Its not just location location in this market. Much more complex issues drive value of both residential and investment property.
When serious damage is done to an asset class and there is a big re-think regarding its true worth, no one truly knows what its worth, past assumptions may no longer be relevant. So appraisers are shooting in the dark. Without significant sale or leasing activity, it becomes difficult to do comps. And looking back is useless, since we know the data series is completely debunked.
FDIC Lawsuits
The FDIC has taken over more then 200 banks in the last 2 years and is considering legal claims against anyone involved in a bank failing. If an appraiser did an appraisal for a failed bank, the FDIC could look to sue. Many appraisers are concerned that there appraisals may be considered high in light of all that equity loss. Appraisers are afraid that they may seen as having fooled the banks or been party to irresponsible lending practices. The FDIC is rumored to be hiring hundreds of law firms to pursue professional liability law suits.
How Appraisers Are Adapting
They Are Coming In Low
Extremely low appraisals, using the lowest possible comparables, are disrupting the housing market. Taking the position, in uncertain times, that best way for an appraiser to avoid a lawsuit today is to low ball the appraisal. Play it safe.
This is causing home valuations to drop even further and perhaps unnecessary so. see chart The write downs in property values are ranging from 10% to more than 60% and they are impacting performing and non performing property.There is a concern that existing and legitimate equity is not being recognized as appraisers over compensate for fear of a law suit down the road. When you have to refi, as the CRE sector does, this may mean coming up with massive amount of money just as they step up to wary banks. Owners who are selling are finding that these low ball appraisals are causing them to pull property off the markets or sell for even less.
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June 22, 2010
Jobs Recovery and Rent
If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound," said Eric S. Belsky, executive director of Harvard's Joint Center for Housing Studies. Jobs keep homeowners out of foreclosure and help others feel confident enough to buy. see chart
Monthly employment gains in May were the highest in a decade but point to a still weak private sector. Most hiring was due to the census project and like the tax credits and support for the secondary markets, the transition back to the public is key.
Defaults Cycle Through The Economy
Morgan Stanley report that 12% of mortgage defaults in February were strategic, other estimate an even higher These strategic defaults do put money back in the hands of home owners who are paying down credit card and other consumer debt. But more housing supply added to the marketplace only drives prices further down and further reduces confidence as buyers hold back and seek the bottom. This negative feedback loop only creates more uncertainty and weakness and more price declines.
Who Wins
Apartment owners will benefit from defaults as former owners become renters. Vacancy rates for all apartment buildings with 5 units or more declined to 12.1% from 12.5% in the previous quarter, according a National Multi Housing Council (NMHC). The national vacancy rate dropped to 7.2% from the prior quarters 8.2%, the lowest level for first quarter vacancy rates since late 2008.
According to a recent Marcus Milliahap study, by 2012 or 2013, the apartment sector will benefit from echo boomers which should contribute to rent growth. A Harvard study indicates that immigration combined with the echo boomers will create a young market equal in size to the boomer generation., creating a new market potential and certainly a greatly expanded renter pool. Now thats huge!
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Related ArticlesStrategic Defaults: A Strategic Option
Apartment Vacancy Rates Decline In The First Quarter
Focus Your Advertising And Rent It Faster
Monthly employment gains in May were the highest in a decade but point to a still weak private sector. Most hiring was due to the census project and like the tax credits and support for the secondary markets, the transition back to the public is key.
Defaults Cycle Through The Economy
Morgan Stanley report that 12% of mortgage defaults in February were strategic, other estimate an even higher These strategic defaults do put money back in the hands of home owners who are paying down credit card and other consumer debt. But more housing supply added to the marketplace only drives prices further down and further reduces confidence as buyers hold back and seek the bottom. This negative feedback loop only creates more uncertainty and weakness and more price declines.
Who Wins
Apartment owners will benefit from defaults as former owners become renters. Vacancy rates for all apartment buildings with 5 units or more declined to 12.1% from 12.5% in the previous quarter, according a National Multi Housing Council (NMHC). The national vacancy rate dropped to 7.2% from the prior quarters 8.2%, the lowest level for first quarter vacancy rates since late 2008.
According to a recent Marcus Milliahap study, by 2012 or 2013, the apartment sector will benefit from echo boomers which should contribute to rent growth. A Harvard study indicates that immigration combined with the echo boomers will create a young market equal in size to the boomer generation., creating a new market potential and certainly a greatly expanded renter pool. Now thats huge!
REsourced from www.yourpropertypath.com
You may republish this article, as long as you do not edit and you agree to preserve all links to the author and www.yourpropertypath.com
Related ArticlesStrategic Defaults: A Strategic Option
June 3, 2010
Freddie Mac weekly Update: Mortgage rates Remain Unchanged
Mortgage Rates Nearly Unchanged
30-year fixed-rate mortgage: Averaged 4.79 percent with an average 0.8 point for the week ending June 3, 2010, up slightly from last week when it averaged 4.78 percent. Last year at this time, the 30-year FRM averaged 5.29 percent.
The 15-year fixed-rate mortgage: Averaged 4.20 percent with an average 0.7 point, down slightly from last week when it averaged 4.21 percent. A year ago at this time, the 15-year FRM averaged 4.79 percent. The 15-year FRM has not been lower since Freddie Mac started tracking the 15-year FRM in August of 1991 and breaks last week's record low.
Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.94 percent this week, with an average 0.7 point, down from last week when it averaged 3.97 percent. A year ago, the 5-year ARM averaged 4.85 percent.
One-year Treasury-indexed ARMs: Averaged 3.95 percent this week with an average 0.7 point, unchanged from last week when it averaged 3.95 percent. At this time last year, the 1-year ARM averaged 4.81 percent. The 1-year ARM has not been lower since the week ending May 27, 2004 when it averaged 3.87 percent.
Freddie Sayz
The economy grew at a slower rate than originally reported in the first three months of the year, according to the Bureau of Economic Analysis , which suggests inflation will remain tame in the near term, said Frank Nothaft, Freddie Mac vice president and chief economist.
As a result, mortgage rates held at historic levels this week. In fact, rates on 15-year fixed rate mortgages set another record low for the third week in a row. There are also signs that credit conditions may be improving. The number of homeowners with private mortgage insurance who became current on their mortgages outnumbered those who defaulted for the third month in a row in April, according to data compiled by the Mortgage Insurance Companies of America
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