1004MC & Neighborhood Section page 1

[Rich Heyn]

These results may or may not support the overall trend of all sf homes in the neighborhood. Typically they do, but not always. The neighborhood section is not designed for specific comparables only. They want 1 unit housing info and trends. I give them that. So now they can look at the similar housing trends as well as all the sf trend.

My contact at Fannie Mae and I had numerous discussions on this issue. One thing he kept coming back to was "what of some if the homes (a given submarket) in the neighborhood are increasing in value and some are decreasing?"
A good example of this might be a neighborhood where some of the homes are waterfront. Say the waterfront homes are increasing and the non-waterfront properties are declining. What is the trend?

 

[residentialguy]

My contact at Fannie Mae and I had numerous discussions on this issue. One thing he kept coming back to was "what of some if the homes (a given submarket) in the neighborhood are increasing in value and some are decreasing?"
A good example of this might be a neighborhood where some of the homes are waterfront. Say the waterfront homes are increasing and the non-waterfront properties are declining. What is the trend?

Exactly. That's where breaking the neighborhood 1-unit down to competing comparalbe sales on the 1004MC can show this contrast.

 

[DWiley]

When one indicates the housing trends in the NEIGHBROHOOD section on page 1 of the URAR, THAT section is specific to the subject's sub-market.

For example, we had an area where the data clearly showed that prices of existing homes were stable, but prices for new homes were declining. There were far more existing homes, so overall it was stable.

In such a case, on page 1 one should mark "STABLE" if appraising an existing home and "DECLINING" if appraising a new home. If I were doing it, the narrative would address both the general market and the applicable sub market, but the X's indicating the trends would be specific to the subject's sub market, because that's what Fannie wants.

 

[CANative]

My contact at Fannie Mae and I had numerous discussions on this issue. One thing he kept coming back to was "what of some if the homes (a given submarket) in the neighborhood are increasing in value and some are decreasing?"
A good example of this might be a neighborhood where some of the homes are waterfront. Say the waterfront homes are increasing and the non-waterfront properties are declining. What is the trend?

The analyst must disaggregate the market to determine the trend for properties in the same class as the property under analysis.

 

[residentialguy]

Ok, so now we switch from One-Unit Housing Trends to mean only similar comparable housing Trends. If you are doing this for one-unit, you need to stay consistant with this and use only comparables when noting one-Unit Housing price and age. Now we have effective age issues, too. Or are we switching gears again to mean something else now?

 

[CANative]

In this neighborhood the overall data (for all sales) indicates decline. However if you remove the low end type properties which are most likely REO transactions the remaining properties indicate stable or perhaps a slight increase. But like I stated in the more detailed comments, it's near impossible to detect a trend over short periods of time (3 - 6 months).

In this neighborhood, all properties are waterfront. But some have good channels, fair channels, poor channels, virtual lake frontage. Other factors are narrow frontage, wide frontage, size of house, condition of house, quality of house, etc, etc.

Wrestling with the form and the addendum is a major hassle and IMO requires the appraiser to make judgment calls that may or may not comply with the letter of the (Fannie) law. (In this case the assignment was FHA)

Market conditions:
Pricing trends in Lake County continue to decline overall but sales activity during the previous three to six months has shown a slight increase over the same period last year. This trend is being seen in most areas of the San Francisco North Bay region. The subject's market is confined to the Clearlake Keys subdivision in Clearlake Oaks. Although there are a few other communities with man-made water channels providing access to Clear Lake, those communities are not considered reasonable competing locations. Pricing in the subject's subdivision has experienced significant declines during the previous two to three years and sales activity is extremely limited. Compounding the appraisal problem is that in addition to limited market sales data property features which affect sales pricing are inconsistent. These features include quality of the water channel, proximity to the main channels leading to the body of the lake, lot width along the channel, and size, quality and condition of the improvements. These conditions make it very difficult to develop a reliable trend analysis over short periods of time. Based on this limited data and my experience in this market it is my opinion that pricing for properties like the subject (which represents the middle to upper range of property types in the Keys development) is currently stable and has been through this seasons market. Pricing for bank owned properties which have condition issues, narrow lots and small residential improvements continues to be adversely affected and pricing for these property types continues to decline. There is some speculation among appraisers, real estate brokers and agents and other professionals that a "shadow inventory" exists and that renewed foreclosure activity in the upcoming months will result in a high number of REOs appearing on market which will change the current supply and demand situation. With regard to REO type sales versus non-REO type sales there appears to be a "stigma" attached to the conditions of sale and a clear difference in pricing based on sale conditions even when actual property conditions are similar. At this time, statistics suggest a price difference of at least 7.5% and as much as 15%.

 

[residentialguy]

Yes, we have this subjective "comparable" issue. Some would say that it is only the sales he used in the grid....hardly enough for a reliable indicator of trend. Or you can expand any parameter you want to get just the right results. That's why it is important to show the whole market and the subject's sub-market.

Fannie Mae is going to get all the information they want...just not in the same place on the paper under a misleading title that they suggest.

.

 

[CANative]

The 1004MC is a classic case of Catch-22, caused by an entity that knows how to create forms but doesn't really understand appraisal issues very well.

The 1004MC requires disaggregation in order to serve it's intended use but by the time this is done there is not enough left over to actually serve that use in a meaningful way.

 

[DWiley]

Ok, so now we switch from One-Unit Housing Trends to mean only similar comparable housing Trends.

According to the folks I have talked to at Fannie, this is not a change. It is the way the have always wanted it. It is not the way I did it in the past, but it is the way that I have done it since being made aware of how they want it completed.

If you are doing this for one-unit, you need to stay consistant with this and use only comparables when noting one-Unit Housing price and age.

That might well be how I would design the form - but this is a Fannie Mae form. So, what Fannie says is far more relevant that what I might think would be the best approach.

You are not alone in your philosphy. I taught several 1004MC seminars, and many appraisers made it abundantly clear that they were not going to do it the way Fannie wants. I cannot control such things, and I don't worry about such things. I just present information for those who want to know the proper way to do it (according to those who designed the form).

The form could be more clear, and I suspect the next version will be more specific.

 

[residentialguy]

Just out of curiousity, FNMA wants one-unit to mean comparables in the trend section. Does that comparable use go for one-unit housing price/age, too? Or does one-unit housing now mean one-unit housing?