Be an educated buyer!

Ten years ago the worst housing crisis occurred. About 2.5 million American buyers  still owe homes worth less than their mortgages. That is about double  what a normal housing market carries.  Many housing markets around the country  are now close to their 2006 values,housing markets however,are hard to image as cyclical.  The market timing is everything, be aware of the patterns that happen in your area and how fast and long they occur.  Usually they are within 7-8 years.

Each cycle will be affected by the relativity within the particular area- ie, jobs, general economy, government regulations, cost of money, building cycles (different) and area of demand. You can’t  control outside factors that control the values of housing only the intrinsic value.  Remember when you buy a property it is a huge investment that affects many aspects of your money.  The costs of housing often goes up as your mortgage may go down- taxes, insurance, utilities, repairs.  Sometimes ownership is NOT always positive , even rentals.  The costs outweigh the value.   It is  a good idea to buy the smallest house in a stable neighborhood, than the biggest house in a declining neighborhood. Be aware of how much money you reinvest in your house- not all of it returns. For instance new windows; no value there, however, cooling costs maybe lower, view better and quieter it makes for a quicker sale.  A pool will return 75%, a kitchen 89% and so on. Sweat equity is always a way to big value.

Another words home ownership has changed in the US.  Many people like to rent  rather than buy, they expect gardeners, midnight keys replacements, plumbing repairs at a phone call, and ften pay late. Many people ARE NOT great tenants or have any pride of ownership. These are the tenants that cost you money- often big money.

Be educated when you buy , keep a reserve of cash for repairs, chose your realtor carefully.  The internet is not the place to research, walking the neighborhood is, talking to neighbors, sitting in car and watching what goes on.  Understand all the complications of ownership and property management. Understand your escrow, watch the adjustments, and understand your local market and the local economy.

Supporting Market Conditions, it is harder than you think!

Supporting market conditions is a very important part of the appraiser’s job- it is mostly misunderstood by sellers, and often miscalculated by realtors. It takes many  years to understand the foundational  value of a home.

It is time to understand the appraisal and the job of the appraiser.  The appraiser must support the current market conditions. This has always been a Fannie Mae requirement.  It is also a Collateral Underwriters(CU), and  Uniform Standards of Professional Appraisal Practice (USPAP) requirements. These requirements satisfy the most demanding reviewer.(AMCs, lenders, and underwriters)

Data is from local MLS markets, however back up data is  graphed and calculated  for specific requirements. This takes very specific information compiled from  the appraiser.  The extra work (and your costs) money, is  well spent- it saves the  reviewers time- enough exhibits to establish the current market value.  The analysis uses median prices rather than average or modal prices.  The Appraiser uses the one that makes the most sense in that particular market area. This requires analyzing information and comparing several things. All three factors- mean, mode, median,  are reviewed then the most accurate information, or the most reflective, is used.  This is not the price  the seller may want- he only understand his value, not the markets fluctuating value. Remember a seller can put any PRICE on his home, it isn’t a VALUE.

MARKET INFLUENCES

SR 1-2(3) (requirements)  – requirse the appraiser to identify the “physical, legal, and economic attributes…” which influence a properties value and current marketability. Part of the analyses behind this is the study of marketability, submarkets, and how the market changes, is  its current  influences.  The market is always under influences related to supply and demand, the buyers ability to pay and a sellers ability to sell.  Even in a stable market( Tucson is not) there are forces at work that could unsettle the market any a moment.  Increase in interest is one of these forces- sometimes it becomes cheaper to remodel, stay, or do nothing.  Moving costs money, moving up costs money, and selling a property costs money. Often consumers are unaware of all the costs to sell a property and are shocked at how little they really get to keep!  When markets have a lot of buyers – buyers are at a disadvantage, finding themselves in bidding wars. The only way to get a property is to overpay- in markets like these the price is clearly the issue, the value is another! It doesn’t mean the price is equal to the value- it means YOU paid too much!  The buyer is bidding to overcome the real estate shortage in THAT particular submarket, at that particular time. Be aware!  Your bid(price) represents a non-real estate component.

Appraisal new technologies

Tucson doesn’t create enough good jobs, have a stable influx of new people, or have friendly policies for new business, therefore the housing market is extremely volatile. We rode the wave of increased prices last year as everyone believed the housing market was improving, and indeed several areas of the country saw great gains- however Tucson has remained sluggish and probably will until 2016. The price increase in 2013 has flattened this year and only lower priced homes continue to be in a sellers market range. Still a few investors are buying, but that has slowed also.
Current credit liabilities and banking requirements with loans, documentations, house pricing, have increased the pressure of more accurate valuations. Appraisers have made adjustments to the changing increase of market data using advanced analytics and influencing technology, both having a significant influence on how the appraisers come up with value. The seemingly endless information, facts, figures, numbers, and charts is leading regulators to hold banks to a higher standard thus turning down more individuals for loans. In return they are holding appraisers to more stringent requirements and increased usage of mobile technology for market analysis. Big data is one of the five biggest trends redefining the valuation process. Augmented reality,a virtual layer of data with geographic specificity, will facilitate market analysis. These new technologies will be enhanced by experienced appraisers in your area who understand the value of mega data, and the changing economics of YOUR community. Be aware poor appraisals have become part of the problem in house price devaluation/ fluctuation, banking standards, and government policies, nobody is really winning here. Low values of homes keep people from moving, relocating, fixing up their home, or feeling positive about the economy.
It is a complicated time to buy, buy only if you anticipate staying 5 years. Realize a 3% increase in home values will be the norm. We are finishing up a 7 year downturn in the business/builder cycle, perhaps the model will return in a positive upturn-

Did you miss the upturn?

Now, one year after I originally posted it was time to buy, I can safely say the market is on stable footings. It has been a difficult time, mainly because of the finance. Strong data has helped to stabilize the markets, yet remember data is backgrounds, what we see NOW is old. Rates are going to go up slightly and keep some buyers out, but others will continue if in the process. The market is cooling from the Spring oversell, cash buyers , investors and buyers are slowing also because inventory is low. Tucson’s real estate markets haven’t risen like national levels, D.C., Florida or California but has risen quickly and now is leveling out. Tucson has price increases, but limited buyers, especially in expensive homes. Next comes a normal market as people adjust to slightly higher interest(still historically low). Flippers will slow down, and prices won’t rise with multiple offers. This becomes a normal buying market with average value increases, qualified buyers, and homeowners getting the financing they qualify for. Financing becomes easier to get for the working family and interest won’t really affect the market other than HOW much they can buy. We still need the job market in Tucson the improve to help the sale of homes in Tucson.
The volatility in the equity markets will affect the interests rates off and on, but in the end, the rate makes adjustments from demand and supply. Be careful when you refinance, or hold off for a bit to buy- let the interest market stabilize- it may come down and level out before going up in 2014. The markets equity and housing in combination) are still unstable because of the economy. Interest can go up fast so keep informed, be prepared, what the markets for the best timing to buy or refinance. Watch all market signs, consumer confidence, prime rates, documented positive growth- and remember markets see ahead, economic data reads in arrears. It will be an economic recovery, but slower and with a muted rise in the 10 year bond. It is time to buy, if you catch another dip in rates. In Tucson we are beginning the upturn in the seven year housing market normal cycle.

Ok, ok, ok, it is time to buy!!

Lucky you, it is finally a good time to buy. If you HAVE cash, patience, and a super stable job- go ahead buy. Don’t necessarily listen to an agent,do your own homework. The best way to buy is to be educated and not rely on anyone to give you a false information. The market has flat lined, that means, you won’t get alot of appreciation, but you will get a good deal and know you are almost or, at the borttom of the market. Plain old ordinary people can make money timing the market, buying low and selling high, but it isn’t as easy as that. The market is still scared, buyers are scared and the economy still plays the largest part of the movement in the market.
Housing trends tend to be 7 years well we starting (offically) in 2008, California 2005, and other parts of the country followed a slightly different pattern, but the majority of the country is trending upward- Yea for us who waited it out…
That doesn’t mean housing is going up, however, it means we are stablizing and that alone is something new. The inflationary positive values upward should begin in 2015, (3% a year average).
Most people who are in the Real Estate industry realize interest has not been so low since the 60′s. We get to go back in time now for buyers- First time home buyers, people with great credit waiting to move up, people who have been renters ,waiting cash buyers, investors, and others who have been patient. The market is till tough to get a loan, so check with several banks and credit unions push hard to get a good loan. The laws have once again changed, and will change again in July.
Purchasing a home NOW offers the reassurance of buying low, chosing from a decent inventory, and buying at a low, low interest rate. Don’t get emotional involved, don’t get in a bidding war, and don’t think you lost something GREAT! There are alot of great homes out there. If you are flexible, certains areas are still lagging and or depressed area ( moving slowly). Be carefull when using zillow or other web sites for a basis on property values, they CAN NOT consider all options as would an appraiser, because they are NOT familiar with the specifics of the house. Appraisers consider views(how could zillow consider that????) interior finishes(not track upgrades necessary) lot orientation, fireplaces, neighboring communities, foreclosures in the areas, specifics from the part of town,(buses, shopping, rural) and specific distances from/ to the home. SO the appraiser gets the best information from his data, education, local market trends, and national/local effects of economies. The value of appraisers in the market will return once the economic values of real estate return to normal levels.
We still have shadow inventories,( houses to be put up for sale from the banks or homeowners), however the inventories are dropping to normal levels. Homes have traditonally given value to people who own their homes for many years, cash out and have some money for retirement, however with many values back to 2004 ,many retirees have no equity and will hold as long as possible- look for a long slow market improvement. With all negative considerations the market has improved just because of time , not any thing anyone has done(infact mostly the markets have improved JUST BECAUSE nothing goes down forever). Interesting fact, remember all markets are cyclical. Always do what others aren’t doing, run against the trend at the time!

Same old, same old….

It seems to me the great recession just keeps on giving, or should I say taking. Home repossessions will be topping 1 million, up from 804,000 in 2011. Total foreclosures fell 34% in 2011 national to 1.89 million, so we are still cleaning up inventories. Housing inventories are slowly going down , but only a few can really get credit to buy, are stable enough to purchase a house and or feel confident with the economy. The MEDIA will continue to report a very rosy picture, but the reality is still tepid, barely breathing. The houses that are selling are forclosures and distressed sales- don’t sell if you can help it. It still isn’t a good time. Things, the micro economies(house values) are improving, however the macro economies are NOT. The job markets are improving in certain areas, that weren’t affected to begin with, some house sales(pricing) are improving, however it is so diferent from area to area, Tucson is still considered declining overall. Watch out for the statistics from January because they are going to be ugly, it will be affecting all sorts of numbers- stocks, housing, and retail. Remember people buy when they feel confident. 2012 should be a better year, that means- stablization of prices generally speaking, however gas is going to affect people in a negative, way once again. That has a negative affect on how people feel about buying- it all runs together.
The greatest asset Tucson has is our weather – because boomers will come with money and THAT ALONE, is the future. It will grow our markets. At some point we WILL need more housing, apartments, inexpenisve first time homes, and single family residences. Yea, to the future of growth.
I have lived in Tucson my whole life and have watched the building cycles, this is an odd one- because of the continuation of negative influences. Prices won’t be increasing any time soon, but hopefully we will feel more confident. Several factors need to come together to make our market stronger. More lending flexibility(Frank Dodd regulations -government), lower cost of ownership(local taxes,government) , increase in educational values and a strongereducational system(local governement), and so it goes, there is a theme that we cannot readily fix. Several personal ideals come into play also, personal responsibility- (affording what you buy),being realistic about values going forward, and understaning what it takes to be a homeowner. Buying a homes is an investment with time and resources. Until these things are understood in the market the housing slump will not improve. It is slowly improving, but it could just continue this way until 2015 -flat. Then it becomes a TEN year business cycle, not a seven. Be involved understand real estate before you buy! Use a MAI appraiser to understand value before buying, or selling- real estate agents job is to SELL understand that fact- they don’t eat if they don’t sell!

Keep waiting!

The housing market in NOT going to improve anytime soon. With poor slow improving unemployment, foreclosures, bank regulations and financial constraints the housing market is doomed to death. Don’t buy anything unless you have money(cash) a really undeniably stable job and are going to stay for 5 years. The market has a long way to go to pull itself from sinking. It is no ones market! Keep in cash, keep debt low and be prepared for a rocky ride throughout next year. The election is the absolute pivital point of the housing market . Houses continue to go down, there is very little value that is stable in the stock market, and gold and gas are rising, this combination is only waiting for for one ounce of bad information to drop further. Foreclosures still out sell existing homes, and prices have been pushed lower, the good signs, inventory is dropping, interest is at record lows, and new homes are beginning to sell. Buyers with great credit are buying multiple houses, however rents are still weak in Tucson. There really is no good sign yet, keep waiting. You finally need to realize the house prices of 2005,2006, and 2007 are gone and will NOT return for twenty years. Be prepared to take a hit at some point.

What does a Real Estate Appraiser really do for ME?

An Appraiser protects your interest in your biggest assest and understands the local market trends! He is a person with a service to offer the community where he lives and cares about. There is so much controversy over how the housing market is failing I thought it would be good to bring some professional insight into the mix. The governement’s view point of housing lacks the knowledge of how the free market really works- and because now FEAR has controlled the buyers/ sellers in the market ,the competive edge of the market has changed- exactly like the stock market. A great point to remember, (when trying to make money) when eveyone runs away – you STAY. Now is a good time to buy, it is just conviencing the average buyer with money and good credit. This housing market however, is not going to turn around anytime soon. The govenment policies will have to change to really make a positive impact on sales. We will continue to improve slowly at best, otherwise flat and that means house prices will remain the same.
Now to explain WHY an appraiser is an important PERSON in the mix.
We are professionals (MAI, SRA, designated appraisers)that often study market trends nationally, understand and relate to values in time(estate properties), can review markets in particular stigmatized neighborhoods through documentations, and have specific collected data that most normal individuals can’t afford to use or have. For instance, how problems with Zillow affect your property; it can’t compare YOUR views, YOUR particular property assests, it can only clump information that is gathered on the computer and average that information together to get an average- therefore often it is severly incorrect. If banks use these number you won’t ever get a loan, some real estate agents use something called a CMA Comparative market analysis- this too has its faults. Real Estate agents look at the property from a SALES point of view , not a value- Two entirely different ways to understand property- often it is only about making the sale, being your FRIEND, working the area, and so on. Remember it is thier job and if they don’t make a sale, they don’t eat.. Appraisers have no interest in what the price of the property is only value. They care what it will sell for-in a specific time frame. So if an appraiser from Phoenix( out of the Tucson area ) comes into to appraise your home they only know to compare Phoenix prices, zillow or CMAs the lowest values…..they only have access to computer statistics, BAD news for you the seller! They really have no interest, they are salaried employes for a management company- they just do thier job, from a form. They are often from out of the area!
This is a big problem in the housing market now- many unqualified appraisers are coming through management companies (because they are cheap and ordered through an online management company from banks, they have minimum educations, qualifications and only do houses because the government gives them a format form. You get no extra choices for views, custom, neighborhood accommodations, and so on. If this continues we might as well all live in track homes because that is where the value is going. We all will have equal living arrangements. Ask your banking institution for an MAI or ask “Does all the money I pay go directly to the appraiser?” You will be shocked out of the $350.00 you pay the bank keeps most of it and gets the cheapest guy to simply write a report. Repeat, I said “write a report” not do an appraisal of your property.That IS not good for you or looking out for your interests. Be aware, be a wise consumer, protect your valuable assest, pay attention to governement rules and how they affect your assests. These are difficult times for homeowners and if mortage tax breaks go away we all are going to take another hit. Hang in there we are half way through 2011 and maybe the end of 2012 will be better! Realistically it looks like 2013 .

Tucson is slow to improve

December 2010, here we are at the end of the year and values still remain deflated, sales are difficult, and financing is hard to get. Nothing has really improved this year, we can only hope next year will improve.

The chances of price increases, value appreciation, or positive housing growth is going to be slow and difficult next year. It’s the economy!!

Over and over again I have to state this because people still won’t believe it, now believe it! Between high unemployment, slow consumer spending and general fear people are NOT buying or willing to part with money.

The US economy will remain sluggish and probably should grow by about 2.6% in 2011, that’s not enough to feel an improvement. According to the National Association for Business Economics the jobless rate will remain above 9% next year, at least the relapse of the recession is getting weaker. We will have another year of flat-lining in housing before any real growth to improve housing values. Still too many foreclosures are flooding the market.

Hang on, it may be tough again next year. At least the banks are now taking a longer time to release new foreclosures onto the market. This allows housing sales to occur that can lift the comparable sales by adding in stronger values. This pricing situation takes time to remove the weaker sales and will eventually solidify normal market pricing. The market has tightened and sales are occuring. The Tucson listing numbers have dropped dramatically. Tucson is slower to recover than other metropolitan areas, but at least its a great place to work and live, that is, if you have a job!

What can we expect now?

We are clearing out some of the back log in housing inventory, however things still look bleak. The July statistics are dismal at best. Only one positive sign is appearing, Tucson is beginning to move in the right direction! Pending contract increased by 47%, however new listings also increased by 23.65%. People must be getting tired of waiting to list their property, it still isn’t time to sell if you have been waiting, prices are still declining. High foreclosures, credit availability, high job losses, and track over building is pushing the prices down, but perhaps a base is beginning to form.

The average sales price for July 2010 is now $192,072. Tucson has returned to a 2004 price value. The last 3 years the prices in pockets of the city, have fluctuated up and down , but the downward pricing trend has been widespread.

Zip codes with stronger sales have been 85706, 85718, 85745, 85757, at least 30 units have sold in these areas over the past year. Tucson still has a large number of listings 6,668, coming off its highs of 10,387 in April of 2007. Home sales volume from July 2009 to July 2010 is down 39%, unit sales (the number of) is down 33% too.

I know these statistics look overwhelming depressed, however the number of houses on the market has slowly gone down, and that will eventually help to stabilize our market.

Tucson’s market is generally slower to recover than other metropolitan areas, accompanied by slow job growth, a slower pattern of growth, and harder regulations on credit. This takes times to improve these areas too, in fact several years. We are probably looking at 2012 until stabilization occurs in Tucson ‘s real estate markets across the city.

This winter with newcomers, visitors and hopefully a stronger national economy our local economy may continue to improve, but all signs lead to a very, very slow recovery and a difficult time ahead for real estate in Tucson!

Remember to call Jeffrey Patch 520 326-6066, Tucson Real Estate Appraisal Inc. The ONLY Tucson Real Estate appraisal team that has worked in this market for 40 continuous years.

He is an MAI., SRA, licensed real estate appraiser in the state of Arizona for 30 years. Call him today with your questions or to order a report.