Appraisal Blog

Something is happening?

Will the 10-year treasury yield fall to ZERO by the end of the year?  You never know... just remember...there is over 14 trillion dollars in bonds with negative interest rates.  The last time interest rates were at a negative yield was... N E V E R!   6000 years of recorded human history all the way back to the ancient Sumerians and there has never been negative yielding financial instruments!!!

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Local Market summary January-February 2019

Realtors reported that seller traffic weakened in January 2019 compared to conditions one year ago. First, the number of movers has generally been on the downtrend since during 1985-1986. The decline in mobility rates is also reflected in the lower turnover rate, or the ratio of existing homes sold to owner occupied housing stock.

Although sentiment was still above last month's low, the bounce-back from the end of the Federal shutdown faded in late February. While the overall level of confidence remains diminished, it is still quite positive.

Nonetheless, aside from last month, it was only lower in one month since Trump's election, but barely, at 93.4 in July 2017. Consumers continued to react to the Fed's pause in raising interest rates, balancing the favorable impact on borrowing costs against the negative message that the economy at present could not withstand another rate hike. Long-term inflation expectations remained near the lowest level recorded in the past half century. Among households with incomes in the top third, the reduction in inflation expectations was even greater, falling to an all-time low of just 1.9%. Upper income households also anticipated a 3.0% gain in incomes, a gain well above those with incomes in the bottom two-thirds. This meant that real income expectations among upper income households rose to the highest level since the peaks recorded in the expansions in the 1980's and 1990's (see the chart). Note that no improvement in real income expectations was observed among households with incomes in the bottom two-thirds of the income distribution.

The data indicate that personal consumption expenditures will grow by 2.6% in 2019 and the strength in consumer spending will mean that the expansion is expected to set a new record length by mid year.


Pending home sales rebounded strongly in January, according to the National Association of Realtors®. All four major regions saw growth last month, including the largest surge in the South. The Pending Home Sales Index,* www.nar.realtor/pending-home-sales, a forward-looking indicator based on contract signings, increased 4.6 percent to 103.2 in January, up from 98.7 in December. Year-over-year contract signings, however, declined 2.3 percent, making this the thirteenth straight month of annual decreases. Lawrence Yun, NAR chief economist, had expected an increase in January home sales. “A change in Federal Reserve policy and the reopening of the government were very beneficial to the market,” he said.


Of the four major regions, three areas experienced a decline compared to one year ago, while the Northeast enjoyed a slight growth spurt.

 

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Market Conditions Early 2019

Following two consecutive months of increases, existing-home sales declined in the month of December, according to the NAR (National Association of Realtors).

None of the four major U.S. regions saw a gain in sales activity last month.  Lawrence Yun , NAR’s chief economist, says current housing numbers are partly a result of higher interest rates during much of 2018.

According to the US Census Bureau and the Department of Housing and Urban Development, the number of new single-family houses sold reduced last month - from 666,000 in May to 631,000 in June. Sales of existing homes also reduced from 5.41 million in May to 5.38 million in June. This was a sharp contrast to the expected 0.5% increase.  
 However, home prices and sales are not the only worrying statistic.
 
The listing prices continue to rise steadily despite a slowdown in sales. Mortgage applications to buy new and existing houses have also been falling as borrowers stay away from expensive loans. Currently, the median selling price for a house is $276,900. Except in rare cases, nobody wants to sell a home for less than $250,000. 
 
Although some experts may argue that the slowdown in sales is due to inventory, this explanation is questionable because housing supply increased from 4.1% in May to 4.3% in June. If inventory was to blame for low house sales, an increase in supply would surely result in improved sales, but that is not the case.
 
Despite the market experiencing reduced demand for real estate purchases, developers have refused to lower prices. Many of them believe that the U.S. market statistics are strong and sales will eventually rise. 
 
Developers refuse to lower selling prices citing increase in construction costs as the main reason for the high pricing. Most of them claim that labor has become more expensive. Since they cannot pay their workers an amount lower than the minimum wage, they have to transfer the costs to the buyer so that they can make a profit. 

Another reason why the prices are really high is construction preference. At the moment, most contractors and building companies prefer to work on high end properties because the work pays more. As a result, the construction of starter homes - which are more affordable - has reduced. 
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Qualified Appraisal Reviews

The purpose of appraisal reviews are to detect: whether the original appraisal or evaluation is suitable for the transaction, the exposure inherit in the transaction, and whether the procedure by which the property valuation is rendered ensures independence and quality.

Moreover, they should indicate whether the appraisal or evaluation report is in line with the engagement letter, which sets forth the scope of the appraisal assignment. Lastly, the Federal Reserve notes that "some banks supplement routine reviews with post-funding evaluations of appraisal quality for some of their higher-risk or greater-value transactions as a control to assist in detecting valuation problems".

If you have questions in reference to an appraisal, or if you're in the need of a real estate appraisal review, call K.W. APPRAISALS, LLC today.

In addition to coordinating our work to the procedures and guidelines of our review customers, there are four Fannie Mae forms that are primarily used for review services, and we will prepare an appraisal review on any of them. They include an appraisal "desk" review, a "field" review, a "short" form and a "narrative" form. Here at K.W. APPRAISALS, LLC, we are experienced in all kinds of appraisal reviews, review processes and the obligations of review appraisers.

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Honesty and Integrity: K.W. APPRAISALS, LLC

Real estate appraisal is called a profession rather than a trade, and as with any profession we have a strict ethical code.

We have a great deal of responsibilities as appraisers, but our main duty is to our clients. Normally, in residential practice, the lender (or an agent of the lender) places the order to the appraiser, becoming the appraiser's client. It follows that appraisers are privy to a lot of information, and like an attorney, can only discuss many of these matters with their client. 

Other obligations include numerical accuracy depending on the assignment's nature, attaining and maintaining an adequate level of competency and education, and of course, the appraiser must behave in a professional manner. Maintaining high ethics and client confidentiality is what we do every day at K.W. APPRAISALS, LLC.

Appraisers will sometimes be obligated to consider the interests of third parties, including homeowners, both buyers and sellers, or others. Normally the third parties are explicitly defined in the appraisal report. An appraiser's fiduciary responsibility is restricted to those third parties who the appraiser is aware of, based on the scope of work or other written parameters of the assignment.

K.W. APPRAISALS, LLC has worked hard for its reputation for producing appraisals with the highest of ethics. 

Appraisers also have rules outside of boundaries of clients and others. For example, appraisers must store their work files for at least five years - at K.W. APPRAISALS, LLC you can rest assured that we stick to that rule.
 

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