T.M., who keeps us abreast of doings in the Tucson market, sent us an article from the Tucson Weekly entitled Finding the Bottom: How Low Will Tucson Prices Go? The article was amazingly well balanced, with more information and less spin than usual. However, the best information was down in the comments. Ricardo Small, a recently retired appraiser from Tucson, weighed in on lenders and appraisals, as well as the critique on Tucson home prices. I tried to contact Mr. Small, but the email listed for his appraisal business is no longer good, and he no longer has his website. I still think his comment is worth sharing.
I worked as a real estate agent for over 30 years and also worked as a real estate appraiser for the past 20 years with some overlap in those decades. My father developed Desert Palms Park on Tucson’s eastside back in the early 1960s.
Mr Strobeck says he hopes lenders have learned the hard lessons of the recent bust. They have NOT. Lenders are still telling appraisers they have to appraise houses at requested values, when there is no objective support from market data. This is a continuation of lenders’ appraisal policies from before and during the build up to the crash.
For example, during one of the last appraisals I completed for mortgage lending purposes a FNMA underwriter told me that I could not adjust the sale prices of comparable houses for price changes over time. In other words, when prices began to plummet at ~2% per month at the beginning of the crash, that underwriter instructed me to ignore that market characteristic. I refused. The lender’s underwriter had another appraiser who followed those illegal instructions complete a 2nd report that became the basis for a loan.
Another example, a loan officer told me that unless I appraised a house at a value that was 30% over market value, he would make sure I never received another assignment from any mortgage lender. I used the “F” word in responding to him.
Most appraisers did not refuse to lie about values, because just about every single lender insisted that appraisers report values to make deals close to generate money for lenders. The lenders sold those loans on the secondary market and did not have to field the high financial risk. Most appraisers followed the type of instruction that I refused. As a result, I shifted my appraisal practice to estate, trust and litigation appraising, a niche that includes a large number of clients who want real values.
Lenders today still insist that appraisers lie about values. That has not changed. Aggravating the pervasive tendency for appraisers to comply with client requests for ficticious reports is the complete lack of effective enforcement of appraisal law by the Arizona Board of Appraisal, which has been and continues to be a totally dysfunctional state agency. Appraisers who have been turned in numerous times for egregious violations are still appraising without modifying their how-much-do-you-need appraisal policies.
As to the Tucson Board of Realtors opinion about the position of the Tucson housing market: A year or two into the crash, the Realtors’ president said prices were at the bottom and it was a great time to buy. Since that statement prices declined by ~30%. The current president says Tucson’s housing market is skating along the bottom right now. I’ve heard that repeated every year since the beginning of the decline.
Given the large number of houses for sale overall, the upcoming foreclosures, the lack of employment and the political climate that drives new business away from Arizona, the housing market has a long ways to go before house prices start to level off. The article quotes Strobeck as saying “normal” prices won’t happen until 2014.
What in the h*** is “normal”, if Strobeck actually said that? Is “normal” back to peak prices?
There is a chance that prices will level off in 2014, but as of March 2011, two months ago … when I analyzed a portion of the Tucson housing market data ….., prices were still declining in the submarket I was working in, which was horse properties in Tucson’s NE, E and SE districts.
It is NOT a time to buy a house. It is a time to rent, Sharon. Keep your cash for at least a couple more years. You may want to follow Glenn Beck’s advice and buy gold instead of another house.
I’m not going to weigh in on Mr. Small’s investment advice, but I agree that the lenders haven’t learned their lessons. The games continue, to the detriment of homebuyers. Lending is tighter, but problems continue.