Paul's Appraisal Blog

The bounce..

May 26th, 2008 9:18 AM

As we all know, the market has been flooded with a huge number of bank-owned properties. To liquidate this inventory rapidly, the banks have been slashing the prices, often by hundreds of thousands of dollars, just to clear them off of their books. This, in turn, is driving all values down at an accelerated rate. At times, it seems there is no end in sight.

However, there is not an infinite number of bank-owned properties. Actually, the percentage is actually pretty small- 1% to 2% at the most of all of the homes out there, depending on which market you are looking at.

At some point, which could be within the next year or so, all of the bank-owned inventory will be gone. When this happens, the only people left with houses to sell will be those that owe more than it is worth. This will create a shortage in a very short amount of time. Then, guess what? Values will bounce back up in a very short time, because, by the laws of supply and demand, there will be a low supply and larger demand.

I wasn't here in the 1990's when this happened before, but I know that it was a similar situation. Home values plummeted around 40% and people were swearing off real estate as a bad investment. 10 years later saw one of the hottest markets in history.

I doubt we will see that same frenzy that we saw in the first half of this decade, but I am convinced that we will recover and home values will bounce back in a short time after the bank-owned inventory is mopped up. There are two things that will never change: people want to live in their own house and banks are in the business of lending money.

So, if you are in the market to buy a home, I would suggest that you do it before the "bounce".

Posted by Advance Appraisal on May 26th, 2008 9:18 AMPost a Comment (0)

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Here comes the final round...

March 9th, 2008 6:51 PM

As I keep my ear to the ground, keeping up with the latest in the real estate market, I have become aware that the end is near. I am not predicting the end of the world. I am merely pointing out that the last wave of mortgage resets is coming, and that this should be the last of it. I have heard, from various sources, that the majority of the adjustable rate mortgages taken out at the height of the market are due to reset this year. This means another flood of foreclosures and bank-owned properties.

Although this is bad news for current owners of real estate (because of the increased downward pressure on value), it is very good news for prospective buyers who have been kept out of the market for the last few years. Homes in Southern California are becoming affordable again.

How about all of those people that lost their homes because their mortgage payments became too expensive? Well, I have been doing a little research and have found that having a foreclosure on your credit report is not the end of the world. Although the foreclosure will kill a score for a couple of years, if a person is proactive and works to improve the score, they can find a mortgage within two to three years. What I get from this is that all of those people that lost their homes, will be able to buy them back in about 2 or 3 years for about 40% cheaper than what they bought them for! We need to remember that mortgage companies want to lend money and people want to buy houses- this mess we're in can't last forever.

Also, because banks are unloading properties at huge losses, the values are getting abnormally low. However, once these REOs are gone, I predict values will rebound substantially. People who own their homes cannot sell for less than what they own on it. Typical appreciation across the U.S. is historically about 7% annually. I predict that values will stabilize around this level within a few years, (if it was bought before 2003). That is to say, if you bought your house in 2002 for $300,000. By 2010, it should have about 56% appreciation or roughly $450,000.

This may or may not be true, but I know that in the long run, real estate always goes up in value. (Unless there is a natural disaster or economic devastation)

The bottom line is that the end really is near. We are about to turn the corner. There is light at the end of the tunnel and it's not the train!

If you have any questions about anything to do with this real estate market, feel free to give me a call.

Posted by Advance Appraisal on March 9th, 2008 6:51 PMPost a Comment (0)

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They're gone...

January 27th, 2008 5:23 PM

I was driving home the other night and as I pulled into my neighborhood area, I noticed that there weren't nearly the number of "for sale" signs as there were a few months ago. After some quick research, I found that most of them actually sold. The rest were just taken off the market because they couldn't get their asking price.

In this market environment of doom and gloom, it seems to me that things are moving along pretty well. Houses are selling. The excess inventory is getting mopped up. Interest rates are low and people still dream of home ownership.

Although times are a bit tough for all of us in the real estate business, I think that what the market has done is a healthy reaction. Houses are affordable again. People are not so easily put into exotic, impossible loans. Life is not great right at this moment, but it's getting there.

Unfortunately, many of my peers will probably go out of business. This is a shame, but so goes the market.

We at Advance Appraisal will be here through the duration. If you have any comments or questions, please feel free to give us a call.

Posted by Advance Appraisal on January 27th, 2008 5:23 PMPost a Comment (0)

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Personal Observations...

January 16th, 2008 7:32 PM

With all of the media attention on declining home prices and the "sub-prime mortgage meltdown", it may be easy to think it is the end of the real estate market and that we are all doomed. However, based on what I see every day, things aren't quite as bad as the media portrays them to be.

Home sales are slow, but homes are selling. All of the REO homes on my street have sold and are now occupied. When I do an appraisal, all be darned if there aren't comparable sales available. Homes are selling, and as prices continue to decline, people will not be able to resist taking advantage of this once in a generation opportunity. More people can qualify for a home.

As banks and lenders start having fewer losses, credit will loosen up a bit more, thus prompting easier sales.

Some of the same people that got us into this mess will be the same people that will get us out- the investors! Many novice "investors" bought on the growing real estate market hoping to make some easy money, thereby driving up prices. When the bubble burst, many of them walked away from these "investments", leaving a glut of foreclosures and REO properties. Now that prices are at an all-time low, the experienced investors are coming in and buying up many of these distressed properties, helping to alleviate the problem that was caused by the novices.

What I'm trying to point out is that things aren't as bleak as they seem. Things are slow now, but business is not dead. It will get better as inventories get bought up. It will not be like it was a few years ago, but we will be back in a viable sustainable market before we know it.

Posted by Advance Appraisal on January 16th, 2008 7:32 PMPost a Comment (0)

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What makes a house recession-proof

January 10th, 2008 5:58 AM

(This was taken from MSN.com)

What makes a house recession-proof

Good homes sell even in a bad market -- and here are a dozen principles the experts watch for when evaluating a potential sale.

By Marilyn Lewis

The real-estate bust has stripped all the smoke and mirrors from the housing market. In the starkest way possible, it is revealing which homes hold value in a recession, and why.

"Even in this market, there are certain things that will sell," says real-estate agent Michelle Sandoval in Port Townsend, Wash., where it's difficult to sell homes, although prices haven't dropped.

"Even in this market, I've had things sell for over full price. There are always bulletproof properties" that hold value better, Sandoval adds.

Certain upgrades can help recession-proof your house, but your home's price resilience mostly depends on choices you made when you purchased. Since most homeowners buy and sell several times in their lives, you're likely to have a chance to use these bulletproof principles the next time you buy.

Location, location, location

You've heard it before because it's true: Location matters. It matters most, in fact, when it comes to holding value under pressure. Why? Because houses are replaceable, but land is not. If you've got a spot everyone wants, your place will sell faster and for a better price than a similar house elsewhere.

Take Punta Gorda, Fla., where, at this very moment, house prices are sliding so fast you can almost hear them sink.

"Everything is depreciating," says Cady Rowe, an agent with Coldwell Banker Morris Realty in Punta Gorda. However, Rowe adds, how deeply your price depreciates depends on where "your dirt" is.

"If your dirt is sitting in Punta Gorda Isles on the waterfront, it's going to be worth a lot more than dirt somewhere else with a thousand lots just like it," Rowe points out.

A December study by Moody's Economy.com predicted price declines in Punta Gorda will be the worst in the nation -- down 35.3% by the second quarter of 2009. And that's not accounting for inflation.

That makes Punta Gorda a laboratory for testing the effect of location on the durability of prices. Appraiser Charles M. Polk III agreed to do some informal research for MSN Money. Polk, an appraiser with 20 years' experience and advanced credentials in valuing residential and commercial property, is also an attorney, a real-estate agent and a magistrate who adjudicates county tax appeals.

In December, Polk compared the sales of 59 homes of equal size and quality in Punta Gorda Isles and the nearby inland development of Deep Creek. Location makes all the difference, he found. Although all Punta Gorda real estate lost value, Punta Gorda Isles homes didn't lose as much. Based on square-foot prices, Punta Gorda Isles homes had seen a 22% drop in sales prices since the last half of 2006, compared with a 32% drop in Deep Creek prices.

More than a view

Location means more than just views and water frontage. Other elements include:

Neighborhood. In some cities -- San Francisco is one -- the durability of home values varies from block to block, says San Franciscan Dick Lepre, whose blog, The Economy, covers real estate.

Lepre, a broker with Residential Pacific Mortgage, says of his town: "It's very much neighborhood-dependent. If you take my house and move it a few blocks up the hill, it's worth another $300,000. And, if you move it down the hill three blocks, it could be worth $300,000 less. In that sense, (affluent) Pacific Heights or my neighborhood, called Market Duboce, tend to be recession-proof because people always want to live there."

With housing prices falling and mortgage money scarce, foreclosures are going through the roof. Homeowner Merian Terry thought she'd escape that by taking an offer to help that turned out to be too good to be true.

Schools and safety. These make or break values. In some Bay Area communities, overseas investors buy homes sight unseen based on the value of the city's public-school rankings. Questions about schools and safety are the first out of buyers' mouths, says Furhad Waquad, an agent in suburban Detroit. He refers them to local police departments for neighborhood information and to the free Standard & Poor's school evaluation service, SchoolMatters.

Culture and public services. Buyers favor homes near libraries, parks, playgrounds and revitalized or charming commercial areas with shopping and coffee shops and theaters. An easy walk to light-rail terminals and bus lines is a plus. In communities full of retirees, proximity to hospitals and doctors' offices is valued.

One caution: Watch out for noise. It's good to be close to an elementary school but not next door, and it's good to be near a main street with bus service but not directly on it.

Infrastructure. Although the fringes of hot cities are popular locations when prices are rising, interest falls off quickly in a downturn. City sewer and water service help hold up prices compared with an identical home on a septic system and well water. Cities with fatter tax bases may boast quicker fire department response times, better-maintained streets and stronger schools, all of which sustain demand.

Take the simple matter of sidewalks: Waquad points to the wealthy communities of Bloomfield Township and Bloomfield Hills, originally built without sidewalks. He credits their recent decisions to install sidewalks for helping hold up sale prices in the Detroit area's severe down market. "Now, you see mothers and nannies with prams and strollers, people exercising, running. It has made a world of difference," Waquad says.

Principles of durability

Location is just one piece, albeit a big one, of recession-proofing. When buying, these principles matter, too:

The "progression" principle. This rule of thumb says better homes bring up the value of a not-so-great house nearby. (And lesser homes subtract from nearby property values.) The lesson: Don't buy the best house on the block.

George Baker, an expert in residential and commercial appraisals with Vestor Realty Consultants in Wilmette, Ill., knew this when he purchased his 2,400-square-foot home surrounded by 5,000-square-foot palaces. "Its value is enhanced by the fact that it's on the block with better, larger properties," says Baker, who is also a real-estate broker.

Single-family homes rule. Condominiums lose more value in a down market, and they lose it faster than single-family homes, says Terry Bernhardt, a Portland, Ore., home appraiser. In part that's because builders tend to throw up too many condos when a market is hot. Also, it's because more buyers want single-family homes than condos. In Portland, Bernhardt says, "middle market" houses hold value best because even in a downturn, more people want them.

Some trends endure. In Bernhardt's market, the craze is Craftsman bungalows. He thinks it's a durable trend. Craftsman homes have charming, slightly nostalgic designs that include covered porches, a mix of indoor and outdoor living areas, higher ceilings and lots of architectural details, including moldings trim, stair rails, and built-in nooks and bookcases.

"It's a warm, attractive design that everybody seems to like, and it prices up substantially," Bernhardt says. Don't bank on a trend, however, without doing plenty of research into what sells in your particular market.

Low carrying costs seal a deal. Buyers may face a shock when confronted by the real cost of a home, in addition to the taxes and mortgage payments. The carrying cost of a house -- including homeowners insurance, utilities, upgrades, deferred maintenance and, in some markets, landscaping and snow removal -- can make a deal unattractive.

Homes that have these costs under control retain value when buyers compare them with homes that have higher yearly carrying costs, says Baker, the Wilmette appraiser.

Market peculiarities matter. As with politics, all real estate is local, so learn your particular market inside out. (Before you buy, get an education as you interview prospective sales agents. Ask each one what's selling and why.)

Apply this knowledge by keeping the home's next owner in mind when you buy or build, says Sandoval, the owner of Windermere Port Townsend. In her small city -- a somewhat remote waterfront community attractive to retirees -- single-level, low-maintenance houses are weathering the market slump best. The town's many beautiful Victorian homes no longer fetch premium prices because these empty nesters shun the upkeep responsibilities.

Market peculiarities even vary by neighborhood. Take suburban New Jersey, where large communities of observant Jews obey the biblical proscription to avoid work on the Sabbath. That includes walking, not driving, to religious services. Thus locations near conservative and orthodox synagogues hold value extremely well in places such as the Highland Park and Edison municipalities near New Brunswick, says Justin Footerman, a broker-associate with Prudential Fox & Roach Realtors in North Brunswick.

Remodel to support value

When you're thinking of investing in upgrades, you can build in more enduring value by following these rules of thumb:

Broad appeal. In a shrinking universe of buyers, homes with the broadest appeal hold their value best. The homes most in demand are three-bedroom, two-car-garage houses with at least two bathrooms. Keep this in mind when you're thinking of remodeling. When comparing the wisdom of adding a new, high-end kitchen, for example, versus a bedroom addition to your two-bedroom home, the addition is probably your best bet for durable value.

That's why, when Port Townsend agent Sandoval and her husband built their home, she vetoed his idea of putting the kitchen and living areas on the third floor, with the best views. Such "reverse floor plans" appeal to too few people, she says. He also wanted to forgo installing a dishwasher. He made a good point: They didn't use one. But "if you built a house uniquely for yourself, with no dishwasher, four levels and concrete floors throughout, there are going to be fewer people likely to like that house," Sandoval says.

Attractive bathrooms and kitchen. These rooms, with all their costly plumbing, wiring and cabinets, have the highest value per square foot of any in the house. Investing in their upkeep props up a home's price, says Portland appraiser Bernhardt. Extravagance isn't helpful. Buyers are simply looking for well-appointed, updated rooms with good layouts and appliances.

"Purchase decisions on residences are typically made by the woman of the house," Bernhardt says, "and they are going to go with where they have to spend the majority of their time."

Upgrades for energy efficiency. Improvements to a home's energy efficiency promise a lower cost of upkeep, so buyers pay attention. Good investments include highly efficient windows, beefed-up insulation, new siding and appliances.

On the other hand, highly personal investments such as lavish kitchen remodels, swimming pools, game rooms and media centers may even detract from a home's price, at least in Portland, Bernhardt says. That's because few buyers may share your tastes. A new owner may see your swimming pool as a liability or a nuisance that must be torn out at great expense.

Published Jan. 9, 2008

Posted by Advance Appraisal on January 10th, 2008 5:58 AMPost a Comment (0)

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New Year's Thoughts...

January 2nd, 2008 8:19 AM

I receive newsletters from different sources and thought this was worth sharing. It doesn't really have to do with real estate, per say, but rather looks at the big picture.

As we begin the new year, it is a great time to reflect on the last year and set goals for the next. Steve Dexter is a local real estate expert who sends a newsletter out periodically which talks about the real estate market and real estate investing. For those of us that might feel a bit down trodden, this seems like good advice:

"...what I am saying is that we have to fight for what we want in our life. It is easier to get what you want if, you guessed it, you KNOW what you want.
I have some ideas on how to make your 2008 great:
Here are ten areas in your life that lend themselves well to goal setting:
1. Physical
2. Spiritual
3. Family
4. Travel
5. Career
6. Investment
7. Social
8. Financial
9. Recreational/Fun
10. Giving Something back

We are setting our goals for 2008 and beyond, in all the above areas. I hope you start yours as well. 2007 was a struggle for many of us, and we don't need to go through this alone. "

You can order his newsletter at:

STEVE@RICHDEBT.COM <mailto:STEVE@RICHDEBT.COM>.

Posted by Advance Appraisal on January 2nd, 2008 8:19 AMPost a Comment (0)

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Home Auctions Quickly Get Foreclosed Homes Off the Market

November 28th, 2007 5:45 AM

Going Once… Going Twice…
Home Auctions Quickly Get Foreclosed Homes Off the Market

Any seasoned salesperson can tell you that waiting for a buyer to make the first move is an ineffective marketing tactic, especially when pertaining to the real estate industry. Instead of sitting back and waiting for a sale to come their way, homeowners are utilizing alternative property marketing methods.

Over the last few years, real estate auctions have become a popular way to market everything from newly constructed condominiums in an over-built market, to single family homes that have been on the market for several months and are in danger of foreclosure. Real auctions not only produce plenty of buyer interest and traffic, they also attract serious buyers. Due to the connotation of the word “auction”, buyers rightfully assume they will find significantly discounted homes and great homebuyer bargains.

Before the Real Estate Auction Tips
Before you raise that auction paddle or settle on placing your property on the auction block, it is important know home auction basics. Below are a few auction tips and financial factors to consider when discerning whether or not home auctions are the solution to your buying and/or selling needs.

Both Buyers & Sellers Should Know the Rules
Is the auction you are overseeing or attending an Absolute Auction, Minimum Bid Auction or a Reserve Auction? It is important to know auction details and rules so you can be prepared to make an educated bid or a quick home sale.

Absolute Auctions are the most buyer-friendly. The absolute auction seller agrees to sell the home to the buyer with the highest bid, regardless of the final price. Since a sale is guaranteed, absolute auctions generate the most buyer excitement and participation.

Minimum Bid Auctions involve the seller agreeing to a minimum selling price, which is normally advertised before the auction. This not only reduces the sellers' risk, but also provides more control over who is permitted to bid at the auction.

Unlike Absolute and Minimum Bid Auctions, Reserve Auctions do not result in an immediate sale. Instead, the seller has the right to accept or decline any bid within a specified period of time. Reserve Auctions are commonly used with court-ordered sales where a price must be sanctioned before closing.

Buyers, Get Pre-Qualified
Avoid buyer's remorse by ensuring you are capable of taking on the financial responsibilities of a new home. Most lenders are dedicated to providing you with practical mortgage product information and loan financing tools to guide your search for a loan program that is appropriate for your situation.

Buyers, Schedule a Post-Auction Meeting with Your Broker
Most auctions require you to gain approval for a loan within a specified escrow time-frame. Failure to get approved for a loan in a timely fashion can result in liquidated damages. Be sure you contact your lender to meet after the auction so that you can obtain your loan within the seller's brief time frame.

(From an email received from Earth Mortgage: http://earthmortgage.com )

Posted by Advance Appraisal on November 28th, 2007 5:45 AMPost a Comment (0)

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Things to be thankful for on this Thanksgiving...

November 19th, 2007 6:51 AM

The holidays are upon us once again, and once again it is time to be grateful. With all the negative media these days, I wanted to remind you that many wonderful things are happening despite what you may hear in the news.

A Silver Lining in the Housing Market

The media always loves to focus on the negative, and it may get you doing so as well-well, don't. The book and DVD called The Secret show pretty conclusively that whatever you focus on becomes your experience, i.e., whatever your worry about ends up happening. So, here are some positive thoughts to focus on:

POSITIVE #1: Since the housing market has slowed down, more people are saving. More savings provide more funds for banks to loan to home buyers.

POSITIVE #2: Since the increase in gas prices, people are driving less, buying more energy-efficient cars, and starting to install more solar features in their homes-all good for the environment. People also are starting to move to the inner city, great for revitalizing downtown areas and giving families more time to spend at home with one another.

POSITIVE #3: The fall in the dollar is helping our economy because foreign consumers are buying more of our products, taking more vacations here, and helping our trade imbalance.

POSITIVE #4: The subprime lenders had sold homes to people who could not afford them anyway. Now those less-expensive foreclosures are being bought by people who otherwise could not have afforded a home.

POSITIVE #5: The slowdown in the housing market is confined to those areas that went up too fast, anyway-i.e., Florida; Washington, DC; New York; California; Las Vegas; and Arizona. Now the locals there once again can afford to buy a home.

So savings are up, we are using less gas and moving back to the inner city, more people are concerned about conserving energy, our trade deficit is improving, and more deserving Americans are able to afford a home. We also live in the best place in the world-what could be better?

Be grateful and enjoy your Thanksgiving.

SOURCE: "Housing Prices are Down, Oil is Up, and That's Not Really So Bad," New York Times, November 14, pp. A1 and A20. (Taken from Marshall Reddick E-Newsletter)

Posted by Advance Appraisal on November 19th, 2007 6:51 AMPost a Comment (0)

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Should you buy a house now? (Buy, buy, housing slowdown.....!)

November 13th, 2007 3:34 PM

Because of the downturn in the housing market, many people are sitting on the sidelines waiting to see if values will go even lower before they buy a house. The problem with this is that as you wait, you may see the home of your dreams pass you by. In other words, if you are planning on buying a house that you plan to live in for the foreseeable future, there is no time like the present. It is a buyer's market and interest rates are still at historic lows. Having the tax advantages and stability of regular payments compared to renting far outweigh the perceived savings you may get from waiting. The price in waiting may be tighter lending requirements and higher interest rates. If your looking to buy, now would be a very good time.

Posted by Advance Appraisal on November 13th, 2007 3:34 PMPost a Comment (0)

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Statistics don't tell the whole story.....

November 4th, 2007 8:23 PM

We've all undoubtedly heard about the downturn in the housing market, and I have written about it in a previous post. What many people don't realize, is that the statistics are very general and don't necessarily reflect what is going on in your neighborhood. For example, you may read in the paper that homes in San Diego have decreased in value by 10% over the last year. This could mean that some neighbor hoods have experienced 15% depreciation while others only 5%, while still others have remained relatively stable. From what I have seen so far, homes nearer the coast and higher priced homes have tended to hold value better that middle and entry level homes. This is why an appraisal based on current, local data is the only way to really know what your home is worth- you may be surprised!

Posted by Advance Appraisal on November 4th, 2007 8:23 PMPost a Comment (0)

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