August 13, 2009

Home Value Code of Conduct (HVCC)

Posted to Steve Randall

New legislation and policies governing the lending process are now in place and having an impact… good and bad. One of these changes is the new Home Value Code of Conduct or HVCC. The intent of this change is to give appraisers a space, free from outside influence, to give lenders a correct value for a home. The intent of the change is good but there are always unintended consequences with any new piece of legislation.

Before HVCC, lenders were able to choose their appraisers and could exercise some influence on those decisions made by the appraisers. In addition, Realtors could also contact appraisers and send comparison properties used in setting the listing price which also had an influence in the appraiser’s decision. In most cases this system worked well but there were also many cases where some felt the appraisers were being unduly influenced.

HVCC changes how the process work so that lenders and Realtors are limited in their contact with appraisers .

Now the process is that lenders contract with an AMC company who chooses an appraiser and works directly with appraisers. This lessens the outside influences on appraisers and the intent is to give appraisers a path to more accurate appraisals. The intent of the law is good.

There are unintended consequences however that are not good for both buyers and sellers. For example, using the AMC as a middle man means that appraisers are getting less money for appraisals because the AMC is taking a part of that revenue for their services. Now appraisers must do the same work for less money. Some local appraisers may turn down work and as a result appraisers from outside the area are doing those reports. Appraisers may travel 60 to 130 miles to do appraisals in areas that they do not know well. Furthermore, HVCC causes each appraiser to be cautious in the choosing of comps (I would too in these circumstances).

The net result is that appraisals are taking longer and may be lower than the market value causing some transactions to fall apart. As long as our sellers and buyers are aware of the possible bump they are normally OK and can make the needed adjustments.

We had a home in West Point, Utah that had this very issue hit them this month. The seller had to adjust the price and the buyer had to give up some closing costs to make the transaction work.

Posted By: Steve Randall





August 10, 2009

Are Unit Sales Increasing in Northern Utah?

Posted to Steve Randall

It is always nice to have market statistics to help us judge if there is a shift taking place in the area that you live in. Our Board REALTOR® magazine called “The Voice” recently published unit sales statistics by zip in Northern Utah. Units sales increased overall in Northern Utah by 11% from May to June of this year. That is positive news given the large amount of inventory we currently have. The good news for sellers is that the average price increased 5% from $212,859 in May to $223,632 in June. This is a hefty increase for one month but it makes sense as many who are moving want to be in by the time school starts. These numbers, if they continue, will show that the bottom of the market was in the summer of 2009. A slow rise is expected over the next six months.

For details about each zip code in Northern Utah please click here. See how your local neighborhood did!

Posted By: Steve Randall





August 05, 2009

Why Are Appraisals Coming in Low?

Posted to Steve Randall

For the past few days we have been talking about when the market will bottom out. Today NAR announced that for the fifth straight month home sales across the country have increased. This is good news that more buyers are jumping back into the marketplace. So with all this good news why are home prices still falling in most areas? The fact remains that inventory of homes remains higher than the number of buyers. True, it is adjusting to a more balanced market but with unemployment high, economic conditions on shaky ground, and homes in some phase of foreclosures equaling over 45% of the market….homes are experiencing a downward trend.

If the market wasn’t already hard enough for sellers, we have a new gift from Freddie and Fannie that impacts how appraisers value homes. Although the purposes of this act are something we should strive to achieve, there are always unintended consequences that come from any new government program.

For example, we are working with our buyers to purchase a home in West Point. It is a very nice home and our buyers are anxious to move in at the end of the month. There were multiple offers on the home and the first buyers to have this home under contract had an FHA appraisal done on the home but were not able to complete the sale. Once an FHA loan is done, that value remains with the home for a six month period of time. This is where we entered with our offer. As we have done our due diligence we find the earlier FHA appraisal shows that our offer too is above this value. Both the seller and the buyer are now trying to figure out just what to do!

What makes the difference in offers and appraisals? The comps we used showed our offer to be within the range an appraiser could use. The appraisal done by the FHA appraiser was likely conservative given the new HVCC regulations and wanting to make sure that estimates of value were easily justifiable. There is not blame meant for any appraiser but simply to explain how the new Code of Conduct is having an impact on the appraisal values of homes and impacting sales even though buyers and sellers are agreeing to pay the price. The problem comes in that buyers cannot get a loan for more than the appraised amount which can cause many transactions to fall apart.

Here is more information on the HVCC Program directly from Freddie Mac. If you need help in understanding how to sell or buy a home in this market, please send me an e-mail.

Posted By: Steve Randall





August 04, 2009

WHEN WILL WE BOTTOM OUT? GOOD NEWS IS SLOWLY COMING!

Posted to Steve Randall

With so much talk about health care, we often forget that it will be real estate that will lead us out of the recession that we are in. In yesterday’s blog we reviewed by zip code how prices have diminished in almost every zip code. No areas of Salt Lake County saw an increase and only Orem in Utah County saw a 5.3% increase. In Davis County, Kaysville and Centerville showed modest increases of about 2%. North Ogden and Riverdale also showed increases of 2.1% and 2.4%.

Lowering prices means greater affordability for buyers. Low interest rates and lower prices make this the perfect buyer’s market. The market may be showing signs of reaching the bottom but prognosticators do not know exactly when the market will rebound. Some pundits felt that the recovery would start in 2010. Others predict that it will take longer and estimate a return to a normal market to be in 2013. Almost everyone believes that the recovery will be a moderate increase each year and will likely take six to seven year to get back to 2006 highs for property values. Click here for more on this point.

As much as we want things to return to normal, we likely will see appreciation rates near normal levels of 5%-6% per year rather than the 89% growth rate we saw from 2000 to 2006. This is the best news we could have given the current economic conditions. As long as employment numbers remain high that means that foreclosures will continue to plague the marketplace. The absorption rates (the rate at which houses are being sold in the market place) are coming down and gradually tipping in the seller’s favor. It is still a buyer’s market but the bottom and possibly the shift to a more balanced market is on its way.

For more information on using real estate investments try this link. For more information on home prices in your neighborhood please contact me.

Posted By: Steve Randall





August 03, 2009

When Will We Hit Bottom?

Posted to Steve Randall

One of the most frequently asked questions is when will Northern Utah Real Estate hit bottom and how quickly will it return? Last week, the Deseret News published an article on the Utah Housing Market showing that with very few exceptions, Utah is still declining but at a slower pace than in months past and we fare much better than many parts of the country. Here is the complete report from the News Article and here is a valuable chart listing how prices have move by zip code compared with this same time last year.

It is evident that the bottom is getting closer but not yet in 2009. So when will it turn around? Stay tuned for tomorrows blogging prognostication!

Posted By: Steve Randall