Appraisers' Free Forum

**Otis** · Last edited by **Otis** on Wed May 14, 2008 5:46 pm; edited 1 time in total

http://www.startribune.com/homes/buy/18171119.html?c=y&page=1

**Corporate Lackey** · Posted: Tue May 13, 2008 9:47 am Post subject:

It is a double edged sword. You do have to report it as declining, and of course if you were lending your money, you would want a larger down payment, but that does make it more difficult to purchase for first time buyers (that down payment hurdle) which in turn decreases affordability. It is a vicious circle, but since the markets were artificially inflated in much of the country because of the ease of credit, it is basically a return to normalcy, albeit a very painful one.

I certainly don't have the answer to the problem; of course being labeled a declining market hurts, but it sure seems necessary to me (and of course as an appraiser, you have to call it like it is!).

**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282

And the problem is further exacerbated by the fact that "declining" is a relative and not an absolute term. So when you assert the market is declining in order to make sense of it you must also say, "as compared to ______." And then there is also the time period to which you refer. There are no standards published that are in wide spread use so the best spinner wins. Decline also depends. Mad

I think the Lackey has it. We are not declining so much as we are becoming normal and the industry seems to lack a description for that.

Back to the emphasis. I do think rating by Zip makes a problem that may not be there. Where do they get their info anyway?
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Edd “In the real estate economy, there are no guarantees that reason will prevail in a market where emotions run high and the amount of misinformation runs deep.” Jonathan Miller in The Matrix. So what’s an appraiser to do?

**Steve Owen** · Posted: Tue May 13, 2008 1:23 pm Post subject:

**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282

**Steve Owen** · Posted: Tue May 13, 2008 3:12 pm Post subject:

Yes. Most definitely. If something is at one level and then at a later time it is at a lower level it can be said to be in decline. It doesn't need to be compared to anything else other than its prior level. I don't believe that anyone would argue that when you at at the top of the chain lift on the Timberwolf Roller Coaster you are getting ready to decline. Of course, compared to the galaxy as a whole you might be found to be going up. You don't have to compare it to that, though... you only have to compare where you are now to some prior, reasonably drawn, time period.

Of course, there are other factors, widely accepted, that can lead to referring to a market as being in decline. For example, in typical analysis, if an active inventory of more than six months of properties on market exists, it is often considered a sign of a declining market. Another example is increasing foreclosures and REO sales competition... I have heard of appraisers determining that their market was in decline from looking at that data alone. And, last but not least, there is the famous "numbers of sales" and average DOM figures. However, if I saw that kind of data, say 8 months worth of inventory combined with a few percent more REO's and short sales than the prior year, and 210 average DOM compared with only 180 the year before, and a few fewer sales than the period before, but still saw prices increasing compared to the most recent quarter, half-year, and year, I would not call that a "declining" market. In my opinion, when considering whether a market is in decline, price is king.
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I haven't a particle of confidence in a man who has no redeeming petty vices.
- Mark Twain, a Biography

**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282

**Steve Owen** · Posted: Wed May 14, 2008 9:39 am Post subject:

Yes I did. I said that there is a nugget of truth there. However, I don't believe you must say what you are comparing to in every case. I believe the public understands that when you say a market is declining you are talking about prices.
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I haven't a particle of confidence in a man who has no redeeming petty vices.
- Mark Twain, a Biography

**Chris H** · Posted: Wed May 14, 2008 10:19 am Post subject:

**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282

**Otis** · Posted: Wed May 14, 2008 5:53 pm Post subject:

**Goodpasture** · Posted: Wed May 14, 2008 9:06 pm Post subject:

**Otis** · Posted: Wed May 14, 2008 10:14 pm Post subject:

**Otis** · Posted: Thu May 15, 2008 4:01 pm Post subject:

This was just sent to me by a real estate broker I've known and respected for many years. It's from BoA.

**Edd Gillespie** · Certified General Joined: 13 Aug 2007 Posts: 2282

Does anyone understand this indexing by OFHEO and Case-Shiller? I have read cautions about relying on indexes alone for market trend analysis and yet there it is out there purporting to report the very market trend I am trying to analyze. I don't know how to use it correctly in my analysis and reports. Can anybody help? I don't see some of the heavy weights using it at all, but here we have BOA and as I recall some PMI company dictating loan parameters based on the index. What gives?

I have tried to get the underlying data from OFHEO and they won't give it up. Something about privacy and confidentiality. So much for transparency and accountability.
_________________
Edd “In the real estate economy, there are no guarantees that reason will prevail in a market where emotions run high and the amount of misinformation runs deep.” Jonathan Miller in The Matrix. So what’s an appraiser to do?