Current Trend: Supply Grows – Demand Slows

As a leading Certified Residential Real Estate Appraiser in California’s Inland Empire, Hosking Appraisal Group spends a great deal of time researching trends and predictions in southern California’s housing market. We believe that knowing and tracking price and buying trends in the areas where we work is paramount to keeping our thumb on the pulse of the housing market. We research and share resources that can help us, our clients — and other visitors to our site — make more confident and healthier decisions when considering real estate options and opportunities.

Recent Housing Market Trends

Unless you’ve been residing under a rock, you’re well aware that we’ve experienced astronomical growth in real estate values the past few years. Our tracking of the Inland Empire housing market in this blogpost from 2017 shows just how much the region’s home values have exploded in a five-year period. The average home price in Canyon Lake in 2017 was $374,000. Redfin recently reported that in June 2022, the average home price was nearly $620,000, a 60% increase in value! Proof that we’ve been experiencing a sizzling hot market with record low interest rates and record high home prices. Market inventory has also been historically depleted, causing a bevy of bidding wars that have driven home prices skyward.

Change is in the air …

As we navigated the first half of 2022, inflation arrived (as predicted) and the mortgage rate jumped from 3.22% in January to 5.57% in August. Market inventory is also growing and fewer people are actively shopping for a new home. One of many reasons is that elevated home prices combined with higher interest rates (and record-high gas prices, especially painful for commuters) have made home buying downright unaffordable for many SoCal residents.

Homes are also staying on the market longer, which means fewer bidding wars and signs of a decline in urgency to buy. This recent article in the LA Times reports that nearly 30% of homes in the Los Angeles/Orange County market had price cuts in June of 2022. In the Inland Empire, nearly 19% more homes were on the market in June 2022 compared with the same period the year prior. Homes are staying on the market longer and month-to-month inventory continues to expand.

An Indefinite Future, at Least for Now

Whether these new housing market trends indicate that home values will decline or simply that the rate of home appreciation will slow remains to be seen. But keep in mind there is still a shortage of housing in Southern California and a lot of buyers who are actively in the market to purchase a home. There is no cut and dry answer as to what the future holds, but we’ll continue to track this increase in supply and decrease in demand, as well as home value trends in the ever-changing southern California real estate market.

HOSKING APPRAISAL GROUP
22860 Compass Dr
Canyon Lake, CA. 92587
Phone: (951) 294-1955
Email: pdqmike@msn.com

Recap: Valuation Expo 2021

As a southern California property appraiser, each year I attend Valuation Expo, the country’s largest trade show for real estate appraisers. It’s an incredible forum for learning, networking, and gleaning insights and forecasts on the future of the real estate market. This year’s expo at the Bellagio in Las Vegas was a brilliant collaboration on ideas and forecasts!

So what’s the consensus, you ask? The country’s largest lending institutions, real estate corporations, and appraisal management companies (AMCs) are each aligned this year in their projections that the housing bubble and prime seller’s market we’re currently experiencing is headed for a substantial correction. And soon! (Nothing like the correction and recession of 2008 expected, but notable, nonetheless.)

And what does this mean for the economy? Buyers and sellers? Realtors and Property Appraisers? Interest rates? Stock and bond markets? The construction industry? All that remains to be seen, and the next several months will no doubt involve disparity and some distressing fluctuations. But they’ll eventually deliver lucidity — allowing buyers, sellers, agents, appraisers, and lenders to plan and budget accordingly. After all, the past few years have seen price spikes and bidding wars that are unprecedented, and corrections are critical for long-term market stability.

So please stay calm, carry on, and plan accordingly. The housing industry may be headed for a significant adjustment, but as the great Helen Keller once said, “A bend in the road is not the end of the road, unless you fail to make the turn.”

Bidding Wars Fall to Lowest Levels Since 2020 -MSN article

Housing Crash 2021 Starts Here -Reventure Consulting

Home Listings Surge. Bubble Over? -Reventure Consulting

Click here for tips on maximizing the value of your home and other frequently asked questions on the property appraisal process.

Busting 9 Myths About Property Appraisals

Property Appraisals vs Home Inspections

There are plenty of of assumptions about property appraisals circulating among home buyers and sellers, and many of them simply don’t hold any merit or truth. Licensed property appraisers must adhere to a code of strict regulations called the Uniform Standard of Professional Appraisal Practices (USPAP), and are congressionally mandated – regardless of location. Here’s a list of nine myths about the appraisal process, and the actual facts behind them.

Property Appraisal FactorsMyth: An appraisal is the same thing as a home inspection.

Fact: An appraiser provides an informed opinion of a home’s value through a comprehensive appraisal process based on factors including location, condition and improvements, amenities, and market trends. A home inspector determines and reports on the condition of a home by assessing its main components including (but not limited to) roof, electrical, and plumbing systems.

Myth: The appraised value of real estate property can vary, based on whether it is prepared for the seller or buyer.

Fact: An appraiser has no stake or vested interest in the outcome of an appraisal, and is mandated to provide his/her valuation services with impartiality and neutrality.

CalculationMyth: Real estate appraisers utilize a generic formula based on ‘price per square foot’ to determine a home’s value.

Fact: Appraisers analyze a number of factors associated with the value of a home. Some of the factors include a property’s location, size, overall condition, proximity to various facilities, and the recent sales price of comparable homes in the market area.

hag-imageMyth: Property appraisers only estimate real estate/property value when a home sale involves a mortgage or lending transaction.

Fact: Depending on his/her qualifications and certifications, a property appraiser can provide property valuations for several other purposes. These valuations can (and often are) be for the purpose of dispute resolution, divorce, estate planning, bail bond purposes, zoning/tax assessment reviews, Private Mortgage Insurance (PMI) removal, and cost/benefit analysis.

Myth: A property’s market value should equal the replacement cost.

Fact: Market value is based on what a buyer would likely pay the seller for a particular property, factoring in that neither party is under pressure to buy or sell. Replacement cost is a determination of the dollar amount that would be required to reconstruct a property in-kind.

Economic conditions

Myth: In a healthy economy when the sales price of homes in a specific area are rising by a specific percentage, the value of individual properties in that area can be anticipated to appreciate along that same percentage.

Fact: The value appreciation of a singular property must be determined on an individual basis. The appraised value includes a variety of relevant components (including the sales price of comparable properties in the area), regardless of economic trends.

Appraisal ComponentsMyth: The assessed value of a property should equal the market value.

Fact: Many states actually support this concept; however, this is not always the case. If other properties in the area haven’t been re-assessed for a protracted period, or if the interior of a home has been remodeled and an assessor is unaware of those improvements, the assessed value of a home may very well differ from market the value.

Myth: Consumers own their appraisal because they are the ones who pay for it when applying for a loan to purchase or refinance their property.

Fact: Unless a lender “releases interest” in the document, appraisals are owned by the lender. However, the Equal Credit Opportunity Act allows that consumers can order a copy of the appraisal report from the lender who ordered it.

Review your real estate appraisalMyth: A home buyer or seller doesn’t need to be informed about what is in an appraisal document as long as it meets the needs of their lender.

Fact: Consumers should confirm the accuracy of their appraisal document, and if needed, question the results. Appraisals include a legal and physical description of a property, including precise square footage and property lines. They also include a list of comps (comparable properties) in the neighborhood and market trends in the vicinity, making them valuable for future reference.