Decisions, Decisions, Decisions….
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Each and every day we make decisions. Sometimes we base our decisions on sound, unbiased information, other times we may base our decisions on no information what so ever and are solely based on our opinions and perception. Right or wrong, we make a decision.
Appraisers utilize sound unbiased information as well as our opinions and perceptions to complete appraisals. Markets are always changing and often historical data only represents just that, historical information. Historical data does not consider what is happening currently or what has been proposed for the future; both of which play an important role in how the market reacts. Appraisers understand the balance between art and science. Some days it seems we are the only ones that do.
Lawrence Yun, The Chief Economist of the National Association of Realtors wrote an article titled “No Housing Recession over Horizon,” published in Forbes on August 2, 2018. Mr. Yun predicts there is no housing recession on the horizon. His conclusion is based on historical data and at the same time he recognizes inventory shortages are rare and historical data is non-existent. His premise is that all the numbers are good and the shortages will help keep the housing numbers growing.
Now we have a decision to make. Do we believe his opinion or not. There is no easy answer. His facts and figures are presumed accurate, so we really have no reason to doubt them right? Well not so fast.
What about the reason why there is a shortage of inventory? Mr. Yun has failed to address this very important fact. Could the lack of good paying jobs be preventing homeowners from moving up? Could it be a generation where homeownership is not important? Could it be the massive amounts of student loan debt both parents and students have? Could it be parents are choosing to enroll their children in private schools in lieu of a dysfunctional public school system? Could it be the fact that so many of the REO homes from the last crash were sold to corporate investors in bulk and retained for rental housing? Or could it be the simple fact consumers remember what happened 10-15 years ago and are cautious about over extending themselves.
Whatever the reason or reasons, Mr. Yun’s positive spin of the state of the real estate market does not seem complete. Lenders have loosen the guidelines for mortgages, Purchasers can now do 100% loans with virtually every credit score under any program. Some programs allow for third party grants to cover the closing costs; allowing borrowers bring not one penny to the table. Fannie and Freddie are waiving appraisals, further increasing risks to homeowners and tax payers. Does this sound familiar to anyone?
What about all the job losses or under employment we read about almost daily? How many companies have announced layoffs and store closings? Let’s not forget about all the mortgage jobs that have been lost in recent months? If things were good, why are these companies getting out of mortgages or reducing their staffs?
Appraisers are good at analyzing the market and are on top of any changing trends. We warned of the last crash and we have raised concerns about the one coming on the horizon. Why is no one listening?
Now getting back to the tile of this article, Decisions, Decisions, Decisions…
Make a decision to get involved with appraisal organizations that align with your beliefs
Make a decision to get involved with the National Association of Realtors Appraisal Committee
Make a decision to be a voice for the appraisal profession.
Make a decision to be vocal with homeowners, borrowers and agents.
By Advocate, Certified Real Estate Appraiser – author requested to remain anonymous