Home Price Expectations - Will They Rise?

Home Price Expectations—Will They Rise?
by Phoebe Chongchua
According to a recent fourth quarter survey by HomeGain.com, 72 percent of Realtors believe that home prices will either stay the same (48 percent) or increase (24 percent) in the next six months. Despite that news, the study found that an increasing number of homeowners (41 percent) think that their homes should be listed 10 to 20 percent higher than what is being recommended by Realtors. In the third quarter of this year that figure was down to 38 percent and in the second quarter it was at 36 percent.

But the flip side of the coin shows that 62 percent of buyers think homes are still overpriced. According to the survey, that figure is slightly down from 64 percent in the third quarter but up from first quarter statistics (59 percent).

The national study surveys 1,000 current and former HomeGain Realtor members and was conducted between December 1 to 6. According to the study, 21 percent of those surveyed say that half of their transactions involved a first-time homebuyer. The extension of the tax incentives for buying homes is being credited. (Read my column: Extended Tax Credit for Homebuyers and Homeowners.)

In a statement issued by HomeGain’s Louis Cammarosano, the company’s general manager, said, "The fourth quarter HomeGain Home Prices Survey of Realtors shows that Realtors believe that the first-time homebuyers tax credit has driven sales and stabilized home prices, for now. Realtors, however, expressed concerns about the cost of the credit to taxpayers and whether sales will continue once the credit expires later next year and additional inventory hits the market.” The study also asked respondents “whether they approved or disapproved of President Obama’s performance so far—42 percent approved and 58 percent disapproved, unchanged from the third quarter and down from the second quarter when the President’s approval rating stood at 57 percent.

Another poll, the Rasmussen Daily Presidential Approval Rating Tracking Poll, published on December 11, 2009, stated that, “Overall, 47 percent of voters say they at least somewhat approve of the President's performance. Fifty-one percent (51 percent) disapprove.” Still, respondents remain optimistic about the housing industry, “The vast majority of Realtors expect prices to remain the same or increase in the first six months of 2010,” said Cammarosano.

With more first-time buyers searching the market for homes, everything from short sales to foreclosures is being considered. And for sellers, estimates that as high as one in five of homeowners is underwater are causing them to take a hard look at their financial situation. Some are turning to an informational Web site called PayorGo.com. It offers a calculation service to help make the decision but doesn’t offer financial or legal advice on the site. The site aims to address this question, “Is it in my economic interest to walk away? You decide.

This calculator is just a tool to help. Numerous variables are involved but the biggest is probably your assessment of the future of housing pricing.” Interestingly, buyers may not be capitalizing on all of the available incentives and resources. In an article published in the San Francisco Chronicle in early December, Walter Zhovreboff, the administrative director of the Bay Area Home Buyer Agency (that promotes homeownership) said, "Many cities have adequate funding to assist families here (with down payments) and we're not running out of money. It's phenomenally frustrating." Some cities still offer down payment assistance for low-to-moderate income levels. Many of these loans are known as “sleeper loans” which provide a period where no money is initially needed to be paid toward repayment, then a moderate interest rate is applied and the loan is paid back over many years.

As always, give me a call for more information and additional resources for your area.

The Truth About Appraisals

The Truth About Appraisals
Knowing the Guidelines Solves the Mystery

The appraisal process often baffles consumers. They may feel that their home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them. It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and real estate agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae. In most states, the mortgage lenders must also disclose the purpose of the appraisal, as each transaction carries its own set of rules.

In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

Upgrades can usually be expressed at a higher percentage of their value in newer homes because the only way to obtain those upgrades was to put more money into the cost of building the home. On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren't uncovered until the project has already begun, such as plumbing or wiring that may need updating.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed.

As a loan professional, I make a point to follow the appropriate guidelines at all times. This promotes a good relationship with the lender, and helps to create easier and much smoother closings for my borrowers.