Thoughts Ideas and Giggles

We are hearing the whispers "The housing market is recovering"!   In our area, we believe this to be particularly true.  Sacramento was one of the first to feel the meltdown, so naturally, we would be one of the first to see some hope of recovery. 

Now the question becomes, what, exactly, does the word "recovery" mean?  Evidently, the answer to this depends on your perspective and the amount of optimism you choose to insert into the equation.

Buyers see this as a possible loss of power.  As the housing market grows in strength, it may be assumed that buyers will see a loss in their ability to negotiate a "deal".  Many first time home buyers feel they have hit the mother lode with a combination of foreclosures and short sales, low interest rates and the federal tax credit.  As the housing market begins to return to normalcy, the government will no longer see the need to stimulate the market or continue lower interest rates.  There is a growing belief that the market has the ability to absorb the remaining foreclosures without the once-touted "wave".  If ever there was a time to get off of the fence to take advantage of a great market, this is certainly it!

Sellers hear "recovery" and instantly assume this translates into their equity growing once again.  While we certainly see an inventory that would appear to give sellers a stronger negotiating ability, this is not translating into an increase in equity.  The "recovery" that is being bantered about is really more of the beginning of a stable market.  Homes that are believed to be the "best house at the best price" are selling fairly quickly and at close to the asking price.  Note, however, the words "best price".  Sellers must be competitive in their pricing to appeal to the "deal" buyers are looking for.  The result is equity being put into a holding pattern for the foreseeable future.  While sellers can be relieved that they are no longer seeing their equity decrease, they should not look to the near future for equity gains. 

Recently in discussing the possibility of putting their home on the market, the seller asked, "What if I wait a year...can I expect to get $100,000 more?"  This question was raised on a $300,000 home.  Simply put, it will many years before this home can see that kind of gain.  The suggestion was to either sell now or rent the home for 5 years and then review the market value of the home.

When discussing "recovery" be certain that it is very clear what that word means.  We got to this place in the housing market through years of "if you fog a mirror, we will give you money" loans.  It will take us years to return to a normal market.  The word "recovery" just may be a term that would better be replaced with "we are at the intersection and are starting the journey towards normalcy".

We have a problem.  We are creating the perfect storm.

• As Erin Attardi's post "Erin Attardi's Short Sale Experiment" reflects, there are areas where the majority of available properties are short sales (and I suspect a few foreclosures thrown in). 
• In the new HVCC regulations, appraisers cannot be in communication with Realtors, agents or lenders.
• It is more important for comparables to be recent than accurate.

Allow me to elaborate.  At one time, appraisers would take into account that a property was a foreclosure or short sale when they were doing their appraisal and adjust accordingly.  If we, as Realtors, felt that inappropriate comparables were being used, we could discuss the issue with the appraiser.  Appraisers, if they felt we had a valid point, could change their appraisal.  Comparable properties could have closed within the last 6 months. If the market had changed, the appraiser would adjust accordingly. 

Presently, appraisers are coming up with value by using the lowest common denominators...the short sales and foreclosures.  No longer is there an adjustment for these types of sales.  Due to HVCC, appraisers can come in and appraise in an area that they have no experience in...and we have no way to help them or provide information to encourage accuracy. With a shortage of comparable sales in now a demanded 3 month period, appraisers are being told to go outside the true area the home is in, thus throwing off the true value of the property. 

So, if we are valuing our listings by the lowest common denominator, and there is no adjustment for the type of sale they are (generally seriously discounted), how are we ever going to see our equity start building again?  The rules to "protect the consumer" is now the consumers worst enemy.

WWW.PaulaSwayne.com

I just attended a gathering of a group of professionals that I couldn't have been more impressed by.  They are the best of the best.  They pay attention to the newest legalities of our industry.  They conduct themselves with the utmost respect and competence.  They are technology savvy.  They promote relationships within the real estate industry and the public.  They sponsor events financially and physically to give to those less fortunate than themselves.  Even though they are from different brokerages, different careers within the industry, there is no shortage of support and encouragement for each other. Who are these wonderful people?

They are the Sacramento Association of Realtors Young Professional Council.  They are setting the bar high for us and those who aspire to be a professional in the real estate industry.  The future of real estate in Sacramento is assured to be bright in their hands.

www.PaulaSwayne.com