So earlier this month I attended a meeting held by the Colorad Mortgage Lenders Association (CMLA) in which they had 3 speakers discussing the Home Valuation Code of Conduct. There was an appraiser, an attorney and someone that works for a large brokerage company in the area.
I found the discussion interesting as that while they mortgage brokers didn't look forward to another piece of legislation they were willing to figure out how to best help people as they go through the largest purchase of their life - buying a home.
The attorney gave copies of the suit that was filed that basically states that the HVCC is capricious and that new laws should be established by Congress and the Attorney General of the State of New York doesn't have jurisdiction over the entire country which is basically what the code of conduct has given him.
As a consumer, a home buyer or someone refinancing their home will still pay between $350 - $450 for an appraisal. However the mortgage brokers have no impact as to who the appraiser will be and most will go through Appraisal Management Companies (AMC) which the HVCC basically forces them to do. The problem is the AMC takes 1/2 the fee and the appraiser than receives $150 - $200. At these financial times it becomes one of the "you get what you pay for scenarios." As an appraiser you must still follow USPAP as well as the Colorado guidelines to become an appraiser but are you willing to go to the indepth research in order to complete the order?
Colorado is also enacting new laws to ensure that appraisers can be fined and sentenced to jail. While I agree there were some appraisers that went way beyond the limits and guidelines of what is responsible, who many professional people want to work in an industry where you can go to jail for making a mistake.
I really love being an appraiser - I think I do a good job and to the best of my ability on every assignment I make sure that the reseach that I complete is thorough and ensure that I am making the best value opinion. So beginning May 1st, if the HVCC is not stopped in most instances I will lose the customers in which I built stong realtionships, have my income cut in 1/2 and have no control over who I do business with in the future. The customers that I have don't ask me to "inflate" appraisals they have too much respect for me to think I would do that....are there appraisers that do that - maybe but I haven't run into many of them.
I hope that someone in the legislature will take a look at the HVCC and try to figure out why the Attorney General of the State of New York is deciding laws and practices for the entire country. And remember the HVCC came into effect because an Appraisal Managment Company was asking their appraisers to inflate appraisals... why is it that the solution to the problem is to send more work to the people that caused the problem. And while I have been a fan of the work that Attorney General Cuomo and especially his father the former Govenor - I am disappointed to learn that he was an owner of an Appraisal Managment Company, this seems like a conflict of interest to me. And why does New York get to decide what is best in Colorado??
Last week the Federal Housing Finance Authority released 4th quarter numbers for the US on housing. Mostly what has been reported is the continued decline in home values. In the U.S. the decline has been 8.27% from the previous year and a 4.36 decline for the quarter. The good news is there was a 12.74% increase in the 5 year numbers as well as 100.50% increase from 1991.
Of the top 20 markets that saw the hgihest declines all of them were in California or Florida except for the Las Vegas area so since we aren't in any of those places the national numbers don't mean as much to us.
In Colorado overall we saw a 2.61% decline year over year and a 3.04% decline in the 4th quarter. Our 5 year growth was 9.24% - and 167.74% increase since 1991. While a few years ago when Florida and California was seeing double digit growth, in Colorado our growth was steady and strong. I believe that is what is helping us through this crisis now as people didn't see their home values double and triple they aren't seeing major declines now either.
Colorado ranks 17th overall in lowest declines and in the US there are actually areas where housing is rising - slightly but it is increase.
Breaking down the metro area numbers the main indicator the Federal Gov't uses is the Denver/Aurora area - it doesn't include any other suburbs so these numbers can be a good indicator but doesn't give the overall picture of the metro area.
Year over year we saw a decline of .071% and quarter over quarter we saw an INCREASE (that is NOT a typo) INCREASE of .77%. While neither of these numbers are large or significant it does show that maybe we are trending into better times. In 5 years our housing prices have increased 6.34% and currently of all the cities ranked we are 111. I think this is really good news for home sellers and buyers both - while prices aren't falling like they were a year ago they are actually increasing slightly.
While bad news dominates our newspapers - we have to remember that it is better to look at local numbers to see what is happening vs looking at the US overall. There are some states that are still seeing an increase in foreclosure activity in the Metro area we seemed to be the first to go through this in the country and I believe we are coming out of it. The next few months are the busiest times in real estate and it will be interesting to see what happens during this period.
The last couple of months have seen interest rates drop to at one point 4.65% which many people are taking advantage of by refinancing and reducing their monthly mortgage payment. However I have found a couple of trends that I thought worth mentioning.
1) While the headlines have been about the loss of home values most people think it is happening elsewhere and their home values have still increased.... well not necessarily. You may live in a great neighborhood that doesn't seem to have many foreclosures or bank-owned properties but the longer houses sit on the market the lower the price goes. So if you just bought your house less than 6 months ago I can pretty much guarantee that the value didn't increase by 50%. If it stayed the same you are doing great. This is a time where people who didn't use their house as an ATM and decided that equity is a good thing are benefiting -their house may not be worth as much as it was 2 years ago but it is still worth more than they paid and they can refinance. Rates fluctuate - now is a good time to speak with your mortgage person about what the rate needs to be in order to make it cost effective to refinace. The more you know now the faster you can proceed if the rate goes where you want it to be.
2) Appraisers - our profession states that an appraisal is our opinion of value based on what the typical buyer would pay for the subject property. This is pretty easy to do on a purchase because in most cases the buyer is "typical" and you know what they are paying. On refinances that isn't the case and appraisers that are "form-fillers" are having a tough time.
Your appraisal should be unique with each report - every property is different so I find it irritating when I read an appraisal report and the only change that was made was the address. This is a time when as professionals we need to step up and do our research to figure out within +/- 3% what is a realistic value for the home that we are appraising.
I would say that it is just as bad to UNDER appraise the value of a home as it is to OVER appraise. Obvioulsy the bank doesn't mind if someone comes in too low because it protects their interests but as a professional that isn't what our job is to do.
A neighbor recently showed me their appraisal and it had more legalese addendums protecting the appraiser then it had about their home, their neighborhood and what was happening with values in the area. If you are an appraiser and feel that you need 5 pages of protections than maybe you should spend more time on the work you are doing.
Another neighbor stated that their appraiser was only in their house for 5 minutes. Well I typically stay longer than that but really being in the home is the shortest amount of time that I spend in the process - the research before I go out and then the analysis once I return takes me the longest when putting together a report. I also pride myself in writing detailed information about the property so that the bank and underwriter feel like they have walked through the house themselves.
As a homeowner that is refinancing or buying a home you have a right to a copy of the appraisal. Take the time to review it - you may or may not agree with the value that is stated but I think it is important to understand how the value was deteremined.
In this economic time many people are wondering - is now the time for me to buy? If you are a 1st time home buyer it is scary enough going through the entire process but then adding economic uncertainity on top of it makes people think twice.
I would recommend that anyone that is interested in buying their first home go through classes that are sponsored by Housing and Urban Development. They are free and offer people an opportunity to ask questions about financing, how to find the right realtor and making sure they have an acceptable credit score.
In the Denver Metro area, we are seeing the average days on the market go down which means that houses are sitting for sale like they were a year ago. Plus with interest rates being at historic lows I would say this is a great time to buy.
If you are a 1st time home buyer don't shy away from foreclosures or short-sales. Some of these properties are total duds and would take lots of money to fix but some of them are very well cared for and because of unforseen circumstances people lost their homes. It may take a while to find the right one but every neighborhood in the metro area has foreclosures and short-sales on the market.
Plus when dealing with banks to purchase these properties it can be very frustrating and time consuming. You need a realtor that knows the ins and outs and can effectively manage the process. By not having another property to sell in order to buy a new one you actually have an advantage over other home buyers. Banks don't want to own real estate but they are overwhelmed with the amount of properties they need to sell not just in the metro area but nationwide. It can be difficult and heartbreaking at times but you can find some really good deals and might get a bigger house than you thought you could afford in that perfect neighborhood that you love.
There are also programs out there for 1st time homebuyers so make sure you are working with a mortgage professional that understands all of the options that you have available and can talk to you about each one.... or as I said previously - take a 1st time home buyers class so that you have a better understanding of the process before you make that leap into home ownership.
Well it has been 60 days since I last posted, which of course now means my New Years resolution is to update my blog more often. To my defense I kept waiting for the financial/economic crisis to stabilize....hmmm I guess I will post anyway.
This of course is the time of year where people make predictions for 2009 - as an optimist by nature I am hoping that 2009 will be a great year of less worry and concern for people.
What will happen with housing prices/values in the Denver Metro area - well that all depends on who you ask. According to the National Realtors Association they have listed Denver Metro and Austin as the 2 markets to watch this year. The Government reports show that Denver/Aurora prices have been stable for the past couple of months as well.
However, some of the reports from economists state that we will see prices fall 10% this year. I am not currently seeing that in the neighborhoods that I have been doing appraisals so not sure if that is a statewide number or a metro number.
I think alot of people attempted to refinance - and why wouldn't you when interest rates dropped to 4.75% on a 30 year fixed - WOW. If you didn't get in on that deal I would say keep an ear as to what is happening to the rates and then call your mortgage person when you hear about a dip. Of course with everything it will depend on your credit score, current interest rate, and value of your home if it makes sense to refinance or not. Sometimes the amount of time it will take to recoup the fees involved isn't worth it.
During December when refinances were going crazy I was surprised to hear how many banks are going through with loans without an appraisal. You would think after all the mess we have been through that banks would want to know exactly how much the value of a home is before they make a loan. Sometimes using automated valuation systems works but not always and in todays marketplace I think it is always a good idea (or is that just career self-preservation??!!!).
The Home valuation code of conduct has been approved and will be implemented May 1st. I will write more about that later - at this time I think it has some good points and some sections that could cause issues but would like to do more research.
I hope that each of you have a wonderful 2009!!!!
This article states that JP Morgan is now going to have regional centers to work with their customers regarding loan modification and will also halt foreclosure proceedings for approximately 90 days. http://money.cnn.com/2008/10/31/news/companies/jpmorgan_mortgage.ap/index.htm?postversion=2008103114, which is good news for homeowners who are in adjustable rate mortgages and doing what they can to keep their homes.
In the Denver Metro area we are fortunate that home values did not skyrocket during the boom times and that most areas are seeing values staying pretty steady.
There are several organizations that are helping people keep their home and refinancing out of an adjustable rate to a coventional loan. There are several FHA backed home loans that are available as well.
If you haven't made a payment on your mortgage and wondering what is going to happen - now is the time to contact your bank and financial institution to see how you can resolve it so that your home is not lost. The bank doesn't want to own any more properties and are working with people on several different options.
It has taken me a few weeks to update my blog as I am at that point where I don't know what to write. As most of us have been doing, I keep reading the financial news and just don't know what to make of it. It is my hope that some very smart people are trying to figure out the best way out of this mess and I hope it happens soon.
In the Denver Metro area I think we are fortunate that we are turning a corner and are seeing property values stablize. Obviously there are areas that are still hurting and being impacted by foreclosures and there are other neighborhoods that are actually seeing an increase in home values. Overall I think that the metro area in general is seeing stablization which is good news.
Also, interest rates are still pretty low which continues to help those that are looking at buying a house. They not only have more inventory on the market but they also can get more for their money with low interest rates.
If you have an adjustable rate mortgage that is about to re-set or has and the payments are difficult to make I would encourage you to contact your mortgage professional to see about moving to a fixed rate loan. If you have owned your home for a few years and haven't taken out the equity chances are your mortgage professional can help you find a better rate.
While reading the financial news remember that every housing market is different and national reports may not match up to what is happening in your neighborhood.
Who hasn't been reading the news wondering - what is going to happen next. First it seems the bailout is a done deal, then breaks apart, then back on and then the vote comes up short. I am not an economist and have no idea what this means for the future of the country.
As my previous post stated the Denver Metro area has been deemed one of the few areas that may have an increase in housing in the next few months. It seemed like we were the first ones to be hit with the foreclosure mess and hopefully we are the first ones to come out.
Does this mean that if the $700B bail-out doesn't happen that we could see a reduction in price. Once again, an unknown and I am sure not one to speculate. It will be interesting to see how this all plays out in the next couple of weeks and months (years??).
Lately I have noticed that my appraisals are being scruntizied much harder than they ever have been in the past. I am now adding more comparables than what is required to help "support my value opinion". While I understand that banks and lenders are at a critical point and must make good decisions... they do still need to loan money. Most of the appraisals I do these days are FHA - Gov't insured loans. Now even if you have great credit and money to put down on your home that it is tough to find lenders that will give you a loan. I think if the bail-out continues to fail this becomes even harder.
Personally I am between 2 schools of thought; My husband and I purchased our home 7 years ago. We haven't taken any money out, we have updated and remodeled it as we had time and resources to do it. We bought less than what we could afford so that if one of us lost our job we could still make the mortgage. Do I want to give $700B to investment companies and bank that made bad decisions. NO, I shouldn't be penalized for making good decisions.
HOWEVER, as a business owner I have personally seen how lending is getting harder and harder and the frustration that it causes the buyer, realtor and mortgage broker. Bad choices that people made prior are hurting those that are trying to buy a house and that is frustrating as well. If people stop buying houses or banks stop giving loans I think we see an even bigger mess than the one we are in today.
I wish I had the answer and I hope that people much smarter than me can come up with something that feels right for both me as a business owner and me as a consumer..... it just seems like something needs to happen soon.
Are things looking up in Denver? Recently there have been news articles that suggest that Denver is more on an upswing and ahead of the nation in real estate recovery.
Some good news - there are less homes on the market for sale - this means that as a buyer you still have inventory to choose from but not as much as in the past.
Interest rates are still pretty low - with the takeover of Fannie Mae and Freddie Mac the government is keeping interest rates low to help stimulate the housing recovery.
Remember the days when the Denver Metro area was listed as the worst or in the top 5 of foreclosures in the country - not anymore - several cities have taken our place. Also we dropped off the mortgage fraud top 10 list so maybe having a little more regulatory control at the state level for mortgage brokers have helped.
I am optimistic that we have or are in the process of turning the corner on the housing market as I go into more and more neighborhood where prices have stabilized or even increased slightly in the past 12 months.
I just read Tucker Hart Adams economic forecast for 2009 and even she has some good news to report. She did mention at least twice how she predicted this recession so is going out on a high note of getting it right once again. She is a very interesting person to hear speak on the Colorado economy and I will miss having the opportunity to do so in the future.
One final note, 5280 Appraisal, LLC has recently celebrated it's 1st year in business. To all of you that have chosen me as your appraiser I say THANKS!!! To those of you that read this blog and have recommended it to others I also say thanks. It will be interesting to see what the next 12 months have to bring in the Denver area regarding home values and I look forward to helping you along the way.
Previously I have posted about the Home Valuation Code of Coduct (HVCC) stating that it seems to be unfair to consumers as well as people in the mortgage industry - including appraisers.
While nothing has been resolved regarding the HVCC it seems that more and more people are coming out against it. Senator Elizabeth Dole spent time questioning the rationale behind it when Fed. Chair Ben Bernake was testifying in front of the sub-committee.
I don't understand how a 3rd party will remain unbiased in helping to find an appraiser for banks and mortgage professionals. This is precisly what happened in New York where the AVM felt they needed to pressure appraisers to "hit the number" so they could retain their clients.
If you hire ethical people to work with (mortgage professionals, real estate agents and appraisers) then this is a non-issue. When you have a boom and people see fast money being made are you really going to have the cream of the crop moving in.... nope you have people looking to make a fast buck.
Lately with each appraisal class that I take I find more and more people are leaving the industry, not just the bad apples but those that have been appraisers for years that can no longer handle the pay cuts and the red tape that comes with each appraisal.
I hope the HVCC doesn't pass or has some sweeping changes if it does; because as an appraiser that has a good product to sell I hope that means I have an advantage over the person down the street that thinks their job is to just check boxes. It isn't and it shouldn't be. Ours is a profession of research and analysis where a decision is based on our findings and not a predetermined number.