Real Estate Analysis and Commentary in Peoria, Arizona

The Real Estate Market Is Changing
June 30th, 2022 11:10 AM

The housing frenzy appears to be over. Multiple offers above list price, sight unseen all cash purchases, bidding wars, homes contracted prior to the sign installation, and real estate agents with a listing guaranteed a commission have been the "norm" over the past two to three years, but then April 2022 came along with rising inflation / interest rates / fuel prices. Being an appraiser and owning a real estate appraisal firm, we are tip-of-the-spear, per say, and we feel the market by changes in volume of orders. This time (April 2022), we were unsure if it was the new Fannie / Freddie desktops or the market slowing, but we quickly noticed the inventory increasing and even seeing "price drops" on listings. What????  That has not happened for years in Arizona, it was then I realized we have crested the mountain and are now going down the mountain.

This does not necessarily mean "Doom & Gloom" and actually is healthy.  Appraisers not only provide lenders with opinions of market value, but we are also mostly real estate market analysts. We see the interiors of multiple homes each day and review interior / exterior photos of hundreds of homes per day. We drive to properties, look at the neighborhoods and recognize changes. During the past three years, we seen a market that did not care what the property was, only that there WAS a property to buy. This would be like starving and when you finally found food, you really would not care what it was if you could eat it. So, why is it healthy? Well, because at the current rate of appreciation, 90% of American families would not be able to afford a home, not to mention the repair expense of the home they found and had to bid well above market value for. There needed to be a reset, and hopefully the days of appraisal waivers and desktop appraisals are gone. I have firsthand seen so many cases of home owners that chose the waiver path then went to refi and found out the home wasn't even worth what they paid for it, although the market has went up over 1%, per month, during the past year.

Interest Rates are a leading cause because it decreases the affordability curve in the wrong way for typical families.  Rising gas prices hurts us all because everything we eat, use, and consume requires diesel trucks / boats / trains and that transportation cost raises consumer prices. Companies have shareholders and shareholders want to see profits. In addition, the housing run just ran out of steam, there were too many factors pulling down on the run over the past six months, and in April, it became too heavy and now down it goes. Do I believe that we are in a 2008-2011 drop? Not even close. Most mortgage loans in today's market, the owner has a pulse and a job and has verified income. But a correction is coming and if you did not pull out 100% equity, it will just be a hiccup in the long term.  I am not going to estimate what I personally believe the drop will be, I will let the market be the market and will just report it as I see it.

So how can homeowners, realtors, investors, etc. get ahead of it. Well, one thing would be to get a real appraisal from a real appraiser. Have them measure the home using ANSI Z765-2021 standards to get a real (Fannie / Freddie) accepted livable square footage. Ask the appraiser to do forecasting for an acceptable window of time, review all the comparable listings and the marketing times of those listings (along with price drops), get a real market value based on the market as of the effective date (not using sales contracted in February, March, or April when there was no inventory). This can be a great marketing tool and provide some reality to sellers for Realtors or Investors and even Homeowners. Times are changing and being at the forefront of the change may save you tens of thousands.

We provide all types of residential valuations, measuring services, market analysis, and neighborhood observations. Visit our website and read the menu, not only does it explain our services it also has self-help guidance tips.

West Valley Appraisal Services

Posted by Amanda Clow on June 30th, 2022 11:10 AMPost a Comment

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