SUPPORTING MARKET CONDITIONS - HOW DO YOU?

[Cynthia]

How are you supporting your market conditions? Here is a typical statement in one of my reports which I further back up with a graph of sales both for the last 6 months and the period since Jan 2006 (made easy with graphing thanks to Anthony the graph guy)

PER MLS STATISTICS THERE ARE CURRENTLY 15 ACTIVE LISTINGS AND 7 PENDING SALES OF HOMES 1000 TO 1450 SQUARE FEET IN THE SUBJECT'S MARKETING AREA AND THERE HAVE BEEN 26 SALES IN THE PAST 6 MONTHS. THESE STATISTICS SHOW THERE IS CURRENTLY A 6 MONTH SUPPLY OF HOMES AVAILABLE WHICH IS CONSIDERED IN BALANCE.

PER MLS OF THE 26 SALES IN THE PAST 6 MONTHS 17 WERE REO'S AND 4 WERE SHORT SALES.

I'd love to hear what others are doing.

Cynthia

[AckAck]

Here's another one. I sometimes add a small spreadsheet to the text addendum that compares the active, pending, and 12 motn, six month, and three month closed sales trends.

Subject Neighborhood. Short sales, foreclosure and other signs of distress appear to make up a significant percentage of the Silver Springs Shores real estate market. Property values appear to be declining. The appraiser analyzed actual closed sales reported in the MLS and public records to determine market trends for the neighborhood. To determine if the sales of smaller housing were skewing the sales data, the appraiser also analyzed the same group of closed sales to determine average sales prices per Sq. Ft. of Gross Living Area. Analysis of sales trends in this neighborhood revealed that average sales prices peaked in 2006, then began to decline, with current average sales prices at 2004 levels. Average sales prices appear to have dropped approximately 25 percent in the past 12 months. See attached charts for analysis of market trends.

Demand and supply appear to be in over supply, with a three- to six-month average marketing time, and a 20- to 24-month supply of 319 current listings. Sales and financing concessions although not unusual, do not appear to be typical at this time. Typical financing for the area is conventional financing.

[John Wayne Glasener]

This is a common statement that I am using in recent times. (Attached) I have evolved to this level of detail due to the requirement of the lenders wanting to tell me that every market was declining and that I should be stating so. Well, as we all know it is not that simple or clear. Sometimes it takes 12-24 months to determine if a market is truly declining. Yes, you can use averages or median price per square foot factors to get an indication, but just think about all of the factors, that could influence an average or median factor. Plus, when they use averages and medians, from what data sets is that report based upon? Where all of the transactions used in that analysis complying to the basis of the definition of market value, which is the basis of a common Fannie Mae report? Or was the entire set of transactions used, including both typical and atypical buyers or sellers? I have not been challenged on rather a market is increasing or declining since I began this format. Although you are providing a "Summary Report" most of the time….. The lending institutions want more data and support, so we can fight them or prepare for the changing times…… Keep in mind they have directives to cut values if a market is declining by perhaps up to 5%. So, perhaps it is our duty to clarify if the market is truly experiencing declines or over supply of offered properties.

[Peter Fischer]

Cynthia,

I have a varied response regarding market conditions. The bottom line is, that if a lender or an underwriter needs to know what current market conditions are, they shouldn't be in the lending business. Pick up a newspaper and read a headline. One trillion dollars is being spent because real estate values are falling and many homes are upside down with respect to the LTV. Here is an idea. Tell the lenders to start lending money so people can buy homes so values don't keep dropping so their portfolios don't drop to zero. If the lenders don't lend out mortgage money, we all go down the tubes. Forget about what the house is worth today. Tomorrow is the problem.

[Cynthia]

Wow Peter

Gotta say you have a unique perspective on the industry. Are you for real?? I would almost suspect you are not an appraiser. Your profile has no info and this response does not sound serious. "The bottom line is, that if a lender or an underwriter needs to know what current market conditions are, they shouldn't be in the lending business." ??????

Appraiser are in the business of analyzing market conditions and values.

Have a terrific day!

[Peter Fischer]

Cynthia,
Yes I'm real. I have degree in economics and finance. I began doing appraisals in 1988. I began selling houses when I was 18 yr old. (1970 ) and became a Real Estate broker at 22. I studied City Planning at Univ. of Va. . I've also been a loan officer for a mortgage company in 1986-87. I've done so many appraisals that now I think I can retire ( except for my 401K account ). sign..... Also, I'm very nice to lenders and I don't insult them or the underwriters. My point is that many of us work for lenders and lenders want a cheap product. And they want it fast. And they want it good. They don't care about economic conditions even if they tell you they do. They want to make the loan and they want to sell it fast. Let someone else take the economic risk. ( Iceland ??).
I think your statement regarding market conditions was perfect. However, I don't think the lenders (management ) really care. Even if they say they do.