Discussion in 'General Appraisal Discussion' started by USPAP Compliant, Nov 29, 2003.
The interesting point of these numbers that they are especialy useful to people who are retiring or engage in a business that physical location is not important.
Makes you wonder what the people from Ft Wayne Indiana think about this. Talk about inferiority complex's!
Being a regression minded person, the question that pops into my mind when I view that table is: “What is the rest of the story.” If these markets are this hot then there must be something driving a hoard of people into these areas and the same people must be leaving some other areas that are suffering the losses in value that offsets the gains in value in these hot areas. It is a zero sum game to the total economy. The big story here is not what’s hot; the big story is what is not hot.
Read the list and you will notice some interesting things: The big are getting bigger. The growth is taking place along coastal cities and resort type areas. Read from the bottom up and you are looking at the interior heartland in relative decline. Is that where the hoard is coming from? Does this show a shift in our economy from a manufacturing to a service/entertainment economy? I would love to take LA and see an analysis of property values from places within 500 miles of LA in comparison.
Herd mentality. Buzz words that most real estate agents are using are: you never get this kind of interest rate in your lifetime (might be true). If you don’t buy it now, you will miss the boat (Might not be true). With your fix income, you will be qualified 50% or more than the amount of loan that you were qualified 2 years ago or may be 2 years later if you missed the boat and rate went up. (Not true). What they don’t say to home buyers is that 2 years ago home prices were also 50% or more lower than today and 2 years later, home prices might be 50% lower if interest rate increased. Most renters with some income followed the crowd and bought homes, any home or condo. In my neighborhood that I have been living for a long time, I have seen 2 for rent signs last 2 months. They are still there. Not many renters are around any more. There were no for rent signs in this neighborhood before. Has anybody noticed this trend? I know one shrewd person with a lots of wealth who sold his home 2 month ago with the peak price and rent a home waiting for the prices to come down and buy back his home or similar to that with lower price. I am not sure this is wise thing to do but the guy is a financial guru.
Very interesting. Broome County New York is an I am familar with(its not listed). They have been hemmoraging business and industry. High Pay, High tech types jobs for the past decade or longer.
Why? They have an entitlement mentality which causes tax and spend policies. The population average age is rising, the people on welfare and other dependent programs are increasing rapidly. The people who produce, invest and make the economy grow are running away as fast as possible. Its a vicious cycle and there is no end in sight. My brother informed me this past weekend that Broome County is raising property taxes a whopping 10% due to budget shortfalls. They are also increasing spending. Small wonder that it is the cheapest place in America to buy a house.
I think you could find this correlation at other cities around the US. Now I admit there will me anomalies. Liberal areas typically are located to very strong capitalist centers so as to glom off of the prosperity.
Yea, I did notice a huge increase in apartment vacancy here. I have been doing apartment appraisals for a long time for mortgage loans and it has always been textbook cases. Do the approaches and the sale price is right in the middle of the target, real no brainers. The last one I appraised the income approach done first came up almost double the sales price and I thought I was having a stoke or something. I couldn’t figure out what was going on. Then I reviewed the sale data on the best comp and found out what the problem was. VAC had gone from the typical 5% to 50%. I have never seen that before. That will do it every time.
There are some strange things going on at the same time. New apartment units are being built with high occupancy. I think what is happening is that older more affluent people are selling their houses and moving into preferred locations so now we have market segments with 100% VAC at the same time we have older units with VAC of 50%. My explanation for this is that the new economy is not having the same affect on all economic classes. The high VAC is on the lower end of the pole and the low VAC is on the upper end. This is a localized version of what I was talking about above. In the new economy the educated and skilled are moving in droves to where the technology jobs are creating a boom market, meanwhile, down home in fly over country the bottom is falling out. A mass migration is going on. I read recently that African Americans are moving back to the South in droves.
If I had to described our local real estate economy it would be this way: Our economy is driven not by growth or new technology but by a mass migration of commercial districts to a new commercial district to avoid the problems of the old district and a mass migration from the city to the county lead by the affluent escaping urban problems like high taxes (double the county level) and terrible schools. Even inside the city people are moving from one location to another to get away from something and it is like a dog chasing its tail. It is a never-ending migration of people escaping social problems created by bad government by moving from where the problems exists to where they don’t exist-yet. I think I heard on the news this week that public schools in Boston, MASS, are 86% non white. How can that be? In the same news story it said Boston is going to stop busing to achieve racial equality in the schools. I can see why, 86% is pretty equal. Busing solved that problem. Meanwhile, didn't I read that prices in VT are skyrocketing? Hey, where would we be without the Liberals and their social policies? You will have to admit, they keep things stirred up. Isn't the Vagas market smoking with people moving in from CA? Get the picture?
check out this site:
......and imagine what chaos there would be if a governmental dictate shut down the borders and no one could leave their state...as of midnight of a certain day ? ! Americans have always been great migraters, and its our Freedom that has allowed that to occur. It is to some extent the People's own personal systyem of Checks-and-Balances. When local, county and state governments, in concert with existing affiliations of business, commerce and "jobs" create a reality that bodes poorly with the Public......the public exercises its Rights to pack up and move to where the pastures are truly greener. The only thing that is constant is change and Americans like to change their locations.... on average, about every 5 to 7 years, right ? So, I guess that means that any appraiser who is doing a report in one of those approximately 124 metro/city locations in that article's listing had better check the "Increasing" box in the form field relating to trend of property values, or else the LO and the U/W are going to be barking and screaming.......because they read the article and do NOT necessarily believe in concepts like.....immediate subject area, most-similar home's compared, most-recent closed sales, etc. Someone said it earlier in this thread of postings. I, too, would like to see the listing proceed from the 0% stable condition....and show all those city/metro areas where the negative %'s (of market depreciation) go out to -10% or even -20%. Now, watch the feathers start to get ruffled ! Can't live in two places at the same time, supply and demand, zero-sum, new construction vs. existing old properties, or something to that effect ?
Moh, Andrew, Bob Ipock:
I just read that article Moh posted. First of all, it sounds like we are right on the money in our prognostications but I read something in the article that reminds me of an interesting experience. One of the first AI classes I took back in the 80’s was taught by an MAI from Charlotte, NC. His name was Rocky but I can’t remember his last name. He told us about the time he received an assignment from an S& L in Texas to do an appraisal I believe in Nashville, TN, on a proposed 400 multi-unit apartment complex. The S & L sent him a copy of the survey plat and the site ran along the Tennessee River for a good distance. Stamped on the plat in big letters was “THIS LAND IS NOT IN A FLOOD ZONE.” Rocky said he and his buddy walked the land and he could see the flood level seven feet up in the trees from recent floods. He immediately called the Texas S & L and informed them of the problem. He was instructed to stop at one and send a bill for his services up to that point.
About two years later he had another assignment in Nashville, TN, and happened to drive down a road overlooking the old flood site. Guess what he saw? A two year old 400 unit apartment complex. The Texas S & L just called another appraiser and I guess the other appraiser figured, hey, the map says no flood zone so if the project gets flooded it is the engineer’s problem not mine. I think the point of the story is that to be an appraiser you have to learn the nature of the business: If mama says no, ask grandmother.