DFW-
I understand 12% interest rates were posted by another poster.
I’m coming from a slightly different perspective. It’s been my job to gather data, digest the data, and come to a conclusion.
Here’s some examples that might shed some light;
[i][b]“You cite the increase of forclosures in 2000-2001 and a record number of forclosures in 2002-2003. That is exactly my point.”
“Check the interest rates during those times. They were FALLING. Falling interest rates are when there are vastly more foreclosures than rising rates.” [/b][/i]
People don’t lose their homes all of a sudden…it takes time. While rates may have been falling at the time…it’s what was taking place in the previous months & years that created a situation in which these folks could no longer hang on. 2002-2003 was a different scenario…that’s when millions of American jobs were lost overseas (there you’d be right…it was unemployment).
“Rising rates mean wage growth, stronger economic outlook, and stronger consumer confidence. People are less likely to be foreclosed upon when their income is steady or increasing. They are much more likely to be foreclosed upon during periods of unemployment.”
I don’t view this as a zero sum issue (interest rates vs. jobs…one or the other). They’re both often interdependent.
Your employment example isn’t incorrect, however, there are many people who lose their homes because, they overextended themselves & bought more home than they could reasonably afford. A slight uptick in rates & they’re no longer able to pay the mortgage…even if they’re employed. This becomes the norm as affordability becomes more of an issue. Many others overextend themselves via refinance.
While I don’t tend to attempt to predict the long term future…I think we’ll have a better understanding of what’s taking place by mid Feb-March. Job & wage growth is increasing (according to the latest stats)…so if the markets are still stagnant by mid Feb-March…it’ll be due to slightly higher rates & thus affordability.
Time will tell, but sooner, or later…affordability will become a major issue. Again…wages haven’t even come close to keeping pace with home appreciation in some of the countries hottest markets.
“Coincidentally, 2003 - the time you point out to record foreclosures was the busiest time in history for appraisers,”
Highly inaccurate. The busiest time in history for appraisers (relatively speaking) was the early ‘90’s’…right after FIRREA came into effect.
Appraisers are going the way of PMI companies. They’re only needed for the riskiest loans. They’ve been largely replaced by AVM’s which couldn’t be used in the early ‘90’s’ to the extent they are now. Additionally, the DeMinimus was significantly lower (again…relatively speaking), and an appraisal was required more often for Federally related transactions.
“I’m not sure if you’re implying that appraisers have some sort of economic insight that other’s do not, but if you are, let me politely disagree. Appraisers appraise homes based on PAST sales, not future sales. The sales comparison approach requires as much. I have a good deal of respect for appraisers, but they don’t predict trends they report on what has already happened, and THAT data is readily available to anyone interested in the area.”
You don’t have a full understanding of the appraisal process (no offense). (Good) Appraisers perform a TREND, and HB&U analysis on every assignment. And what about the Cost & Income Approaches to value. You don’t think I’d use outdated rental information & cost manuals do you? I work with a number of builders…they’re great sources of up to date information.
While it may appear that an appraisers job is akin to driving down the freeway while looking in the rearview mirror…a good appraiser will analyze active, STI, pending, cancelled, and expired listings, and perhaps incorporate one of those into the analysis as additional support (especially active, STI, and pending listings).
Moreover, appraisers must gather and analyze data regarding; growth rate, property values (trends–direction), demand/supply, marketing times, and interest rates.
Appraisers are required to research and analyze the "factors that affect the marketability of the properties in the neighborhood (proximity to employment and amenities, employment stability, appeal to market, etc.). And they’re required to give their opinion whether current trends are expected to continue in the short term, or if economic indicators are leading them to believe otherwise.
“Also, and you know this is true, appraisers back into most of their values for purchases.”
Perhaps we run in different circles. I left appraising for mortgage loan purposes behind a looooong time ago. My clients wanted, indeed needed my opinion. If someone wants to be my client currently…they’ve got to want MY unbiased opinion. If anyone thinks their going to give me an assignment with my opinion on it…their order will go directly into the trash can. I don’t need em.
The last few years I appraised I performed primarily appraisals for REO companies that had large government contracts. They wanted “as is” value, “as repaired” value, items in need of repair & cost estimates, and my opinion as to whether they should list “as is” or “as repaired.” I was rated against my competitors statistically, and scored highest in the states largest three counties.
Finally, as an investor, I like being underestimated. I really enjoy people thinking they know what it is I do, or my understanding of the markets. As an investor I’m simply required to cite my qualifications (Broker/Appraiser)…I can’t MAKE somebody think I may actually know more than them.
-Infowell