Mortgage Lending Expert - Home Price Trends

Where are the home values go? No real estate professionals and economists have exclusive inside - and simply are not sharing? … not quite. A number of organizations to collect and analyze data on housing values - often include projections about where prices are headed. To obtain the best possible information for use in real estate lending and investment, we have reviewed many of these reports. Usually fall into one of two main categories, each with a fundamental flaw:

1) Realtors, builders, mortgage bankers and other “special interest” groups have their own full-time economists. Producing compilations of data and projections about home values and market activity. Major flaw: It is biased information. Those whose existence is directly related to the number of homes sold have a great interest in predicting long-ing a positive outlook for the original values. In the domestic market more inflated in our lives, the housing boom 2006-2007, key industry economist of real estate brokerage said the market was stable and not fall in prices was likely. Advice There is nothing worse than that!

Legitimate research 2) of economists, data providers and government agencies: The research tends to be a wider range of sources. These vendors are simply selling their research, (rather than influence home buyers) they tend to give unbiased conclusions about the data. Major flaw: most of the data and analysis available from these vendors is composed of statistics of a whole region, city or zip code, and not a specialized market area. Imagine your own zip code - if the number of lower-priced homes happened to sell in a given period, the “average sales price” of their area would be artificially low, not including the most expensive houses did not sell.

For lenders and real estate investors, this does not work. Given the importance of knowing where the market goes, we need accurate and objective information about what is happening in specific neighborhoods in which we invest. Find a better way …

First, we went looking for reliable sources of information. We talked to several research providers in the real estate industry, real estate executives and mortgage companies, as well as evaluation of several companies. We could not find a reliable source of research and analysis that address our concerns.

Then, working with our own staff, we have defined what information it needs and what the problems were with the available data.

As a result of our investigation, we realized that we had specific information about homes in different markets, with the ability to detect trends in small sub “markets.” There was only one option. We had to develop our own system. We did. - A patented system for data collection, data analysis and monitoring of value. \ The system consists of six main components;

1) First, we identified seventeen townhomes homes in California and representing a cross section of the types of properties that make loans to households vary in size from 750 to 3,600 square foot, with market values of $ 75,000 to $ 900,000 , in areas ranging from downtown to the suburbs to outlying areas.

2) We have documented all key information such as square footage, lot size, age, services, and similar to other houses in the area. We always assumed that the property is in average conditions, comparable to other houses for sale in the same market area.

3) same house carefully reassessed every six months (and sometimes more often if necessary) completely from scratch, research houses have recently sold in the market and similar homes for sale.

4) Next, analyze the data, noting the specific changes in the value of the house. After determining whether the value of housing has increased, decreased or remained stable, begins investigating other data available in the neighborhood, the immediate market area, zip code, city and county. Often, the details of a $ 500,000 house in a neighborhood can signal any change in value, while statistics on $ 900,000 homes in that market have a very different story. We often find big differences between our results and overall statistics are available on the same ZIP code or city.

5) After investigation of the local economy around and the changes occurring in the local city of county, etc. to study the reasons for the decrease or increase in value that may be different from the available data on trends in the largest area of the market. This part of the process is critical. Understand the “pocket areas” and smaller sub-markets that completely escape the most common research can help avoid a “bad” decision for loans or bad investment.

6) When we receive a loan application or evaluating an investment opportunity, we are often provided with a property appraisal. We will almost always re-evaluate the property for ourselves or for an evaluation of an appraiser you trust. As part of our review of the evaluations, we use our research of value. It is disturbing to realize that most appraisers are generally aware of such research and analysis in the evaluation of the property.

This represents a lot of extra work - but a huge amount of lending and investment process. Many smaller areas, in large cities or postal codes are increasing or decreasing their value, but not in the same direction as the zip code or city, statistics show - all the information available from special interest groups.

The risk imposed by fluctuations in the value of the property requires attention, a careful investigation and study. While we do not have all the answers, this approach improves the quality assessment of investment and lending decisions, while reducing risk in the process.

By : Joffrey Long

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