Steven R. Smith

http://smithrealtyadvisors.biz

21 Comments

    • Housing on the Slide [view article]
      It is siimple really, Mortgage Fraud committed at a variety of levels by participants who earned comissions, some licensed, some not, some for profit, some for housing alone. Sep 13 12:10 PM
    • Will Housing Bottom in 2010 or 2012? [view article]
      The Housing Bottom is not one but thousands of Bottoms. Within each local market, the trends vary in speed.

      The faster the declines, the sooner the Bottom.

      In Zip Codes that are going down 5% per Month, they will reach their Bottom sooner than those at -1% per Month.

      How do you measure the Bottom in any given market is also important. The formula I use is based on Supportable Demand, which is a function of the interest rate on fixed rate loans.

      Take the average house price minus the Supportable Demand price and subtract. The difference is then divided by the Change Rate. If it is -5% per Month, the Bottom might be reached this year.

      What is true by virtue of how the Case/Shiller charts are done, is that this phenom will not start showing up until 2010. By then many markets will be well past their Bottom.
      Jun 26 09:12 AM
    • SoCal April Real Estate: Rising Sales, Flat Prices [view article]
      At the micro level, which may not be showing up in the charts yet, Zip Code after Zip Code in the Inland Empire Region entered a Free Fall this Spring. Some areas are going down more than 5% per month.

      I am surprised this is not apparent. Maybe just the last 10 weeks should be graphed for it to be really glaring. It will show up later though, for all to see.

      Absent real estate speculators and gamblers and fraud for housing transactions, Supportable Demand is all that is left.

      Take any Zip Code and calculate how much of a mortgage the average Household can support at an 80% loan, FNMA fixed rate, where the buyer has to Qualifty. Add a down payment of 20% and that is the Supportable Demand Level.

      Subtract that from the current Price Level and you know how much more it has to come down. Apply the rate of change, like -3% or -5% Per Month, as the case may be; and you can calculate when the Bottom of the Market will be reached in any given local market area.       May 20 10:25 AM
    • The Housing Crisis is NOT Over [view article]
      We are calculating the bottom of the market by Zip Code, using the Median Household Income, a 32% underwriting ratio and 20% down payment. In my Region, the Inland Empire, we have areas that are 8 to 15 months away from the Bottom. It depends on the Rate of Change. The faster things are going down, the sooner the Bottom.

      Some areas are in Free Fall, going down more than 5% Per Month.       May 07 08:34 AM
    • The Reverse Ripple Theory of Metropolitan Home Price Corrections [view article]
      Excellent article. Apr 04 10:37 AM
    • Housing Market Tracker - Subprime Strikes Korea, Switzerland, Israel, Australia, Germany... [view article]
      To me, this seems like a financial pandemic that is in the making, that is the ball is rolling, steam is building, and we are going down hill with no brakes, no one big enough to break the trend.

      The good news is that by 2011, things might have worked themselves out.       Apr 02 10:56 AM
    • No Sign of a Credit Crunch Outside of Real Estate [view article]
      Car dealers are often required to guarantee the loans that they write. Most will be a 90 day gurantee to the lender if the car goes delinquent and the bank can repo it before 90 days, they pay off the loan.

      Those with stinky credit are unconditionally guaranteed. Try that model on the Housing Market and we might not have had such a problem.

      Builders, like KB Homes as an example, partnered with lenders or set up their own lender, raising the prices and packing people into deals.

      Liberal lending allowed people who did not qualify, buy bigger houses than they could afford. This was helped along with Appraisers who willfully inflated the prices and called it Market Value.

      Now prices are in free fall, on their way back down to where the average household can actually afford them.

      Most all are in denial about their role. What happened amounted to Racketeering.
      Apr 01 10:27 AM
    • Housing Market Tracker - A Brief Look at Global House Prices [view article]
      Predatory Lending was not restricted to the USA. Nor was the Mortgage Fraud or Appraisal Fraud that went along with it. Prices will fall back until they reach a level where there is supportable demand, which is in the Household Incomes of the local markets.

      We can predict and are teaching Appraisers in my market area how to predict the bottom of local housing markets and the timing. We do this by measuring the rate of change over the last 12 months, and chacking for velocity.

      We check the last 3 months and compare to the average for the 12. If it is constant {which it is not}, it is one thing. If it is increasing {which it is}, then it is a different thing.

      Example, last week we taught a group of 12 to project the future in a market that had gone down 16% in a year, but 10% of that was in the last Three months. Using 3.3% per month we projected the Trend Line outward in Time.

      Using Household Income, 32% underwriting ratio and a Fixed Rate Loan Constant of .0063, we calculated the supportable Loan Amount and added a 20% down payment.

      Next we subtracted this calculated amount from the Average House Price for our area we were studying and came up with a 36% Differential.

      This is the amount left to be shed before we could expect the market to Stabilize and stop going down.

      In this example, the market will stabilize in 8+Months. Try it in any area where you can get HHI and Sales Price Averages. It works.

      Actually, Prices might stabilize a little higher, but so what, we are not brain surgeons trying to be 100% precise, but we can be predictive with a certain level of certainty.

      The breed of appraisers who are learning this type of thing are forming an new order, called Property Economists. Small in number, but led by the teachings of George Dell, MAI, SRA of San Diego and myself.

      The next course to be offered will be a four day session on Stats and Graphs for Appraisal Applications in Roseville, CA on 4/8/08       Mar 27 09:36 AM
    • How Counter-Productive Is Realtor Association Spin? [view article]
      There ought to be a law that a person working for a special interest group, when quoted, be labled as the Advocate for that group, not as an Economist.

      There is a grass roots movement with a small but growing group of appraisers that started in Southern CA, who have found a way to measure the bottom of the market and the timing. Led by George Dell, MAI, SRA of San Diego and Steven R. Smith, MSREA, MAI, SRA of Redlands. The next offering of their course will be in Rosevilled on 4/8-4/12.

      Small groups from 12 to 30 appraisers at a time are being trained in a new level of Housing Market Analytics. These appraisers have skills that can be used to predict the future value change rate and direction.       Mar 26 11:50 AM
    • Record Declines in Home Prices Continue [view article]
      Falling Prices will continue until they get down to a level where 70%+ of the Households in the local Zip Codes can afford them. Housing Affordability is the issue.

      Liberal lending allowed people to buy houses they could not afford, and others to refinance to levels they could not afford.

      I have been teaching students how to measure where the bottom of the market will be in their individual Zip Codes in our Real Estate Finance and Appraisal classes at CSUSB.

      Take the Household Income for an area, 32% of that, dived by 12 and you get a Loan Payment they can afford.

      Divide that by a loan constant on a 30-year fixed rate loan, say 0.0063, and you get the Loan Amount.

      Add a 20% or 25% Down Payment and you find the level where there is Supportable Demand.

      Compare that to where the Average Housing Prices is for that Zip Code and subrtact the Difference. Divide the Difference by the Average Housing Price and you get a Percentage, that amount that is left to be shed.

      In my Region, the Inland Empire, we still have 25% to 40% left to be shed.

      Then, once that price level is reached, all over supply needs to be absorbed. During this period, the market willl be Flat.

      Then, in another 2-years or so, prices may start increasing again, assuming incomes have increased, jobs have increased, etc.       Mar 26 11:15 AM
    • How Will the Housing Crisis End? [view article]
      You miss the point so far that it is amazing. Lowered Lending standards allowed what happened to happen. Liberal Lending is a root cause of the problem of the run up in Housing Prices.

      Prices need to come down more for them to once again be Affordable. Bringing prices down another 25% to 40% will solve the problem. That and never allow another loan to be made to someone who cannot afford it.

      And put all of the Appraisal Whores in prison for a year or two, that should cause some sobriety in theri field.

      You would only need to put 30,000-40,000 of them in jail, along with the 50,000 or 60,000 unlicensed people they had in the field doing the appraisals.
      Mar 26 11:05 AM
    • Housing Bust Blame Game [view article]
      I think the lenders, of all kinds, and the Realtors will point the finger at the appraiser, who was supposed to be ethical and honest.

      Yet, there is no requirment, not even now, that the appraiser be ethicl, or strong, or even really educated for that matter.

      As long as they were not a felon before they got their license and could memorize test answers, many criminal minds entered the appraisal field.

      Licensing ruined this field IMHO.       Mar 20 12:44 PM
    • The Insolvencies of Non-Bank Financial Institutions [view article]
      Excellent article. I would have preferred that that they not bail out any investment firms. Let them fail, and fail quickly. Instead we are in for slow deaths, in the, paid for by all of us. Mar 19 10:05 AM
    • Pending Home Sales Down 19.6% [view article]
      Are there any economists not attached to industry related organizations that report on the housing markets?

      The trouble is that while we might see through the spin, many others do not, they believe it.

      I think part of what NAR does is to try to make life easier for their members by getting their economist to spin things what might help sales volumes go up.       Mar 07 11:16 AM
    • Homeowners Feel the Pain of Over-Improvement Syndrome [view article]
      It is interesting that there has never been a published study on the effects of Market Cycles on amenities. I have often taught that individual amenity items have more value in boom times, counter tops or pools. The get compressed during a bust. And, just opposite is true with flaws in a property, which get compressed during a boom and become huge hits on the value when a bust arrives.
      Mar 03 08:23 PM
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