AppraiserGuy

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    • Wed Jan 2nd 14:43 PM | Rating: 0 0
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      Don't Expect a Housing Bottom Until Late 2009
      I am a commercial appraiser in Southern California. Several of my fellow appraisers & I have been "shouting into the wind" about the former "impending" and now certain crisis for over two years now. Unfortunately, we have been proven correct. We believe that you are "right on" as to how much longer this crisis will last

      Here is an analysis that was created by one of my mentors, Steve Snith, MAI in San Bernardino, CA. He published a paper entitled "Measuring Supportable Demand for Housing and Projecting Future Value Trends" on 12/23/2007. Briefly, his hypothesis is that future value declines will follow along the lines of the Median Household Income to determine how far prices will decline. Only when the "average" income can afford a home will declines cease.

      Below are the calcualtions we are using in our Market Analysis sections of appraisal reports we are completing to predict supportable price levels. Steve is teaching these methods in a Finance Class he is teaching at Cal State San Bernardino.

      The figures we use are easily obtained from Sites like REaltor.com and are based upon Zip Codes:

      Median Household Income in Zip 92264 = $42,431

      $42,431 x 32% average allowed PITI in loan apps = $13,578
      Divide by Loan Constant for 6.5% Fixed Rate: 0.0638

      Yields the maximum Supportable Loan: $212,820
      Add a liberal down payment: $100,000

      Maximum supportable value in this Zip: $312,820

      Average price for 1800 SF SFR in 92264 = $498,078
      Median price supported by HHI = $312,820

      Possible Percent decline to reach
      supportable income:.................. 37%

      I realize that there are many more sceanarios possible with respect to ratios of income to debt allowed in mortage loans, down payments but with ANY analysis along these lines, the results show that there is a significant amount of value left to be "shed" until values meet the Household Incomes and therefore meets the ability of the "average" person to afford to buy a home.

      Please feel free to comment on these methods we use as appraisers to analyze demand:

      John C. Carlson
      Certified General Real Estate Appraiser
      Diamond Bar, CA






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