The eye of the storm has just passed over
From 1999 onwards the hurricane started to build, moving ever closer to the world's financial system, obvious even to the man in the street. Yet the near-term gains were so beneficial to individuals and government budgets that every Finance Minister threw prudence down the well. Chancellors even became popular. Bizarrely, the only people who did not recognize the inevitable were the regulators, senior bankers and fund managers. In 2007, the storm ripped into the banks. There was a brief calm as the eye came overhead, within which complete regulatory and political paralysis developed, even as institution after institution imploded. Now the eye is passing; we're back into the other side of the storm. Initially the winds will be extreme, but each crisis will be a little less than the one before. It is the best possible outcome, for the alternative was an immediate vertical drop into a deep economic Depression. This would have made the 1930s look a picnic. The 'positive' alternative may not seem that glamorous as many small countries are already in recession and the major ones will follow before the end of this year. Yet this recession will be a 45 degree slope, not a 90 degree fall. This is because the correct response is now in train. It means that as early as 2010, a stuttering recovery could commence.
As I read this excellent portrayal of what has happened with the banking industry, I can't help but hear those critics who are blaming President Bush for our current economic crisis. That is not to say that there may have been some bad decisions or misguidance in the past eight years, but I think this crisis was staged before George Bush ever made it into the Oval Office. Put yourself in his position. As soon as you take office and are starting to get settled in, you are forced to deal with the largest, most devastating attack to hit American soil. I don't care how much denial we are hearing in this current political debate about the war. I don't know of too many Americans who didn't want this war in 2001. I think the American people need to remember that hind site is 20/20, especially in this election year. It is easy to say what we should have done and what would have been best for this country but as far as I know, you can't change the past. We can only use our experiences to make better decisions in the future.
Although this turn in the market and economy can be very painful (that includes for me as well), this downturn is a correction in the economy that is well needed. If consumer spending continued to grow as rapid as it had been, think of what you would be paying for a gallon of gas or a gallon of milk. We were all complaining about paying $4.00 for a gallon of gas. If the economy didn’t slow down, the retail prices wouldn't’t either. Look around the area now. Gas is in the mid $2.00 range. In fact it just dropped 20 cents in one day this past weekend. Go to the grocery store. The biggest drop I have seen is in cereal. It is actually down to $2 something a box. Think about it. If we are in the mindset to spend, spend, spend, we will be paying for it.
In early May, CNN reported on fraudulent home appraisals and the agreement between Fannie Mae, Freddie Mac, and Attorney General Cuomo. To see the video click on the following link http://www.cnbc.com/id/15840232?video=734374266
Alan Hummel, Sr Vice Pres and Chief Appraiser at Forsythe Appraisals, St Paul, MN was a guest in the report. Alan is a former President of the Appraisal Institute and is a national speaker on appraisal topics.
Alan spoke about using technology to be efficient in this industry. At BK Appraisal Services we are efficient with the use of online ordering, electronic delivery, and online data sources. Our website is packed with useful information for just about anyone.
Alan also spoke about competent/incompetent (under educated, under trained) appraisers. The appraisal industry saw a 30% increase in appraisers in the past 7 years. Although I have been in the appraisal business just over 3 years and am considered a part of the aforementioned 30%, my resume shows the numerous courses I have taken to keep current in the market as well as staying current with numerous trade journals and economists reports.
Ronald Peltier, CEO of HomeServices of America, mentioned AVM’s (automated valuation model). As Alan Hummel stated, AVM’s may be ok for ‘cookie cutter’ neighborhoods, meaning all the homes are similar in size, style, condition, and construction quality but they do not take into account location, or special characteristics each property may have. AVM’s are used by lenders to keep costs down and to get a value quicker. Yes, an AVM is cheaper than an appraisal however this is a case of you get what you pay for.
The following is an article from our local paper that just put me in a tizzy. My opinion is stated at the bottom. Please feel free to post a comment. I am interested in other opinions.
The threat of losing Oceana Naval Air Station nearly three years ago forced the city to rethink how it did business with the military. The city compromised. The Navy gave a little. But now a pair of council members are chafing over the power they seem to have relinquished to protect the Beach's largest employer. This week, the council members said they feel they no longer have full control over the future of residential development around the base. "What's left for us?" Councilwoman Barbara Henley asked. "I wonder where the City Council is in this, or have we abdicated our authority?" City Councilwoman Reba McClanan said she appreciates the more amicable relationship that has developed between Virginia Beach and Oceana officials in recent years but wonders what the cost has been. "How much citizens have given up in the process to keep Oceana and the planes here, I don't think is clear," McClanan said. The federal Base Realignment and Closure Commission in 2005 recommended moving the jet base because too many homes were being built too close to Oceana. Since then, the City Council has approved a slew of new policies to keep the base. Virginia Beach and the state are spending more than $30 million to buy properties from willing sellers around Oceana. The City Council tightened its zoning rules, allowing fewer new homes near the base. And Beach and Oceana staffers now meet regularly to discuss and review residential development applications. However, the latest change has caused at least two council members to raise an eyebrow. Earlier this month, the City Council unanimously voted to slice the 65-to-70-decibel noise zone around the base into three sections with different degrees of restrictions. The western part of the band is the most restrictive, and residential rezonings for additional homes are allowed there only if nothing else can be built. Along the southern portion, by General Booth Boulevard, the number of homes allowed in new subdivisions is limited to a density no greater than what already has been permitted on nearby properties. The Oceanfront is the least restrictive section, and development plans there face little objection from the Navy. Two separate cases this week, from South Hampton Roads Habitat for Humanity and The Breeden Co., tested the new policy. The City Council approved both plans after long debates. Habitat's plan called for six townhomes off Interstate 264 in the most restricted area. The Breeden Co. wanted to build 99 apartments and a strip shopping center off General Booth Boulevard. The joint staff committee reviewed both plans and found them acceptable. That's a call the City Council should be making, not the committee, said Henley, who said she thought 99 apartments were too many in an area of primarily single-family homes. The joint committee's report is just a recommendation, said Bill Macali, a deputy city attorney. It's similar to the planning staff's recommendation on land-use issues, he said. "We're not divesting the council of any powers," Macali said. "Council has full, 100 percent authority." A call to an Oceana official this week was not returned. Still, having the Navy on board with a project will make it more difficult for council members to vote against it, Henley said. Councilman Jim Wood said he welcomes the Navy's input. "This is a process that has been ongoing since Virginia Beach was first placed on the BRAC list," Wood said. "To say at the 11th hour that we've turned everything over to the Navy is shortsighted." Torrey Breeden, with The Breeden Co., said the joint review and the new rules in the 65-to-70-decibel noise zone help developers figure out what they can build. "You know where you stand," Breeden said. "It gives the council a little cover because they can say, 'Look, they're following the rules.' "
Deirdre Fernandes, (757) 222-5121, deirdre.fernandes@pilotonline.com
Comment:
I can not believe that as elected officials some city council members are concerned about making a decision contradictory to the joint staff committee. The city council’s job is to decide what is best for our community. This is much different than the joint staff committee who is making sure the proposal is within the regulations. If our council members are concerned about making decisions then we, as voters, need to remember this at election time. The residents and elected officials of Virginia Beach need to realize that if the Navy leaves Virginia Beach, more than just the jet noise will diminish. Everyone is complaining about the drop in home values as of late. Imagine what will happen when the city’s largest employer has left town. Your home value will plummet, since we would no longer have the thousands of military personnel, families, and support businesses needing housing. So for those of you who feel you may be ‘giving up ‘ things to keep the base here and others who feel they are losing their ‘power’, take a look at your property value and then decide what is best. As elected officials, you make the decisions about our community.
These terms are heard throughout any news media now days. No wonder everyone is afraid to purchase anything. The media has put a scare into consumers, not only in the housing industry but also in the retail industry. Luckily for us here in the Hampton Roads area the housing market does not apply to all the hub-bub reported in the news. We live in an area that is very transient. Thanks to the military, the businesses associated with the military, and the shipping ports. This area has a constant flow of personnel in and out of the area. This not only helps with home purchases, but also with rental properties. The problem is that many people want to live in the past 3 years when the housing market was outrageously overpriced and home buyers were competing for purchase contracts. The market has turned into a ‘normal’ market. Buyers and sellers are negotiating a price, sales concessions are considered in the purchase agreement, and homes are staying on the market longer. Now is a great time to BUY!
If a home buyer is purchasing a home to be a bank, they are in the wrong frame of mind and will be disappointed in the short-term. However if a home is purchased as a long-term investment and is treated that way, then it will most likely be rewarding for the home owner. In all my economy classes through out high school and college I never heard of using real estate for a short term investment. The previous market conditions allowed this anomaly to happen. Unfortunately too many people took advantage of the market and got in over their head.
With the change in lending practices, many homeowners are going to lose their homes. You know who you are. Bite the bullet and try to sell your house now, plan on it being on the market for at least six months. If you choose to sell now, hopefully it will sell before you get behind on your payments. Keep your credit clean so you are able to purchase a more affordable home. As for homebuyers, now is the time to buy. Interest rates are great and sale prices are reasonable.
Today President Bush announced that HUD’s Federal Housing Administration (FHA) will help nearly ¼ million homeowners avoid foreclosure. The new plan called FHASecure will start immediately. The plan will allow borrowers with strong credit histories, who had been making timely mortgage payments before their payments increased, but are now in default, to qualify for refinancing.
FHA will also implement risk-based insurance premiums that match the borrower’s credit profile with the insurance premium they pay. In other words, riskier borrowers will pay more in premiums. This risk-based pricing structure will start on January 1, 2008. The combination of the FHASecure plan and the risk-based insurance premium will help bring stability to the housing market. It will also allow those who were in good financial standing before their payments rose to keep their homes.
With the changing market, FHA has seen an increase in the number of conventional borrowers refinancing into FHA products. The FHASecure program will help even more borrowers. The number of FHA transactions has tripled since 2006 and are projected to surpass 100,000 loans by the end of the current fiscal year.
FHASecure loans will be underwritten similar to the other FHA products. Each loan will be underwritten to ensure the borrower is able to repay the debt. The loan will require an escrow account for taxes and insurance and will continue to offer unprecedented foreclosure prevention assistance. The FHA has never permitted and will not include pre-payment penalties or teaser rates that are common in exotic mortgages and have caused much of the current market troubles.
To qualify for FHASecure, eligible homeowners must meet the following five criteria:
The FHASecure program should bring liquidity to the mortgage market. FHA anticipates more lenders will offer FHA-insured loans, pool them, and securitize them with the Government National Mortgage Association (Ginnie Mae), which has the full faith and credit of the U.S. government. This guarantee makes Ginnie Mae's mortgage-backed securities the safest on the market and helps to channel greater capital into the housing market, benefiting U.S. homeowners.
Since its inception in 1934, FHA has helped almost 35 million people become homeowners, making it the largest insurer of mortgages in the world. Today, President Bush also urged Congress to quickly pass the Administration's FHA modernization proposal to help more families in need.
For more information about FHASecure and other FHA products, please call 1-800-CALL-FHA or visit www.fha.gov or www.hud.gov. For a list of your local homeownership center or a HUD-approved housing counseling center, go to www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
-excerpts taken from HUD website.
We have all heard about those FREE online home value estimates offered by companies such as Zillow, Home Value Estimator, etc. If you are seriously looking for the value of your home, do not rely on these sources. I have personally tested these sites and have not been able to get a reliable value.
My home is located on a navigable canal in a rural area. A recent appraisal has valued the property in the mid $400,000’s. Zillow and Yahoo Homevalues were unable to find a value for my property, while Coldwell Banker’s Home Value Estimator was able to give a value range. The problem with the range given is that the home was purchased less than a year ago for more than the highest value in the range and a recent appraisal is almost $100,000 more than the highest value. This is a big difference if these values are being relied on for future real estate planning such as refinancing or selling.
If you live in a suburban area which has had frequent sales, the values may be more reliable, but beware. These values are derived from public records which are not always accurate. These estimates do not adjust for upgrades such as granite, marble, hardwood, inground pools, central air, exterior material, etc. It also does not account for lot size or waterfront properties. The best way to get the most accurate home value is by having a full appraisal done on your property by a licensed real estate appraiser.
For more reasons to have an appraisal done on your property instead of relying on a free home value estimate, check out the ‘About AVMs’ button on my home page. To find a licensed appraiser in your area go to http://appraisalinstitute.org. “Find an appraiser” is at the top left side of the page. But of course if you are in the Hampton Roads Area we would gladly be of service to you! Give us a call or order right on line.
The following is an article from the Appraisal Institute website regarding home sales. The difference in the number of sales vs. the sale price is interesting. I hope you can find this information useful.
Sales of new homes surged in April by the biggest amount in 14 years, but the median price of a new home dropped by the largest amount on record. The mixed signals left no clear picture of whether the worst of the nation’s housing slump is over.
The Commerce Department reported that sales of new single-family homes jumped by 16.2 percent in April to a seasonally adjusted annual rate of 981,000 units. That was far better than the tiny 0.2 percent gain that economists had been expecting. However, the median price of a new home sold in April fell to $229,100, a record 11.1 percent decline from the previous month. The big price decline indicated that builders are slashing prices in an effort to move a huge overhang of unsold homes.
The jump in sales was the biggest increase since a 16.4 percent surge in new home sales that occurred in April 1993. However, analysts cautioned against reading too much into the big gain, especially in light of other surveys showing that builder confidence has sunk in recent months over worries that troubles in the subprime mortgage market will further crimp demand in coming months. There was also concern because all of the strength in sales came in one region of the country, the Northeast, which saw a surge of 43.1 percent. Sales were down 28.1 percent in the Midwest and 25.4 percent in the West. Sales fell a smaller 3.4 percent in the South.
The drop in median prices in April compared to March was a record one-month decline. If the April sales price was compared to the sales price a year ago, the decline was 10.9 percent, the biggest one-year drop since 1970.
It is that time of year again. We have all received our new tax bills. Although some are astonished by the amount their taxes have increased, those of us in the real estate industry should not be taken by surprise. As a licensed residential real estate appraiser, I am aware of the fact that tax assessments are usually a year behind the market. Take a look back at last year. Many home owners were basking in the glory of the equity accumulated due to an outrageous real estate market. Now however, the market is adjusting itself into more realistic values, many home owners are getting a reality check.
Although I do not have experience in mass appraisals, I will try to explain the difference in tax assessments and real estate appraisals. First, we need to understand the difference between an appraised market value and a tax assessed value.
o The definition of market value as defined by USPAP (Uniform Standards of Professional Appraisal Practices) is an opinion of value that presumes transfer of a property, as of a certain date, under specific conditions identified by the appraiser. In lender’s terms it means the most probable price a property should bring, as of a specific date, in a competitive and open market under all conditions requisite to a fair sale. The buyer and seller are prudent and knowledgeable and the price is not affected by undue influence.
o A mass appraisal is defined as the process of valuing a universe of properties as of a specific date using standard methodology, common data, and allowing for statistical testing. In other words, a mass appraisal value is determined by using models, statistics, and ratios.
Market value is determined by using sold properties within a particular market area. The value is derived from the market, not through models and charts.
When a mass appraisal is conducted, city assessors do not normally enter a property to obtain interior information. They rely on public records and building permits to record room count, number of bedrooms, number of baths, floor coverings, heating systems, etc. An exterior inspection is usually completed annually to verify any additions or deletions to the property such as living area, decks, covered porches, etc. They also look at the exterior walls, foundation, and roofs. Once this data is obtained, it is compared to other similar properties in that neighborhood. A statistical model is used to calculate the value of each structural improvement. This value is then multiplied by a factor to obtain a tax value. Your local city assessor’s office can answer any questions you may have on your tax bill. You can also read more information on my site by clicking here AssessmentAppealServices
Contact Us | Order an Appraisal | Fax an Order | My Blog
Copyright © 2008 BK Appraisal ServicesPortions Copyright © 2008 a la mode, inc.Another XSite by a la mode, inc. | Admin Login| Terms of Use| Site Map
