.com and FHAAppraisers.com FREE!)

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Tell us what you think!

We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: bill@appraiserhelp.com with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at www.appraisernews.com

Regards,

Bill Collins, Appraiser Help Inc.

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