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AI Answers: A Walk Through “The Appraisal of Real Estate,” 15th Edition

AI Answers, with Jeff Sherman, Steve Roach, Leslie Sellers, and Bill Garber, spotlights the newly released “The Appraisal of Real Estate,” 15th edition, a peer-reviewed Appraisal Institute text and an authoritative source of recognized methods and techniques for valuation practitioners.  

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Housing Starts Finish 2020 Strong, but Trouble Could be on the Horizon: NAHB

While housing starts ended the year on a strong note, rising lumber prices and increasing regulatory cost concerns could affect future production. Led by a solid, double-digit gain in single-family starts, overall housing starts increased 5.8 percent to a seasonally adjusted annual rate of 1.67 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The December reading of 1.67 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 12.0 percent to a 1.34 million seasonally adjusted annual rate. The multifamily sector, which includes apartment buildings and condos, decreased 13.6 percent to a 331,000 pace.

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FHA to Allow DACA Status Recipients to Apply for Administration-insured Mortgages

The Federal Housing Administration announced Jan. 20 that it will allow individuals classified under the Deferred Action for Childhood Arrivals program who are legally permitted to work in the U.S. to apply for mortgages backed by the FHA. Borrowers must satisfy the same requirements as U.S. citizens to be eligible.

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New Supply of Office Buildings Adds to Vacancy Woes: Report

By Michael Tucker

Cushman & Wakefield, Chicago, reported the recession that began in March is still being felt in the U.S. office market.

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Colliers Survey Shows ‘Surge’ in Commercial Property Investment Expected This Year

Leading diversified professional services and investment management firm Colliers International Group Inc. (NASDAQ and TSX: CIGI) reveals investors are largely optimistic about a market rebound in 2021, according to its new Global Capital Markets 2021 Investor Outlook. Colliers’ research anticipates a 50 per cent surge in investment activity in the second half of the year, pointing to a broad-based renewal of confidence in the property market as a result of recent vaccine developments and continued government stimulus.

“Based on our global analysis, which gives us a bird’s-eye view of investors’ interests and expected appetite, longer-term tailwinds in the property sector remain intact. With a massive volume of equity raised globally and the need for real assets, investors are eager to deploy pent-up capital and pursue opportunities during the year,” said Tony Horrell, Head of Capital Markets | Global at Colliers International. “We expect to see movement up the risk curve this year, with investors exploring all types of assets from senior care homes to public infrastructure projects.”

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FHFA Extends Moratorium on Single-family Foreclosures

The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will extend the moratoriums on single-family foreclosures and real estate owned (REO) evictions until February 28, 2021.  The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The REO eviction moratorium applies to properties that have been acquired by an Enterprise through foreclosure or deed-in-lieu of foreclosure transactions. The current moratoriums were set to expire on January 31, 2021.

“To keep our communities safe, and families in their homes during the COVID-19 pandemic, FHFA is extending Fannie Mae and Freddie Mac's foreclosure and eviction moratorium," said Director Mark Calabria. 

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Moratorium on Foreclosure Activity Results in Record Low Filings in 2020, Data Shows

Foreclosures were 57% lower in 2020 than in 2019, reaching a record low of 214,323 filings on residential properties — 0.16% of all housing units — due to the government moratorium, analytics firm ATTOM Data Solutions reported Jan. 14. The highest foreclosure rates were reported in Delaware, Illinois and New Jersey.

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Residential Activity Strong, CRE Struggles: Fed Beige Book

Residential real estate activity remained strong in many fed districts even as home prices increased due to inventory shortages, but commercial activity still struggled amid weak conditions, according to the latest Beige Book released Jan. 13 by the Federal Reserve.

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SBA Re-opens Paycheck Protection Program for New and Some Current Borrowers

The Small Business Administration, in consultation with the Department of the Treasury, on Jan. 11 re-opened the Paycheck Protection Program for new borrowers and select current ones. The latest round of funding authorizes up to $284 billion for small business owners to aid in job retention for their employees and to assist with other expenses.

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GSEs Extend Flexibilities for Appraisals, Employment Verification

The Federal Housing Finance Agency announced Jan. 14 that Fannie Mae and Freddie Mac will extend their flexibilities pertaining to both property appraisals and employment verification through Feb 28. The flexibilities were initially put in place in March 2020 and extended throughout last year in an effort to facilitate liquidity in the mortgage marketplace during the coronavirus outbreak.

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Essential Worker Status May Help Appraisers Get Early Vaccination

The Appraisal Institute on Jan. 20 advised its professionals to check with state and local government agencies where they reside to see if the real estate valuation profession falls into an essential workforce category that will give them early access to a COVID-19 vaccine.
 
Some state and local governments are scheduling vaccinations based on essential workforce categories that were put in place when the stay-at-home orders and other restrictions were initially enacted. Individuals identified as being in an essential workforce category, or as being in a public facing occupation or profession are often placed into a “phase” or “tier” that would give them earlier access to a vaccine.
 
Inclusion in the essential workforce category is what permitted most appraisers to continue providing services while state and local stay-at-home and other restrictions were in place; some areas still have those orders in place. 
 
The “Guidance on the Essential Critical Infrastructure Workforce: Ensuring Community and National Resilience in COVID-19 Response Version 4.0,” published by the U.S. Cybersecurity and Infrastructure Security Agency, identifies workers who support “residential and commercial real estate services, including settlement services” as well as those supporting “consumer and commercial lending” as being “Essential Critical Infrastructure Workers.”  
 
If a state references the CISA guidance or if it identifies public facing occupations and professions, it is possible that appraisers will have earlier access to a vaccine. Additionally, appraisers should check to see what documentation is required that identifies them as being part of an essential workforce category when scheduling a time to be vaccinated or at the time of vaccination.

Supreme Court Denies Further Stay in FTC Case Against LREAB

The U.S. Supreme Court on Dec. 18 declined to intervene or issue a further stay of the administrative proceedings brought by the Federal Trade Commission against the Louisiana Real Estate Appraisers Board, making it the first case concerning real estate appraisers to reach the Supreme Court in almost 60 years.

In its complaint, the FTC alleges that certain LREAB regulatory actions regarding appraisal management company payments of reasonable and customary fees to appraisers are anti-competitive and in violation of the Sherman Antitrust Act.

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In Memoriam: Jim McNairy, MAI, SRA

It is with great sadness that we report the passing of James (Jim) D. McNairy III, MAI, SRA of Greensboro, NC. Jim was a long standing and active member of the Appraisal institute, holding various leadership positions at the chapter and national levels. He was awarded the AI Volunteer of Distinction award for Region V in 2013. Jim served on the NC Chapter’s Executive Committee from 1996-2000 and was NC Chapter President in 2000. In addition, he served on a variety of national and chapter committees including AI’s Experience Screening Panel and the Piedmont Chapter’s Board of Directors in the early 1990’s. Jim and his wife, Jeanne McNairy, MAI, SRA, founded McNairy & Associates in 1978 to provide professional commercial and residential appraisal and consulting services in North Carolina.  

Arrangements are being handled by the Forbis and Dick Funeral Home. Our deepest sympathies go out to Jim’s family.

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FHFA Seeks Input on Appraisal Policies, Practices and Processes

The Federal Housing Finance Agency (FHFA) issued a Request for Input (RFI) on appraisal-related policies, practices, and processes. The input received in response to the RFI will be used by FHFA to determine the necessary modifications needed to ensure Fannie Mae and Freddie Mac (the Enterprises) operate in a safe and sound manner.

“Modernizing the appraisal process has the potential to create a more streamlined and accurate collateral valuation process. But if modernization is not properly adopted, it could have negative unintended consequences," said Director Mark Calabria. “Today's RFI will improve FHFA's understanding of how the Enterprises can improve the appraisal process while at the same time ensuring they don't take on unintended or inappropriate levels of risk. The comments we receive will inform how we will modernize appraisals to improve both loan quality and the origination process."

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Mortgage Rates Stay at Record Lows Even as Treasury Yields Increase: Freddie Mac

Freddie Mac released the results of its Primary Mortgage Market Survey (PMMS), showing that the 30-year fixed-rate mortgage (FRM) averaged 2.71 percent.

“Mortgage rates remain at record lows, resisting their typical correlation to Treasury yields, which have recently been moving higher,” said Sam Khater, Freddie Mac’s Chief Economist. “Mortgage spreads – the difference between mortgage rates and the 10-year Treasury rate – are declining from their elevated levels earlier this year. Although today’s mortgage spread is about 1.8 percentage points and still has some room to move down if the 10-year Treasury continues to rise, it’s encouraging to see that the spread is almost back to normal levels.”

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Homebuying Sentiment Declines After 3 Months of Growth, Fannie Mae Reports

The Fannie Mae (FNMA/OTCQB) Home Purchase Sentiment Index® (HPSI) fell 1.7 points in November to 80.0, the first decline after three consecutive months of increases. Three of the six HPSI components decreased month over month, with consumers reporting a more pessimistic view of homebuying conditions, including mortgage rate expectations, but a more optimistic view of home-selling conditions and home prices. Moreover, consumers also reported mixed results regarding job loss concerns and household income changes. Year over year, the HPSI is down 11.5 points.

"The HPSI appears to have peaked for now as consumers continue to consider how COVID-19 impacts their ability to buy or sell a home," said Doug Duncan, Senior Vice President and Chief Economist. "This follows the HPSI's recovery of slightly more than half of the loss experienced during the first few months of the pandemic."

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Foreclosures Fall 14% in November, Down 80% from 2019, Data Shows

ATTOM Data Solutions, licensor of the nation’s most comprehensive foreclosure data and parent company to RealtyTrac (www.realtytrac.com), a foreclosure listings portal, released its November 2020 U.S. Foreclosure Market Report, which shows there were a total of 10,042 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — in November 2020, down 14 percent from a month ago and down 80 percent from a year ago.

“It’s not unusual to see foreclosure activity slow down beginning in November and through the holiday season,” said Rick Sharga, executive vice president at RealtyTrac, an ATTOM Data Solutions company. “Both foreclosure starts and repossessions were down about 80% on a year-over-year basis, but it might be worth noting that a few cities that may be vulnerable to the pandemic-driven flight from urban areas to the suburbs – like New York City, Chicago, and Miami – were among the markets with the highest levels of foreclosure actions.”

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US Housing Market Will Withstand Foreclosure Wave When Forbearance Ends: Redfin

The U.S. housing market will likely withstand a wave of foreclosures as investors and first-time homebuyers purchase these homes, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. This analysis was conducted by Redfin Chief Economist Daryl Fairweather.

More than 3.3. million of U.S. homeowners will be on the hook for delinquent payments when mortgage forbearance ends. While some of those homeowners who are overleveraged or unaware of their options will contribute to a wave of foreclosures, most will be able to work with their lenders to either refinance their mortgage or sell to cash in on rising home values.

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Survey Reveals Continued Challenges for Commercial Real Estate Sector: Deloitte

By Jim Berry and Kathy Feucht

The impact of COVID-19 on the global economy and the CRE industry has made 2020 the most memorable year in recent history. CRE companies have needed to digitize operations, close physical facilities due to extensive lockdowns, and prepare for reopening, while ensuring the health and safety of employees and occupiers and considering the financial health of tenants and end users.

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Nearly Half of Office Tenants Likely to Reduce Square Footage, BOMA Survey Reveals

By David Kitai

A study of the COVID-19 pandemic’s impact on commercial real estate, commissioned by the Building Owners and Managers Association International (BOMA), has found that office users face widespread economic challenges but many remain convinced that in-person workspaces are crucial to their operations. They noted, as well, that landlords and property managers have successfully adapted to new needs during the pandemic.

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