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Is the current economy the new reality

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Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
Story has implications for the real estate industry:

Most economists think that higher deficits help cause higher long-term interest rates by increasing competition for savings. Higher rates, in turn, would sharply curtail mortgage refinancing and cool a housing industry that has been among the economy's few strengths. Until growth picks up and private demand for investment capital strengthens, few economists expect interest rates to move significantly higher.

http://www.nytimes.com/2003/03/24/business...pagewanted=1&th
 

Mike Simpson

Senior Member
Joined
Jan 30, 2002
Steve,

It's called CYCLES!!! The markets are in a constant mode of change, and always have been. We've had historically low interest rates for quite sometime now. Some licensed and certified appraisers don't even know what it's like to be slow!

Rates will invariably begin to rise, and when they do the refinance market will slow considerably. This happended in late 94 & continued to early 97. Many appraisers (especially those working for someone else) found themselves out of work. Those fortunate enought to have work found themselves expanding their service areas. Tracking the refinance market was kind of like watching a bay empty just before the tsunami.

The tsunami for the appraiser eventually came in the form of record home sales resulting from new found wealth in the stock market, and immigration. The stock market would eventually burst, and the interest rates then began to come down as a result, and we slid back into a refinancing boom (I feel we're approaching the tail end of that boom now).

It appears to me that we'll slowly slide into a scenario similar to the period between 94-97, which is a very good reason to diversify our business's. The appraiser of the future should insulate themselves from the whim's of the refinance markets to the best of their abilities, so they'll be able to take advantage of other possibilities.

-Mike
 

Oregon Doug

Senior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
Oregon
Steve - yes, the current economy is the new reality. Mike is right on when he says that it is all about cycles.

I've been an appraiser long enough to reflect on cycles going back to 1970 and how the Vietnam war influenced our economy both during and after. I remember trying to find a job in 1972 when there were none. Things got crazy a few years later when we were making 2% per month time adjustments, 89 day repos were paying 15% and Jimmy Carter was our leader. Then that little S & L issue came to the front and the REITS lost a little glitter (and other stuff too). Were you an appraiser during the double digit unimployment period in the mid '80's? If you were, you likely understand. We've had a pretty good run on real estate during the past decade or so - better in some corners of the country than others. As the dot.bombs began to explode, there was a lot of uninformed money running amok and the stock market has gone nutz during the past few years.

The beat goes on.

As an appraiser, I find it comforting that it does. When the economy goes up - they need us; when the economy goes down - they need us. It's hard on appraisers when everything is stable. Yes - the current economy is the new reality and it will be tomorrow too.

Enjoy the ride, Oregon Doug
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
I concur with your concurrence! Thank God for cycles. Can you imagine what our business would be like without them? No need for appraisers if values always go up.

This refi boom will bust as soon as the interest rates tick up about 1/2%. Mortgage loan officers will be jumping out of windows and companies will close. But guess what? We will still be here doing our thing because there is as much foreclosure business as there is refi business when the market turns.

Started out in 1980 as an appraiser but was involved in real estate since 1968. Have seen several "cycles" including Colorado Springs being called the foreclosure capital of the US. Seems about 1/3 of my present business is foreclosure/liquidation appraisals. Does history repeat it's self?
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
The refi boom is down significantly from last year. Sales are starting to pick up and foreclosures appear to be down. However, I'm still seeing nice homes go into foreclosure and values are still at 1999 levels (yes, based on paired sales) in many areas. But growth is continuing, new commerical development and new subdivisions are springing up everywhere.

The bottom line is, if you are in a static, slow, or rural area, you will be affected by cycles more than those of us in the high growth markets. We see them too, just not as bad (OK, the late 80's were the pits!!).

Roger
 
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