residentialguy
Elite Member
- Joined
- Mar 24, 2009
- Professional Status
- Certified Residential Appraiser
- State
- Minnesota
Good question!
We are appraising to the effective date, not a future date. That said, one should remind the user of that but still warn the lender...so you don't get "you should have told me"
Here's an example what I have put in my reports
MARKET VOLATILITY
This report is based upon the effective date and not a future value. This is not an attempt to predict the future, rather a disclosure of market warning signs for the lender to consider. Currently the market appears strong and optimistic in many ways; However, the appraiser suggests that the lender approach this optimistic appearance with caution as many aspects of the current housing market is very reminiscent of the years just prior to the 2008 housing collapse.
National median family home prices are 32 percent higher than inflation. That's similar to 2005, when they were 35 percent overvalued. The Housing Bellwether Barometer is an index of home builders and mortgage companies. In 2017, it skyrocketed like it did in 2004 and 2005. That's according to its creator, Stack Financial Management, who used it to predict the 2008 financial crisis. Home prices in Denver, Houston, Miami, and Washington, D.C. are at least 10 percent higher than sustainable levels, according to CoreLogic. Warning signs are seen in the stocks, as well. Overall, the S&P 500’s index of home builders increased 75 percent last year, about four times as much as the stock market as a whole.
In 2017, 35 percent of Fannie Mae's loans required mortgage insurance. That's about the level in 2006. In some ways, these loans are worse. Fannie and Freddie lowered their definition of subprime from 660 to 620. That means the banks are no longer calling borrowers with scores between 620 and 660 subprime. The Fed has projected three rate increases for this year, which raises the risk that today’s highly inflated housing market will again end badly. A rate rise from just 4 to 5 percent for a 30-year loan would drive up monthly mortgage costs by 12 percent. For buyers, that’s on top of the annual median price gain, reported at 7% for existing homes in November, according to CoreLogic. By comparison, disposable income, or earnings adjusted for taxes and inflation, increased just 1.9 percent, according to data from the Bureau of Economic Analysis.
