Appraisals: Friend or Foe?

Whenever you have a lender involved in the purchase of a property an appraisal is required.  There are more stringent requirements on appraisers these days, many of which I believe are justified.

Did you know that the appraiser will have a copy of your purchase and sale contract? They will. And frankly they will try to hit the agreed upon price if they can justify it.  To keep both sellers and buyers satisfied that is the best result.  But today we do see more issues arise than we did in the past. One of the areas that can be difficult is we have seen appreciating values this year in Ada and Canyon counties, contributed to by out low inventory levels, multiple bids and low interest rates. It can be difficult to find accurate comps for your listing.

In a recent survey conducted  by the National Association of Realtors (NAR), it was revealed that:

• 11% of Realtors said a contract was cancelled because an appraised value came in below the price negotiated between the buyer and seller


• 9% reported a contract was delayed


• 15% said a contract was renegotiated to a lower sales price as a result of a low valuation

I personally have not had any major issues thus far, but I work hard to establish accurate values for both my sellers and the buyer I represent.  I am also including an interesting graphic from KCM Blog.



 

Housing: The reasons it is coming back

Here is a good treatment on the housing market and the upward pressure on values.

Monday, we told you that many experts are beginning to call a bottom in house prices. Why? Writing in the Financial Times, Roger Altman, former deputy Treasury secretary, explained why he is so bullish on housing:

“This surge will be driven by a combination of improving house prices, a lower inventory of homes for sale, rising rates of household formation and population growth, and improving access to mortgage credit.”

Altman gave his thoughts on each point:

PRICES

“The S&P/Case-Shiller Composite 20 City Home Price index has risen 8 per cent since March. Indeed, Barclays has projected that, by 2015, nominal home prices will exceed their 2006 peak. Home affordability is also way up, as the ratio of mortgage payments to both income and rents has never been more favourable. Moreover, the relationship of home prices to household income is back to the level of 30 years ago. Rising prices and affordability, of course, lead directly to the buying and building of homes.”

HOUSING INVENTORY

“The levels of relevant supply have fallen sharply. The number of homes for sale has fallen back to its long-term average of 2m. Yes, there is a larger “shadow inventory” of homes that are in foreclosure or carry delinquent or defaulted mortgages. However, many of these are distressed, in that they have not been physically maintained. This means that the supply has become two-tiered – quality homes and distressed homes. For most buyers, only the first of these two markets is relevant and the supply there is approaching its lowest level since 1992.”

POPULATION GROWTH

“Housing demand is going to be strong, driven by demographics. The International Monetary Fund forecasts that the US population will increase by 15m during the 2012-17 period, more than the increase of the past five years. The two groups of the population that are growing fastest are the over-55s and the so-called echo boomers, the grandchildren of the baby-boom generation. The first group has the highest rate of home ownership. The second has been renting disproportionately, and is primed to start buying. JPMorgan estimates that 6m new units of housing are needed by 2017 just to serve the bigger population.

HOUSEHOLD FORMATIONS

“There is the coming recovery in household formation. According to JPMorgan, this rate was steady at about 1.4m annually from 1958 up to 2007. But, it plunged below 500,000 for the three years following the financial crisis, as young people moved in together or lived with parents. Now it has doubled from that level and estimates of pent-up households are at an all-time high. Most expect formation rates to rise much further still, exceeding the 50-year average for a few years.”

IMPROVING ACCESS to MORTGAGE CREDIT

“The availability of mortgage credit is starting to improve. Underwriting standards tightened sharply following 2008 and the proportion of home sales that are financed by new mortgages is now at a 10-year low. However, household finances have improved sharply, with debt service ratios returning to pre-crisis levels. Moreover, banks also need the income from originating mortgages. Mortgage credit availability is therefore opening up, which also boosts home sales.”

It seems apparent that many aspects of the housing market are in the process of turning much more positive.

 

Cycle of Foreclosure

 

Ada County Real Estate September Report

Is this where I say “I told you so…?” by marclebowitz   by Marc Lebowitz, RCE, CAE   Executive Director Ada County Association of REALTORS   Sales in September 2012 were 563 in Ada County, an decrease of 3% compared to September 2011.   Year-to-date sales are 5,258; 9.13% over the first nine months of 2011.   Dollar volume for September was up 14% to $117Mil. For the year we are at $1.043Billion!   New homes sold in September increased 53% over new homes sold in September of 2011!!…and are up 63.4% YTD.   Historically, September sales decrease by 9% from August. September 2012 sales decreased by 20% from August 2012.   Of our total sales in September… 21% were distressed (112 total sales)….unchanged from August 2012. In September 2011, 42% of our sales were distressed.  In January 56% of distressed properties were REOs and 44% were short sales.  In September the ratio was 71% short sales (79 total sales) and 29% REOs (32 total sales). This is six consecutive months with short sales being the larger percentage of distressed properties sold.   Pending sales at the end of September were 1,110; unchanged from the end of August. In general pending sales in May are the highest of the year; and June the second highest.  The percentage of pending sales in distress increased 1% from August, totaling 28% overall. There has been very little fluctuation in this number since May 2012 when we first went below 30%. A year ago we were averaging close to 50% of pendings in distress; but have decreased steadily since January.  Of Pending sales in distress, short sales outnumbered REO’s 2.5 to 1.   At the end of September, we had 28% more sales pending than at the end of September 2011.   September median home price was $174,990; up 21% from September 2011. Median home price is up 27% since January of this year and above $150,000 for eight months running.  We continue to outpace our national recovery; according to NAR’s most recent report.   New Homes median price for September was $240,565; up 12.5% from September 2011.   The number of houses available decreased 1% from August; reversing a five month trend of modest increases. At the end of September our total active inventory was 2,092 homes. This is 9% less than last year at this time.   At the same time, the percentage of distressed active dropped 1% to 23%. This is the lowest number we’ve seen in several years. We have been hovering between 33% and 36% for the last year. We remain well below the 40% levels set last spring….when we were on the increase.   With an inventory increasing and the percentage of distressed inventory decreasing; median home price will continue to strengthen.   Of our Distressed Inventory 91% is Short Sales (437 homes) and only 9% is REO (43 homes); nearly unchanged from last month.   Available inventory declined in most price points.  We added eight homes in the $200,000 to $250,000 and ten homes in the $400,000 to $500,000 price ranges…and…we added one home in the $700,000 to $1,000000. All other price points had decreases in available inventory.   The number of available new homes increased in the price ranges of $160,000 to $200,000 by a total of ten homes; and by seventeen homes in the $250,000 to $300,000.   In Ada County we now have less than 3.2 months of inventory on hand.   The price category in shortest supply is in the range of $120,000 to $159,999 where we have 2.3 months. All price points up to $400,000 have less than 4 month’s supply. We have benefited for nearly two years from inventory levels much lower than national average.   Multiple offers are much more prevalent; now becoming the norm.   Based on September sold data, our most desirable price point is $120,000 to $160,000 which was 23% of total sales. The next largest price point sold is $160,000 to $200,000 at 15.4% of all sales.

 

Boise Skyline Condo

I have a new listing, a stunning two story condo in the Veltex Building in downtown Boise. Few residences in Boise match this for location and amenities.

This penthouse unit features spectacular South and Southwest views.



Modern design and attention to detail.





Listed at $1,275,000 If you would like to view just give me a call! 208-602-0055

Is the California Exodus Restarting?

I received correspondance from a young family today thinking about transferring here to buy a house instead of continuiing to try and locate a house in California they can afford.

Next week I have a family coming to purchase a home after selling there home in California and due to the huge value difference they are planning on paying cash here for a similar home that they sold there.

Both of these buyers will be transferring within the same companies for employment.

So it made me wonder, if the influx is returning. It has in the past been quite pronounced, and then it had seemed to die down along with most areas of our market, but based on my experience it appears to be back on the upswing.

Ada County, Prices UP and Sales UP

Here is the August Market Report in Pictures.

Impact of Interest Rates on Cost of Your Idaho Home

I touched on interest rates in yesterday's post, here is a graphic that illustrates it very well.

Idaho Home Prices Are Going UP!

Corelogic is reporting that home prices rose more in August than any time since July of 2006.

Home prices increased 4.6 percent year-over-year in August. This marks the sixth consecutive increase in home prices on month-over-month and year-over-year bases too, CoreLogic reports.

That is, of course a national figure, but IDAHO was one of the five highest appreciating states in the country.

So what does that tell you?  The time to buy is now, home prices are going up and interest rates are at historic lows. My last buyer is getting 3.5% on a 30 year fixed rate. AMAZING!

Call me today to help you find your new home!

If Need to Short Sale, DO IT NOW!

I have spoken about this before and so far the Mortgage Forgiveness Act has not been extended. Will it?  Most people believe it will,  one Hill-watcher only puts the odds at 60-40,  but if it is not, it will have major negative consequences for those folks short selling their homes. (As well as going through foreclosure!)

Now I am not an accountant or an attorney, and if you are facing these events I encourage you to seek the advice of competent professionals.

But my understanding is this, if you borrow money from a commercial lender and the lender later cancels or forgives the debt you may have to include that cancelled amount as income for tax purposes.  You will receive a from the lender, and it will be reported to the IRS, the amount forgiven on a Form 1099-C, Cancellation of Debt.

The Mortgage Forgiveness Debt Relief Act allowed that amount to often be excluded from income on certain cancelled debt on your personal residence. It will expire the end of this year unless there is congressional action to extend.

So if you need to do it and have been putting it off, call me TODAY, time is nearly gone. 602-0055