Declining Market Verbiage.

[bobby jones]

An underwriter asked me provide reasons for declining trends and indicate what if any impact these trends will have on the opinion of the market value for the subject property.
MLS has charts for each city in my market area. This particular town had a 8.2% decline in values for 2007 compared to 2006. I indicated this in the report, along with MLS statistics showing this. My research also shows values declining by using county records and looking back at homes sold in 2004 that have been resold within the last six months.
So, my question is how would you word the underwriters question. This is the first time in my ten years of appraising that I have faced declining property values.
Thank you for your help.

 

[Karl]

The market Sucks!! As any lender that can read should know. Now of couirse you can find Appraisers that will "DO AS INSTRUCTED" Ask many of the now unemployed lenders. I have given you a detailed overview of the Market. You asked for an Apprasisal you received an Appraisal SORRY if you can't see that there is a decline in the market. As a Appraiser I report the market . I do not make the market to comply with your wishes.

 

[Pat Butler]

The comps sold DURING the bad market so they are reflective of what's happening in the market. What else needs to be said? Is your client looking for your opinion of the FUTURE market for the subject property?

 

[Kevin A. Spellman]

Report the facts and not the reasons. The residential appraisal fees we received from the lenders cannot support the discussion of macro or micro economics. If there is evidence of a large employer leaving that could be a fact. The MLS data should be ample.

I recently used a month to month comparison between the average and median prices and used the percentage differences. This gave a little support, but was not conclusive and looks unreliable. The analytical data I use has indicated 2005 as the highest priced year and for both 2006 and 2007 both median and average sales price were lower.

 

[bart nathan]

What goes up must come down.

 

[Artemis Fowl]

An underwriter asked me provide reasons for declining trends and indicate what if any impact these trends will have on the opinion of the market value for the subject property.
MLS has charts for each city in my market area. This particular town had a 8.2% decline in values for 2007 compared to 2006. I indicated this in the report, along with MLS statistics showing this. My research also shows values declining by using county records and looking back at homes sold in 2004 that have been resold within the last six months.
So, my question is how would you word the underwriters question. This is the first time in my ten years of appraising that I have faced declining property values.
Thank you for your help.

Bobby.

Why is there an 8.2% decline?
What factors are negatively influencing the value of real estate in your market?

I don't think it's an unreasonable request at all. It should be easy cause you should know the answer. If it's a FNMA form...you MUST answer this question and should have in the 1st place...look it up.

In my market I would generally attribute negative influence from regional job loss and attendant population decline combined with the current national housing situation. Locally I would consider availability of financing and type, supply and demand, proximity and amount of vacant housing and bank-owned properties and whatever else may influence values.

(See following post for something written much better than I do it )

They don't need a treatise on economic principles...just a simple summary of why you think the neighborhood property value trend indicator is currently declining.

 

[CANative]

From yesterday's report. Things are getting pretty ugly in some of my areas.

Current market conditions in the Hidden Valley Lake PUD:
The current mortgage lending market remains very volatile eight months after a global repricing of credit in July 2007. Many lending programs and products that were readily available less than a year ago are no longer available and there has been a significant decline of investors in the secondary market. The result is higher higher borrower qualification, less liquidity and other conditions resulting in fewer loans being made. Fewer loans available reduces the amount of purchase-ready buyers and increases the amount of competition among the sellers for those fewer buyers. When sellers are competing for buyers, they do so by lowering prices. Media saturation campaigns detailing the current problems in the mortgage lending industry and it's effect on real estate markets, in particular the spector of upcoming foreclosures resulting from resetting adjustable rate mortgages in combination with declining residential property values appears to be exacerbating the problem. This dynamic has become apparent in trend analysis and its influence, based on my research and conversations with market participants, is present in the market and is likely to increase. Therefore, the reasonable conclusion I draw is that this market is best described as volatile and unstable at this time and housing price trends are in decline in the Hidden Valley Lake PUD.

The Hidden Valley Lake subdivision experienced rapid growth in new construction homes during the 2005 through 2007 marketing periods even after it became obvious that the market had slowed significantly. It is saturated at this time with new construction homes. Significant buyer/seller uncertainty in the market and this has resulted in increasing inventory, longer marketing times, fewer sales and signficant declines in pricing and property values. It is the consensus of most Realtors that there is a current oversupply of listings at this time in the Hidden Valley Lake development with about 144 homes listed for sale and only about 10 pending or under contract sales. There have been 40 closed sales during the previous 6 months or about 7 sales per month. Many builders/contractors, faced with a slow market and unable to move the inventory of recently built homes have lowered pricing significantly. There are examples of new construction homes in the 1500 square foot range being offered at prices starting at less than $300,000. This appears to have significantly impacted pricing for the existing stock of older homes. Average exposure time appears to be about 150 days but can range from less than 60 days in some cases and up to 320 days when a property has been listed at above market accepted pricing. Estimating accurate exposure time in Lake County is difficult due to the manner in which the MLS calculates days on market. It is especially difficult in some developments affected by over supply of new construction such as areas in and around the City of Clearlake, The Clearlake Riviera development in Kelseyville and the Hidden Valley Lake development because it appears that some agents are taking short term listings on properties and then relisting them in order to reset days on market to zero. This is known as "listing churning."

There are numerous REO (bank owned) properties on the market in the Hidden Valley Lake development. Almost all closed sales during the previous three months of modest, older homes have been foreclosures and short sales. Although precise numbers or statistics of REO properties is very difficult to estimate, it appears that as many as half of the current listings of homes similar to the subject are bank owned foreclosures. With the exception of comparable sale 4, all of the closed sales and active listings in this report are banked owned, REO sales.

It should be noted that on the day this report was written the Federal Reserve lowered interest rates by three quarters of a point amid fears of a nationwide recession and in an effort to stimulate the economy. It is too early to tell how this will effect conditions in the real estate markets.

 

[Terrel L. Shields]

indicate what if any impact these trends will have on the opinion of the market value for the subject property.

The value is an esimate of market value as of the date of appraisal. The value at some future point in time cannot be determined nor forecast with any accuracy.

What I think he is wanting you to say is to promise that the market value you provide with be good for the coming months and years and you cannot do that.

 

[Tim The Enchanter]

Nice blurb, Greg.

I tend to stick to the numbers. How many sales, listings, pendings, price ranges, median price and averages, days on market, supply, absorption rate, how many REO or short sales and listings. I edited it down a little, more like what I'd do. I don't get into the macro info.

In this case I'd probably say

REO and short sale properties have become a significant part of the market.

***********************

There is a current oversupply of listings at this time in the Hidden Valley Lake development with about 144 homes listed for sale and only about 10 pending or under contract sales. There have been 40 closed sales during the previous 6 months or about 7 sales per month.

There are numerous REO (bank owned) properties on the market in the Hidden Valley Lake development. Almost all closed sales during the previous three months of modest, older homes have been foreclosures and short sales. Although precise numbers or statistics of REO properties is very difficult to estimate, it appears that as many as half of the current listings of homes similar to the subject are bank owned foreclosures. With the exception of comparable sale 4, all of the closed sales and active listings in this report are banked owned, REO sales.

Average exposure time appears to be about 150 days but can range from less than 60 days in some cases and up to 320 days

 

[tjcou812]

I had a stip from an UW the other day. "Appraiser noted oversupply in subject area. appraiser to comment - when did it start - when is it anticipated to end(i'll get my crystal ball out for this one) - how does it affect subjects marketability. Also at the end of comments pending possible reduction in value per managers discretion, more conditions may apply. So I called the lo and told him that if the uw doesn't like the answers that I give him he's going to reduce the estimated value that I gave in the report. Like I said above I could answer 1 & 3 but I cannot predict the future of when I think the oversupply will end.