Declining market or still stable

[George Hatch]

IMO the 1004 implies a one-year market conditions history analysis and the boxes in the neighborhood section should match. Just explain what happened over the past year in detail and include the current trends in your commentary.

If prices increased and then cooled, I mark stable. It might be just the winter trends.
If prices increased and then crashed, I mark decreasing. The data is obviously different than a seasonal slump.
if prices are still increasing, I say so. Rare, but it's still happening in a few neighborhoods here.

My commentary is usually something like: "Prices increased tremendously in 2021 and Q1-Q3 2022 as a result of the covid pandemic and lowered interest rates. Recently interest rates have increased dramatically and prices are cooling. Days on market and supply are increasing, but it is still very much a seller's market."

Smiley was making the point - with which I agree - that looking at the monthlies is too specific because of a couple different variables being in play. The datasets are relatively smaller, they're more subject to differences in unit mix and volatility.

But by the time you get to looking at these datasets by quarter or semi-annually and you go back a couple years then any changes that result cannot be attributed to volatility. The pricing really is changing. Or not changing, as the case may be.

When I went after these markets in my region on the monthly basis that was not for something I would do in an appraisal report. I did it for 2022 specifically to see when/where the market went from increasing to decreasing. IMO that analysis has no utility other than that. Quarterlies and semi-annual make a lot more sense and will be more persuasive. I would say the same for months of supply and DOM analyses, too. One month can and sometimes does produce a fluke or outlier. Aggregating for 3 months or 6 months, not a fluke or outlier.

 

[Joe Flacco]

I would like to add that at the neighborhood level, even 3 months or 6 months can be a "fluke". Neighborhoods are small and you get the same issue with smaller datasets even if it is 3-6 months. But at the county level or metro area level, monthly has sufficient data. This is one of the main reasons the 1004MC is so bad. This and it not making YOY comparisons.

 

[William Rightsell]

So, I'm thinking about this declining market. Are you guys putting "declining" on page 1 and on the 1004MC ?
I know every market is different. Issue I see now with page 1 on neighborhood characteristics and overall trend on the 1004MC might be conflicting. The 1004MC shows the "overall" trend from the past 12 months, but doesn't page 1 reflect current market conditions? I have had clients tell me that page 1 does not match the 1004MC check boxes.
Because when I do the 1004MC, I am seeing current sales prices being near what they were approx 6-12 months ago, but obviously down from the previous 6 months. Should we just use the data from the previous 6 months rather than the previous 12 months on the 1004MC?

Why are you still providing a 1004MC form? Even FHA has done away with it officially now.

 

[Fernando]

Bay Area home prices fell more than anywhere else in US last month

I'd been saying prices were falling since last summer. Bay Area is the canary in what will happen to the nation.
Although prices have fallen, the market is not as bad as the Great Recession....yet.

 

[The Bob]

Why are you still providing a 1004MC form? Even FHA has done away with it officially now.

Do you have a link to that. When I Google it this is the only thing that comes up...

https://www.HUD.gov/sites/dfiles/SFH/documents/SFH_FHA_INFO_21-25.pdf

 

[sputnam]

Why are you still providing a 1004MC form? Even FHA has done away with it officially now.

The GSEs have decided that the 1004MC is no longer required however, many Clients still do require it. If your Client requires it, and you accept the assignment then, you have to provide it in your report.

 

[ZZGAMAZZ]

The GSEs have decided that the 1004MC is no longer required however, many Clients still do require it. If your Client requires it, and you accept the assignment then, you have to provide it in your report.

The 1004MC has significant shortcomings, everybody agrees, but it is a tangible form with baseline data that pertains to competing properties. Lots of us prefer to continue to use the form to establlish baseline data. IMO

 

[glenn walker]

Stable Until CNN says its going down

 

[Alsie35]

Do you have a link to that. When I Google it this is the only thing that comes up...

https://www.HUD.gov/sites/dfiles/SFH/documents/SFH_FHA_INFO_21-25.pdf

Here is what one of our clients emailed us yesterday, with the link:

"FHA has eliminated the requirement of the Form 1004MC. Please be aware that there are lenders still requiring the use of this form.

FHA has also added guidance on the measurement of contributory value for ADU’s. Changes identified in Section II.A of Handbook 4000.1 may be implemented immediately but must be implemented for mortgages with case numbers assigned on or after April 18, 2023.

Please see link below for the redline version of the 4000.1"

https://www.txappraisers.org/resources/Handbook%204000%201%20Redline%20for%2020230118.pdf

 

[George Hatch]

The idea behind the 1004MC analysis is still sound regardless of the flaws of the format of the form.