The National Association of Home Builders (NAHB) reported this week one out of every three of its builder members has lost a sale during the last six months because of home values reported by appraisers.
NAHB Chairman Bob Nielson said, "The inappropriate use of distressed and foreclosed sales as comparables in determining new home values is needlessly driving down home prices, killing home sales, causing more workers to lose their jobs and delaying a housing and economic recovery."
The NAHB did not stop there, further hammering appraisers with the following:
* According the Association, appraisers are using "faulty" practices by utilizing distressed homes as potential comparable sales against new homes. Mr Nielson said in a statement that "This is not only unfair and unreasonable, but it perpetuates the cycle of declining home values, drives more home owners underwater, harms local economic activity and acts as an obstacle to the recovery of the housing market."
* Mr Nielson notes that in many cases, new home appraisals are coming in below the cost of construction, because of flawed appraisals for utilizing existing and potentially distressed homes.
* Per the NAHB, These appraisal practices are a major contributing factor to the current acquisition, development and construction (AD&C) lending crisis that has choked off credit for home builders and threatens to prolong the current housing downturn. Falling appraised values for land and subdivisions under development have led some financial institutions to stop lending to developers and builders, to demand additional equity and even to call performing loans.
* The NAHB has been having summits, with leaders throughout the housing industry in an effort to find solutions that will allow appraisers to develop realistic valuations based on sales that are truly comparable.
Mr Nielson and the NAHB concludes that, you guessed it, “Major reforms in appraisal practices and oversight are needed to ensure that appraisals accurately reflect true market values and don’t contribute to price volatility or harm aspiring home owners and move-up buyers.”
One thing I know from the real estate world: It is always the appraisers fault. NOT! What we do have from the NAHB is information misrepresentation.
This must have been some series of summits. A bunch of bureaucrats gathered together to central plan the housing recovery, culminating in the one thing we need less, not more, of; additional regulations.
If additional regulations were the answer, the sweeping regulatory action spearheaded by former HUD Secretary and Architect of Ruin Andrew Cuomo, The Home Valuation Code of Conduct (HVCC), would have done the trick. Instead, it has wrecked the appraisal industry, leaving unregulated Appraisal Management Companies to coordinate, and in many cases dictate, appraisal performance.
Since distressed properties make up approximately 65% of the market here in Florida, it would be highly inappropriate to fail to consider these as potential comparable sales, provided the gross living area, age, amenities, and, of course, condition, were reasonably similar.
By applying political pressure to "develop realistic valuations," made as instructed will become a reality and as a result, valuations will be lacking in adequate support and accurate value.
Appraisal practices, as governed by the Uniform Standards of Appraisal Practice (USPAP), provide a framework for appraisers nationwide to adhere to in an effort to provide consistent and accurate valuation through the three approaches to value. These voluminous guidelines are a contributing factor to providing the industry with appraisal reports arriving at well supported value indications , not further deteriorating the housing crisis as the NAHB says.
Conspicuously absent from the many factors cited by the NAHB for the continued downward pressure on the housing market are the actions of the Obama administration. It is well documented that the origins of the collapse centered around the governments efforts to provide housing to buyers the marketplace weeded out. These potential buyers were not weeded out due to race, as ACORN would have you believe, but due to the higher risk associated with their ability to repay the loan. Before political correctness ran amok, his used to be referred to as sound business practice.
Among those applying pressure to the banks in the form of threatening race related boycotts was a young attorney for ACORN, Barack Obama.
While George Bush made failed attempts at forcing Congress to rein in the Government Sponsored Entities known as Fannie Mae and Freddie Mac, under House Finance Chairman Barney Frank, the Congress looked the other way.
Meanwhile, instead of letting the market cleanse itself, the administration has invented program after program to reward bad behavior and prop up the values of housing, which has only prolonged the pain and the problem. Government, who cannot be trusted, should leave the housing marketplace and let the free market establish a base for prices. In fact, we now learn the housing numbers have astonishingly been inflated.
Housing is not the only place numbers are inflated. Government spending, regulation and taxation is what is crushing the job market, with unemployment actually around 12% rather than the reported 8.6%, and for buyers to feel comfortable making large purchases in the form of housing, the job market needs to be at worst steady. Under this administration, there is no job creation, debt is expanding exponentially and Americans are in fear for the future.
Until jobs can be created in large numbers and the government diminishes involvement in what should be private sector activity, continued negative pressure on the housing market and America will remain.
As Ronald Reagan accurately said, "Government is not the solution to the problem, government is the problem."
Wednesday, December 14, 2011
Tuesday, March 29, 2011
Bottom Fishing
Last week, new home sales shockingly fell to a historic low as new and existing home prices continued to fall. While pundits across the fruited plain, including the "academics" at 1600 Pennsylvania Avenue, were shocked, it was unfortunately what we expected.
Efforts to fix the problem have been temporary band-aids which have had little or no effect on shifting the curve. CNBC's Larry Kudlow, joined by outstanding colleague Diana Olick, engage Brian Wesbury, economist at First Trust Advisors and A. Gary Shilling, who was spot on predicting the downfall years ago. Take listen:
Certainly, there are two schools of thought represented in this discussion, and I know who is correct. A. Gary Shilling. Wesbury thinks housing is bad, but not central to the grand economy, representing only 2% of GDP. While true, there is more to the story, commonly referred to economics as the ripple effect. Our economy is consumer driven, and those hurt in housing have suffered impaired credit, restricting the ability to purchase big ticket items. In addition, disposable income has taken a crushing blow, leading to downturns in household expenditures, including retail and small luxury items.
Just like two years ago, rising gasoline prices, which is essentially a tax, will add to the problem. Should the price of oil remain high, any potential recovery, both in housing and in the overall economy, will be dashed.
The absorption rate for housing is abysmal and new home construction barely has a heartbeat. Inventories are sky high, and many evicted from their homes are shacking up with family and friends, creating a negative impact on the rental market.
Quantity demand is handcuffed due to the aforementioned problems. Homeowners in negative equity, or those owing more on their home than it is worth, is understated. Add in governmental regulatory intervention, which is prohibiting the market from cleansing itself, and there is no port in the storm. Statistical measurements indicate we are just over 25% through the foreclosure process.
Unfortunately, the problem extends far outside real estate. The unemployment rate is significantly higher than reported in the media, due to those no longer actively seeking employment. Until we see the job market turn around, consumer confidence, purchasing power and credit worthiness will remain a stiff headwind into both housing and overall economic recovery.
Forget the arguement about a double dip recession, it is already in progress. Retail dining numbers have recently turned negative, as has the home price index as seen in the chart below.
CHART: BLYTIC.COM
In the housing market, government needs to get out of the way, allow the market to wring out the bad players and find a bottom to build a base off of. Of course, the answer is free market capitalism and not government intervention and influence in the marketplace.
Efforts to fix the problem have been temporary band-aids which have had little or no effect on shifting the curve. CNBC's Larry Kudlow, joined by outstanding colleague Diana Olick, engage Brian Wesbury, economist at First Trust Advisors and A. Gary Shilling, who was spot on predicting the downfall years ago. Take listen:
Certainly, there are two schools of thought represented in this discussion, and I know who is correct. A. Gary Shilling. Wesbury thinks housing is bad, but not central to the grand economy, representing only 2% of GDP. While true, there is more to the story, commonly referred to economics as the ripple effect. Our economy is consumer driven, and those hurt in housing have suffered impaired credit, restricting the ability to purchase big ticket items. In addition, disposable income has taken a crushing blow, leading to downturns in household expenditures, including retail and small luxury items.
Just like two years ago, rising gasoline prices, which is essentially a tax, will add to the problem. Should the price of oil remain high, any potential recovery, both in housing and in the overall economy, will be dashed.
The absorption rate for housing is abysmal and new home construction barely has a heartbeat. Inventories are sky high, and many evicted from their homes are shacking up with family and friends, creating a negative impact on the rental market.
Quantity demand is handcuffed due to the aforementioned problems. Homeowners in negative equity, or those owing more on their home than it is worth, is understated. Add in governmental regulatory intervention, which is prohibiting the market from cleansing itself, and there is no port in the storm. Statistical measurements indicate we are just over 25% through the foreclosure process.
Unfortunately, the problem extends far outside real estate. The unemployment rate is significantly higher than reported in the media, due to those no longer actively seeking employment. Until we see the job market turn around, consumer confidence, purchasing power and credit worthiness will remain a stiff headwind into both housing and overall economic recovery.
Forget the arguement about a double dip recession, it is already in progress. Retail dining numbers have recently turned negative, as has the home price index as seen in the chart below.
CHART: BLYTIC.COM In the housing market, government needs to get out of the way, allow the market to wring out the bad players and find a bottom to build a base off of. Of course, the answer is free market capitalism and not government intervention and influence in the marketplace.
Sunday, November 28, 2010
The Pilgrims and Property Rights
As we enjoy this Thanksgiving weekend, we must give thanks for property rights, which is central among the foundation of our republic. Reason TV explains how our Ancestors got fat and happy:
HT/CARPE DIEM via ReasonTV
HT/CARPE DIEM via ReasonTV
Thursday, September 9, 2010
Amendment 4 Attacks Property Rights
Amendment 4, also known as the Hometown Democracy Referendum, is a very serious threat to property rights. Excessive governmental regulatory influences on property owners to utilize their property in legal fashion is not only an attack on the property owner, but all consumers.
The Coalition for Property Rights has presented a brief summary on the amendment, and the following video is quite informative.
Please join the Coalition for Property Rights and various other organizations for a Land Rights Rally BBQ cookout. See the following schedule:
The Coalition for Property Rights
An old-fashioned LAND RIGHTS RALLY & BBQ
Friday, September 10th 11:30 - 1:00 p.m.
Sorosis Club, 501 East Livingston Avenue, Orlando
Passage of this amendment would be a very serious blow to the economy of Florida, and would allow government to seize more of your rights, further reducing your liberty our founding fathers fought so hard for.
The Coalition for Property Rights has presented a brief summary on the amendment, and the following video is quite informative.
Please join the Coalition for Property Rights and various other organizations for a Land Rights Rally BBQ cookout. See the following schedule:
The Coalition for Property Rights
An old-fashioned LAND RIGHTS RALLY & BBQ
Friday, September 10th 11:30 - 1:00 p.m.
Sorosis Club, 501 East Livingston Avenue, Orlando
Passage of this amendment would be a very serious blow to the economy of Florida, and would allow government to seize more of your rights, further reducing your liberty our founding fathers fought so hard for.
Thursday, August 12, 2010
Thomas Sowell on Property Rights
On his new program Freedom Watch, Judge Andrew Napolitano speaks with famed economist Dr. Thomas Sowell of The Hoover Institution.
Like many other of our founders concepts, property rights are under attack. Most Americans do not realize that the cost of the erosion of these rights is felt even by those who are not property owners.
Certainly, this interference also has a negative impact on property values.
Like many other of our founders concepts, property rights are under attack. Most Americans do not realize that the cost of the erosion of these rights is felt even by those who are not property owners.
Certainly, this interference also has a negative impact on property values.
Tuesday, August 10, 2010
Foreclosure Statistics Scary
Gerri Willis of The FOX Business Network breaks down some of the foreclosure statistics, and they are not pretty.
This may be the summer of recovery in the minds of those in the cabinet, but get ready for the double dip!
This may be the summer of recovery in the minds of those in the cabinet, but get ready for the double dip!
Monday, July 26, 2010
Are You Over Assessed?
Over the last half decade or so, it has been a real roller coaster for real property owners. An unusual spike in demand and easy money propelled values to historic highs versus the moving average only to come crashing down regressing to values of a decade ago in some cases. Among the carnage left to deal with for property owners is an assault on property rights, historically tight credit and massive properties in distress dragging down the value of your property. You are wondering where to hide!
For property owners, few steps can now be taken to reduce your financial exposure without parting ways with the property. However, perhaps an opportunity for relief recently arrived in the mail in the form of the TRIM (truth in millage) notice you received in mid-August. Certainly, during the home value escalation the local assessors offices kept pace nicely raising assessed values in unison, but have they been equally efficient during the recent downturn in bringing the values back down?
In our capacity as residential real estate appraisers, we notice that approximately two thirds of residential real estate is over assessed, meaning the assessed value the property taxes are based off of exceeds the current market value. The end result is the property owner paying higher property taxes than the market would dictate.
What can cause a property to be over assessed? For starters, the physical characteristics of the building could be in error, most notably living area square footage. Although each year stands on it's own, an error here could represent a significant amount of excess payment over time. In the current environment, perhaps the distressed sales in a particular neighborhood were not given enough weight.
For a myriad of reasons, it is a prudent measure for all property owners to perform due diligence in investigating the assessed value and how it relates to market value. The appeals process is not overwhelming, but there are deadlines that are strictly adhered to. Please refer to your TRIM notice for details regarding the avenues for appeal and the deadline dates as each county is slightly different.
In this competitive marketplace, opportunity cost is more significant than ever. Certainly, if you require assistance, Accurate Property Values would be happy to assist you. Please feel welcome to visit us at our table at the CFRI General Meeting in September or call us at 407-488-6458.
For property owners, few steps can now be taken to reduce your financial exposure without parting ways with the property. However, perhaps an opportunity for relief recently arrived in the mail in the form of the TRIM (truth in millage) notice you received in mid-August. Certainly, during the home value escalation the local assessors offices kept pace nicely raising assessed values in unison, but have they been equally efficient during the recent downturn in bringing the values back down?
In our capacity as residential real estate appraisers, we notice that approximately two thirds of residential real estate is over assessed, meaning the assessed value the property taxes are based off of exceeds the current market value. The end result is the property owner paying higher property taxes than the market would dictate.
What can cause a property to be over assessed? For starters, the physical characteristics of the building could be in error, most notably living area square footage. Although each year stands on it's own, an error here could represent a significant amount of excess payment over time. In the current environment, perhaps the distressed sales in a particular neighborhood were not given enough weight.For a myriad of reasons, it is a prudent measure for all property owners to perform due diligence in investigating the assessed value and how it relates to market value. The appeals process is not overwhelming, but there are deadlines that are strictly adhered to. Please refer to your TRIM notice for details regarding the avenues for appeal and the deadline dates as each county is slightly different.
In this competitive marketplace, opportunity cost is more significant than ever. Certainly, if you require assistance, Accurate Property Values would be happy to assist you. Please feel welcome to visit us at our table at the CFRI General Meeting in September or call us at 407-488-6458.
Tuesday, July 20, 2010
Lessons Not Learned
Unfortunately, the financial bill (FINREG) has passed. Crafted by two of the top members of the architectural team of the housing crisis, Rep. Barney Frank (D;MA) and Sen. Chris Dodd (D:CT), this bill be deal a serious blow to the consumer. In addition, it will add further negative pressure on the housing market long term.
FOX Business takes up the potential effects in the following interview:
The new bill, over 2000 pages with many of the particulars of the legislation yet to be firmed up, will simply be devastating to small business and consumers. Governmental regulation increases costs which limit the choices of the consumer.
The banks will not be free to lend as they see fit, in their own communities taking into account current local market conditions, but will be governed under the new regulatory framework of this bill. It certainly will make effort to secure credit by the consumer more costly and much more difficult to obtain.
While we had to pass it find out what in it, there have been some real distressing items uncovered, from regulations on insurance to affirmative action hiring quotas for Wall Street.
Among the more puzzling items, the bill does absolutely nothing to rein in Fannie Mae and Freddie Mac, the government sponsored entities which contributed greatly to the housing crisis. Imagine that! CNBC has more:
The bill, signed in a ceremony at the Ronald Reagan Building, is insulting as it is in direct opposition to the principles and economic beliefs Reagan championed.
It would be great for Americans to let the following sink in: Free Market Capitalism is the best path to prosperity!
FOX Business takes up the potential effects in the following interview:
The new bill, over 2000 pages with many of the particulars of the legislation yet to be firmed up, will simply be devastating to small business and consumers. Governmental regulation increases costs which limit the choices of the consumer.
The banks will not be free to lend as they see fit, in their own communities taking into account current local market conditions, but will be governed under the new regulatory framework of this bill. It certainly will make effort to secure credit by the consumer more costly and much more difficult to obtain.
While we had to pass it find out what in it, there have been some real distressing items uncovered, from regulations on insurance to affirmative action hiring quotas for Wall Street.
Among the more puzzling items, the bill does absolutely nothing to rein in Fannie Mae and Freddie Mac, the government sponsored entities which contributed greatly to the housing crisis. Imagine that! CNBC has more:
The bill, signed in a ceremony at the Ronald Reagan Building, is insulting as it is in direct opposition to the principles and economic beliefs Reagan championed.
It would be great for Americans to let the following sink in: Free Market Capitalism is the best path to prosperity!
Friday, June 4, 2010
A King In His Own Court
Andrew Cuomo, who is running for Governor of New York, thinks quite highly of himself. Curtis Sliwa goes on the offensive to call Cuomo out at a recent convention of Democratic leaders.
Need a refresher on the origins of the housing crisis?
Andrew Cuomo was Housing and Urban Development Secretary under President Bill Clinton and forced Fannie Mae and Freddie Mac to make loans to low income candidates who under normal criteria would fail to get loans. This practice directly led to the collapse of the housing market when values backed up, unemployment rose and those sub prime loan recipients failed to satisfy their obligations.
Cuomo was not done. In the aftermath of the crisis, he implemented the Home Valuation Code of Conduct, which has turned the appraisal market upside down, killing jobs and lowering the quality of appraisals under non regulated appraisal management companies. This law is a direct assault on free market capitalism.
Cuomo represents that government, under elected officials who "are much smarter than you are" implement regulatory action that business owners must adhere to, raising costs to all associated. These regulatory actions serve as a tax, which increases costs, limits choice and hampers economic activity.
Andrew Cuomo is a candidate who has caused excessive damage to our economic system through his efforts in affirmative action and has not been held accountable. I hope the voters in New York will do just that, hold Cuomo accountable and deny his bid to become Governor of New York.
Need a refresher on the origins of the housing crisis?
Andrew Cuomo was Housing and Urban Development Secretary under President Bill Clinton and forced Fannie Mae and Freddie Mac to make loans to low income candidates who under normal criteria would fail to get loans. This practice directly led to the collapse of the housing market when values backed up, unemployment rose and those sub prime loan recipients failed to satisfy their obligations.
Cuomo was not done. In the aftermath of the crisis, he implemented the Home Valuation Code of Conduct, which has turned the appraisal market upside down, killing jobs and lowering the quality of appraisals under non regulated appraisal management companies. This law is a direct assault on free market capitalism.
Cuomo represents that government, under elected officials who "are much smarter than you are" implement regulatory action that business owners must adhere to, raising costs to all associated. These regulatory actions serve as a tax, which increases costs, limits choice and hampers economic activity.
Andrew Cuomo is a candidate who has caused excessive damage to our economic system through his efforts in affirmative action and has not been held accountable. I hope the voters in New York will do just that, hold Cuomo accountable and deny his bid to become Governor of New York.
Saturday, May 29, 2010
Get The Lead Out!
I recently attended a continuing education class and had to tackle my wallet as it bolted for the door. In what can only be described as a staggering example of an overreach of governmental regulation, the EPA has implemented new costly regulatory measures to combat potential issues involving lead based paint, which is found in buildings constructed before 1978. An NBC affiliate has more:
The Better Business Bureau offers further explanation.
Like the greater majority of governmental intervention in the marketplace on behalf of the consumer, the new requirements, which are beyond extensive, are going to cause significant strains to an already bludgeoned housing industry and small businesses in supporting industries. Jeremy Drobeck of 1st Class Mortgage Service is not happy. Take a listen:
FOX Business's Dagen McDowell and Brian Sullivan have more:
The Wall Street Journal thinks you are willing to suck down more costs to defend against lead based paint, but FOX Business's Brian Sullivan sums up the unintended consequences. Property owners who own homes built prior to 1978 who are considering repairs face an estimated 25% in additional costs per project as businesses must pass along the extra costs of completing the job. These additional costs serve as a tax raising expenses which could make these renovations cost prohibitive.
As a property owner of these type of properties, I will now refrain from taking on upgrading projects that fall under the new EPA requirements. In my capacity as an investor, I will be much more inclined on purchases for renovation and for long term holding to seek out buildings built after 1978. Since I am no doubt not alone in this mindset, in my capacity as an appraiser perhaps a negative adjustment should be applied to all homes built before 1978 due to the extra costs associated with any repairs that may be required going forward.
Who will enforce these regulations anyhow, since county code enforcement workers are plenty busy already. Could it be the 6000 person civilian army President Obama has recently implemented?
Currently, our government is engaging in the installation of excessive regulations, much in support of global warming from cap and trade, that will severely handicap economic growth and prosperity. These regulations take the form of a tax, and you need not be Milton Friedman to recognize that when you tax something, you get less of it. With the implementation of the looming cap and trade bill, the residential governance on the energy efficiency of improvements and this overreach regarding lead based paint, it appears that property rights are under alarming assault. In addition, property values will face additional negative pricing pressure and any future recovery of the housing market will be handicapped.
Free market capitalism remains the best path to prosperity!
The Better Business Bureau offers further explanation.
Like the greater majority of governmental intervention in the marketplace on behalf of the consumer, the new requirements, which are beyond extensive, are going to cause significant strains to an already bludgeoned housing industry and small businesses in supporting industries. Jeremy Drobeck of 1st Class Mortgage Service is not happy. Take a listen:
FOX Business's Dagen McDowell and Brian Sullivan have more:
The Wall Street Journal thinks you are willing to suck down more costs to defend against lead based paint, but FOX Business's Brian Sullivan sums up the unintended consequences. Property owners who own homes built prior to 1978 who are considering repairs face an estimated 25% in additional costs per project as businesses must pass along the extra costs of completing the job. These additional costs serve as a tax raising expenses which could make these renovations cost prohibitive.
As a property owner of these type of properties, I will now refrain from taking on upgrading projects that fall under the new EPA requirements. In my capacity as an investor, I will be much more inclined on purchases for renovation and for long term holding to seek out buildings built after 1978. Since I am no doubt not alone in this mindset, in my capacity as an appraiser perhaps a negative adjustment should be applied to all homes built before 1978 due to the extra costs associated with any repairs that may be required going forward.
Who will enforce these regulations anyhow, since county code enforcement workers are plenty busy already. Could it be the 6000 person civilian army President Obama has recently implemented?
Currently, our government is engaging in the installation of excessive regulations, much in support of global warming from cap and trade, that will severely handicap economic growth and prosperity. These regulations take the form of a tax, and you need not be Milton Friedman to recognize that when you tax something, you get less of it. With the implementation of the looming cap and trade bill, the residential governance on the energy efficiency of improvements and this overreach regarding lead based paint, it appears that property rights are under alarming assault. In addition, property values will face additional negative pricing pressure and any future recovery of the housing market will be handicapped.
Free market capitalism remains the best path to prosperity!
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