What Real Estate Crisis?

I walked into the office this morning to find a copy of an article from Forbes Magazine lying on my desk. It was titled "What Real Estate Crisis?". It was a short article, three paragraphs long, but the graphic is what really caught my attention. According to the National Association of Realtors, Cumberland is the 10th hottest real estate market in the country with a price appreciation of 9.3% in the second quarter. I know that they are a little slow getting the data out but if you look at one of my previous post (November 1, 2007) you will notice that prices in the area are continuing to climb through the third quarter and into the fourth. It's nice to know that things are looking up.

The Appraisal

As an appraiser I have noticed a big change over the past year on how banks are being more cautious about what the appraisers are sending them. When I send in an appraisal now I typically get a phone call from the mortgage underwriter asking about different sections of the report. Most of the time it is just to clarify some of the information. Granted most of the underwriters know nothing about Allegany or Garrett Counties, and typically they don't understand why I would be need to go more than 1/2 mile away to find a comparable property or why the houses I used for comparison aren't exactly like the subject property. I guess in the big city suburbs it is easy to find hundreds of three bedroom, two bath, 1500 square feet ranchers. So as you can imagine, I am usually trying to explain how our area is not like the big city suburbs or downtown's. In my opinion it is a good thing that I get to interact with the people reviewing my appraisals. It gives me feedback an helps to put out a better product.

A year ago I could go months without talking to anyone. There were times I believed that I could send in anything and the loan would get written because the appraisal really didn't matter. All that mattered was that banks had a lot of money to give away and their job was to get it out the door as soon as possible. I know that several of the appraisals that I turned down last year, because I was sure that the property was not worth what the bank was trying to lend on it, did end up being appraised by other appraisers. Typically they would come from the Baltimore/Washington area and like the mortgage underwriters know nothing about the area. I have reviewed appraisals that have compared houses on Columbia Avenue in Cumberland to ones on Washington Street. Anyone who has visited the area for any period of time knows that this is like comparing concrete to wood. Just goes to show how far some banks will go to make a loan.

I know that these are my opinions and luckily many of the local banks and mortgage brokers have high morals. This is why the market in our area is still in balance and hopefully will continue that way.

Prichard Farms

I read yesterday in the paper that the City of Frostburg sent the homeowners in the Prichard Farms Development a letter stating that the city would not clear the snow from the streets in that development this winter. This being due to the streets not being built to code. How surprising! It seems that the developer has continually attempted to skirt the codes since this development began nearly two years ago. First it was the vapor barrier in the crawl spaces wasn't constructed correctly, then the sewer lines went to nowhere. How much longer is the city going to put up with this? Although I can't completely blame the developer, the city has dropped the ball on insuring that all of these items were done right in the first place through the inspection company that they hired. Well, that's probably another story. I feel pretty bad that I sold a house in this development to one of my friend's. Too bad these issues are just coming out.

Trends In The Local Market

I just read the local report from our Multiple Listing Service. The most recent data available is from the second quarter of 2007 which ended in June, the third quarter data is not available but I have tried to retrieve as much as I could. According to the data Allegany County is in a Stable Market with an indicator of 3. 1 meaning that we are in a buyers market and 5 meaning that we are in a sellers market.

Third quarter data shows that an average of 450 homes are on the market at any one time. This is down from the second quarter high of 597. The days on market has risen in the third quarter to about 110 days. This could be due to the number of homes that were on the market in the second quarter and hopefully we will see this number fall in the fourth quarter which will indicate better things to come.

Total units sold in the third quarter was 173. This number up from 152 in the second quarter and 118 in the third quarter. It should be noted that 174 units sold in the third quarter of 2006 before the market slowed. Average sales price for the third quarter was $125,350. This number is up from $122,800 in the third quarter and $111,200 in the first quarter of 2007.

I think I like what I am seeing for the Allegany County market. With the interest rates down the forth quarter should mean better times in the local market.