I’ve got a few things on my mind today. Some light stuff and some deep stuff. Let’s talk about lumber, food in listings, that leaning building in San Francisco, bias in valuations, and a slowing vibe in the housing market.
Skim topics or digest slowly.
5 THINGS ON MY MIND
1) Lumber is lower (sort of):
The good news is the price of lumber as a commodity is coming down. The bad news is that doesn’t necessarily mean savings are being felt by the consumer immediately. For instance, here’s a snapshot of the price of a 2×4 at my local Lowe’s yesterday. In short, the local price here is still at an all-time high despite lumber overall dropping about 45% lately. If you didn’t know, a 2×4 was under $3 just over a year ago.
2) Real estate listings mentioning food:
How often is food mentioned in real estate listings? These are words associated with food and retail in the public description of home sales and listings in the Sacramento region so far in 2021. These words were chosen at random and they’re honestly pretty rare, but I’m still tickled (and hungry).
3) That one leaning building in San Francisco:
We’ve all been glued to news about the heartbreaking tragedy unfolding in Florida right now with the condo building collapse. Not to bring up real estate, but this is going to spur on many conversations about structural integrity, the role of HOAs, and liability. Speaking of structural issues, here is a visual of sales in Millennium Tower in San Francisco, which has been documented as a building experiencing tilting and sinking. By the way, residents were informed in 2016 that the building had issues. Can you see the difference of that news?
4) Conversation about bias:
Last week I was on Agent Kee’s podcast along with Dr. Jesus Hernandez. We talked about lots of stuff, but at the 55-minute mark we had a ten-minute discussion about valuations and racial bias. I find it’s not easy to talk about this today, but this is what should be happening. Ultimately as an appraiser I am doing lots of listening and self-reflection. I’m also clear we need to be careful about quickly saying it’s racism every time an appraisal comes in lower than expected. This conversation is only the tip of the iceberg, but I’m hopeful we can have more discussions like this. Please note I won’t approve any toxic comments because that’s not the culture of this blog.
5) Steroids & slowing (two realities of today):
The market is moving about as fast as it ever has, so it feels like it’s on steroids, but we’re also seeing what looks like seasoning slowing. For those interested I’ll be talking on Thursday at the Yolo Association of Realtors about this dynamic (I think you have to be a member).
FEWER MULTIPLE OFFERS:
Having fewer multiple offers is a symptom of slowing. Even though we’re basically seeing some of the highest levels of multiple offers ever, the numbers have been slightly lower for two months in a row. So clearly competition has begun to pull back slightly (which is what we’d expect to see at this time of year).
INSANE PRICE GROWTH:
With that said, prices are still rising. It really isn’t a slow market, but we are noting some slowing (two different things).
Anyway, that’s what’s on my mind today.
Thanks for being here.
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Lots of good stuff here. My take from 500 miles south, in reverse order 5) Multiple offers still happening, very low shortage, if it is slowing here-it is like going from a Ferrari to a Lambo. 4) I am sure that the bias concerns are not entirely without merit but the media attention may spur unfounded claims. An appraiser by nature is to be an unbiased third party that provides an opinion of value based on market data. 3.) The leaning tower of SOMA does not appear to be significantly adversely affected-prices there are still in the stratosphere. 2) Proximity to food and drink are important in housing. One minor change-I would move donuts to the slot right under dispensary. 1) The cost of lumber and all building materials has increased, along with just about everything it seems. Appraisers should take this into consideration when developing a cost approach. Thanks for sharing your thoughts Ryan.
Thanks Mark. I love the Ferrari to Lambo reference. Too good and that’s pretty much the case here too, but we’ll have to adjust the cars since we’re NorCal and less flashy than SoCal…. In my post a few weeks ago I talked about the market going from 135 mph to 128 mph. That’s a good way to think about. I see even Steven Thomas in your neck of the woods is talking about seasonal slowing. Very slight. Still bonkers.
Great commentary on everything else. I always welcome your take on things.
By the way, I see that funky tower house in Sunset Beach is listed for sale. I’ve always admired that one.
Ryan–your content is always clear and valuable, but, and I don’t think this is just me, the fonts are very small and not black but gray, and they can be really hard to read. Thanks for having a look.
Thanks John. I appreciate the feedback. I’ll make a note to look into this. It may be a bit as I am taking off next week. To me the font looks black, so that’s interesting. I’ll look into the code though. When you’re on your browser are you finding it’s only my blog with a smaller font? I just want to be sure it’s an issue with my blog and not the font size on your browser. Thank you again.
Ryan, I am using Chrome on my PC. Font is large enough for easy reading. Color is black.
Cheers!
Jeffery Hall
Thanks Jeffery. I appreciate it. The font looked black on my PC and cell. I’ll still look into this.
Great information as always Ryan! Thank you for providing such eye-opening statistics. The median home price in our region is staggering! I have noticed less multiple offers on two of my most recent listings (only received two offers on each); what I found interesting is that in each case, once buyer #2 learned they were competing with another buyer, they blew the first offer so far out of the water it left my clients no choice but to accept! I think this market is conditioning buyers to be aggressive. I have also noticed that, if a listing loses their “new status” in the MLS, buyers start to wonder what is wrong with it. “Why is this home sitting?” One of my buyers asked me after a home had been up only 8 days. Curious to see what fall will bring!
Again, thank you for adding such value to the community!
Thank you for the kind words. I really appreciate hearing what you are seeing in the trenches too. That’s valuable perspective for me. Your comment helps underscore the temperature of the market, but there is also a takeaway that you don’t always need ten offers to command a huge price. Buyers these days are pretty in tune with the idea of having to bring strong offers. Though I just talked with a buyer above $800K who offered $30K over asking and only about 4% over the list price just didn’t cut the mustard at this price point (for this listing anyway).
Wow Ryan! Thank you for sharing. One more interesting note: in both of the cases I mentioned, I listed the homes on a Friday. I usually list on a Wednesday to give time to build “momentum” for the weekend. I think the day a home lists matters far more than I realized; for in each case our activity was less than amazing. Thank you again!
It’s a funny thing because there isn’t really any formula we can apply to every single listings. What works in some cases doesn’t work in others. Just over 20% of all sales in the market sell at or below the list price too, so offering above in some cases is not necessary. It’s tricky to gauge and the advice we give is going to be different depending on the circumstances.
I like the idea of listing on Friday or even Thursday. The highest number of listings is typically Thursday and the second highest day is Friday. This may not be true in other markets, but it’s true here. I’ve actually been pushing out a visual to show the number of Thursday / Friday listings lately, but I’m not sure I’ve actually put that on my blog yet. I’ve posted on some of my social channels. Anyway, these days in a low-inventory environment Thursday and Friday have been like Christmas morning for buyers. So much attention takes place on those days.
Congrats on your success.
Thanks for this very thought-provoking information. #1 I’m glad to see lumber/supplies coming down in price and hopefully that will be felt by the consumer sooner than later! #3 I have been concerned about that leaning building in SF. I used to drive past it every time I left SF after dropping my son off at art school. Now that the worst has happened I am hoping more can be done to prevent it ever happening again, anywhere. #4 Valuation and racial bias is getting more and more attention as it should. Definitely a difficult subject to confront but we must. I am looking and learning and I hope we all will continue the discussion. #5 Lastly, I have really learned that the one thing I can always count on is change. This market is the wildest I have ever experienced . . . until the next one!
Thank you Melissa. I really appreciate your thoughts. And you are so right. Change is the only constant (in life too – not just real estate). This market will keep going until it does something else. The truth is the market is always moving. And that’s the fascinating part because there is always something new to say or watch.
As the market keeps going up, I hear Jim Cramer in the back of my head screaming, “sell, sell, sell!” I just do not think we have seen the top yet. It will be interesting to see what happens in the next two years or so. Thank you for the thoughtful post.
Thanks Ray. I am very curious myself. We cannot help but talk about affordability these days in light of higher prices, but so far it doesn’t look like there has been a mass exodus from the buying process locally. Granted, some buyers are clearly sitting on the sidelines, but having some sitting out really doesn’t typify the market for now. This is definitely why I’m watching both pendings and sales volume.
By the way, congrats on your pickleball championship. That’s amazing. One of these days we’re going to have to play. Though I’m a newbie, so I’m not sure if you would associate with my kind…
You’re so good at having a discussion about something without making it political. Prices and racial bias discussions can be difficult on that front.
Thank you Gary. This is a big conversation with many moving parts and you are so right that this can be incredibly difficult. I find many times it’s easy to make this a very polarizing conversation by talking in absolute terms when in fact both sides probably have some things to consider. My hope is to strike a diplomatic tone and be full of humility and hopefully logic. That’s my style in life really and we’ll see how it shakes out here. In truth I’ve been trying to figure out my voice in all of this. I’m a little concerned about the conversation to be honest because it can end very badly at times. But I’m here for discussion and I’d like to play my part in listening and speaking up when asked too.
Unlike Mark B I will not go in reverse order I prefer my eggs scrambled.
As to food, didn’t see anything about pasta, a great marinara or Pesto sauce and Good Chianti, you can add the Hannibal Lecter accent if you like. Material costs are nuts but heck if you want to buy, you can’t find it even at an overinflated price. I have a four month delay in getting white vinyl fence posts, YIKES. Leaning tower in SF. Like Mark I see the price change but shouldn’t it be down near the bottom of “X” axis. The sad thing is I hope that Florida doesn’t repeat itself. As to racial bias, a friend of mine went off last night and quite frankly I agree with him. This racial bias issue with no foundation or evidence is well, just NUTS….. This reminds me of all the (sorry about what I am about to say) agents who tell me how great the seller is or how cute the young buyers are. Now please agents don’t go to crazy, but I DON’T care about the folks involved in the transaction. I don’t care if they are blue with pink Pokka Dots, 7 heads, 22 eyes and are 30 ft tall, folks, I am there to appraise the real property. This is the same approach I take on all my appraisals. I don’t care about your race, religion, heck I don’t care if you are democrat, republican or independent. And yes, I am a white guy, who wears a Stetson and can get burnt under a fluorescent light bulb, but that said I don’t care about the owners, buyers, lenders, and RE agents, I only care about figuring out what a property is worth with similar market data out of a market area that is defined (sometimes that is easier said then done) and utilize data that is competing with the subject. Until someone shows me the reports along with transcripts and emails done in each of the three cases that have stirred up this hornets nest, then to me this is all NOISE. And yes as a very smart man earlier this morning told me this ain’t about appraisers it is about something all together different, us appraisers will be scape goats since we are under represented. I can hardly wait till my entire 54 hours of classes needed to renew my license are consumed with USPAP, Fed Regs, Racial Bias and lord knows what other classes they come up with. Okay so now I am done. My hope is that Ryan you are okay with this post.
Thanks Brad. I get it. There is so much noise out there and it’s hard to stomach at times. That is exactly why I mentioned in the video that we need to be really cautious about assuming racism is the culprit behind every low appraisal. That’s an easy narrative to spin. I find this conversation has many moving parts and I think having conversation publicly is going to take skill, involve lots of listening, sometimes conceding reasonable points, and not being afraid to speak up for the truth.
For any colleagues looking on, I’d like to ask you to please listen to my video and don’t mistake my posture of listening and diplomacy for a lack of backbone in believing appraisers are not motivated in mass by racial bias. And ask yourself this. What is it going to take for the appraisal profession to survive this narrative? Seriously, how can we make it out of this? And if all we do is say we are not racists, is that going to be enough?
Ryan, I think that as we discuss the disparities in value between white and minority homeowners, the public should know we are duty bound to select comparable sales in the NEIGHBORHOOD. It begs the question of what is a neighborhood? Clearly it should not be racial; yet some are the result of historic racial bias and is systemic. Appraisers can’t fix this by making any kind of biased decision + or -. It’s the neighborhood market, (buyers and sellers) and the $ agreed on. Neighborhoods and appeal can change, but appraisers don’t control the socio-economics or government policy.
Thanks Christopher. Yeah, real estate value is tied to location, so this is where appraisers reflect the value of a particular property for a particular location. Appraisers didn’t create the market, but they do need to reflect what is realistic within the market.
The Brookings Institute had a study that came out two years ago that really helped propel this entire conversation. The study talked about the devaluation of black neighborhoods compared to white neighborhoods. I’m thankful for the study frankly because it highlights the problem of redlining and the result of the missed opportunity of generational wealth-building. These are topics we should absolutely talk about and they’re important to me personally (and even professionally now as we are talking about all of this). The one big issue I have is the word “devaluation” suggests human appraisers have been involved in actively devaluing neighborhoods in mass. This study was not even about appraisers, but the narrative has become about appraisers obviously.
There are some really important social issues we need to deal with in our society and here we are wrapped up in the middle of the conversation. There are some things we can certainly look at in our profession, which is why my diplomatic tone may not sit well with some appraisers. For instance, we are very white as a profession and that is something that clearly needs to change. Diversity is a good thing. But there are some narratives being spun that are simply false also. It’s a mistake to gloss over redlining and decades of policy that led to the way things are while putting the microscope exclusively on appraisers. Granted, when we hear stories of such a huge disparity between two appraisals, we frankly deserve scrutiny. But just as I said in the video I posted, my concern is that here we are talking about appraisers while ignoring policy-makers. That’s not to say we shouldn’t be scrutinized because I actually welcome that. My concern for the movement though is without a change in policy we’re not poised to see any real change in society…
“Diversity is a good thing. But there are some narratives being spun that are simply false…”
I’m not in real estate, but I watch it very closely. With that said, when I bought my first home–I never gave a thought about diversity. It was not on the “list” of what I was seeking in a home or the area. With that said my realtor told me that it was against the law to talk about race. It was not as easy to get stats on crime then either, which is of concern. I relocated from Calif. to out-of-state and was just ecstatic to be able to get a home. I was seeking affordability, value, space and convenience to amenities. The “diversity” I sought was in the job market–not RACE. That struck me as common sense. I realized that our home would involve “sweat equity”. I wouldn’t move to a location ticking off boxes for how “diverse” the races are, or their sexual orientation, etc. I don’t make friends that way either. I don’t tick off boxes of how many “friends” I should know of this race or that. I do care about crime and predators. I had no idea how long I would live in the home and I had concerns about the area–too much info to get into here. For all the “negative” comments I hear about gentrification who in their right mind would put sweat equity into a home and then watch it go to the skids–that would be unwise. If I look at areas I want to see people invested in their homes, which you can assess by looking at how well they take care of properties and how many people own their homes. People who own homes are far more invested in their communities than those who rent. I see that in my own neighborhood and the problems associated with that. I’m certain though that what I’ve just written someone could twist it into that I’m a racist or privileged, blah, blah, blah. That seems to be the name of the game these days.
I really don’t trust realtors for a host of reasons and the current focus on “diversity” –how I see it played out today, would only further create distrust and makes me wonder about their motives. And the same goes for anyone else in the industry.
I appreciate your input. The real estate community really does have to be careful about making decisions based on race, religion, marital status, etc… in light of the Fair Housing Act (and ethics (let’s not forget that)). So there is a line to not cross in conversation for sure. This past year or so there has been added scrutiny about buyer letters for this various reason. I’m sure there are lots of opinions on this, and I’m not looking for a war of words, but the big idea is a buyer letter with a photo and specific mentions about background, familial status, and religion, could be interpreted the wrong way and causing a seller to violate the Fair Housing Act. I’m not a lawyer, so I’ll let smart people figure this out. I’m just saying this is one practical way Fair Housing Act issues are showing up in the real estate space.
The Fannie Mae appraisal report form even states, “Race and the racial composition of the neighborhood are not appraisal factors.” So in appraisal reports when describing what values are doing and the dynamics of a market appraisers might talk about the architecture, type of properties, schools, parks, proximity to conveniences, businesses, economic trends, price data, level of inventory, investor activity, etc… It’s all about these factors rather than the people. It is off limits to even include race in analysis. Of course in light of redlining and restrictive racial covenants there are surely areas where race is quite different. That’s common knowledge. And maybe there is even a difference in price when comparing different neighborhoods based on race. But race is not something appraisers research, write about in reports, or consider for the value. If it happens it absolutely should not.
Ryan, I think I can understand how the Appraisers are feeling like a deer in headlights with the current discussions around accusations of racist practices. As a Realtor of 14 years I can only say that any complaint I’ve ever had on an appraisal is that the appraiser missed some comps, in my humble opinion, and didn’t come up with the number I wanted. The Fair Housing Act was passed in 1968. 53 years ago. Appraisers are not responsible for real estate values of neighborhoods affected by higher crime rates, poorer schools and larger rates of non owner occupants. These are societal and community issues that we as a country have been trying to deal with for a very long time. So much has been done to make fair housing practices a systemic reality in the last half century that I hate to see this fact ignored. Hang in there Appraisers.
Thanks Bill. I appreciate you taking a moment to comment and for your support. It’s been a brutal year and I hope appraiser organizations will maybe get out on top of this a bit more to listen and speak up as needed. Honestly I welcome the focus and increased scrutiny and I’m willing to really analyze motives and practices too. I think it’s a good thing to be challenged and assess the way we do things because it can help us be better. It’s just not an easy conversation to have these days because it’s coming in the midst of decades of systemic racism in real estate that has helped shape many of the neighborhoods we know today.
I will say a huge disparity between two appraisers frankly should be under the microscope. I think these viral examples are really highlighting a quality problem in the appraisal space at the least. I’m not saying racial bias couldn’t be a factor, but I don’t discount how huge of an issue quality really is.
Regarding diversity though, I’m all for seeing more diversity among actual appraisers. This seems like a great starting point. Ironically it almost seems controversial to some colleagues to say this, but I think it’s a no-brainer as differing viewpoints can make us stronger.
Taco and Donut are the most important. I’ll have to mention both in my next listing to get their numbers up 🙂
Please do so. Haha. The market needs that Doug. 🙂
I’ve never heard of buyers letters–that must be a recent thing. I did look it up. I don’t get those letters–just a steady stream of annoying real estate cons and scams attempting to chase me out of my home. It’s good that the price of lumber has gone down. I recall a news show segment in mid May that cited a study which stated that the average price of lumber was 280% higher than pre-pandemic lumber for homes, which is causing the price of construction to increase by 30-40%.
I notice listings that include food–more trendy restaurants in trendy areas. It’s obvious who the target audience is. I read listings and I feel many do a poor job of marketing the home and area, but in a hot market it doesn’t seem to matter. I know my areas well. Donuts and tacos would not be a persuasive selling point for me.
I agree with some of the other commenters that this really isn’t about race or appraisers. It’s about something else. As someone else stated appraisers don’t control government policy or socio-economics.
Our city council person alerted residents to a city planning meeting concerning zoning laws. Of course it would concern residents, since it impacts them and their property. Activists who scream and accuse anyone with a conflicting viewpoint of racism showed up. Their behavior is so predictable–just make accusations of racism to silence and bully people and get people on the defensive. That’s how they operate. It happened right before the lockdowns and pandemic and they rammed through their agenda anyway. It’s all political and it has nothing to do with race.
The letters have come under scrutiny more recently. I don’t know how long it’s been a practice. I think in a market where buyers are really struggling due to lopsided conditions it feels like a letter will help give an edge. Yet I find lots of discussions about this and agents are thinking through wording more carefully these days and some agents are not allowing letters like this. One staunch advocate against letters reviews contracts with the seller and covers all the names of buyers too in order to eliminate any possible bias (race, martial status, gender, etc…).
I can see how the letters could be problematic and could possibly make a buyer feel that it may give them an edge under the current conditions. I’d never heard of the practice. I would probably be inclined to persuade my clients not to write them, if I were an agent. It could place the seller in an uncomfortable situation too.
A seller in my neighborhood received 5 cash offers in the first half hour after they placed their home on the market. It sold $35K over the asking price due to the bidding wars and he got a sweet deal. His spouse was a realtor as well. That was over 2 years ago and the fierce bidding wars has continued, but then people have been flooding in from Calif., and other coastal regions driving this situation. The inflated prices does create resentment from locals who get priced out among other problems associated with increased population.
Yeah, not much love for California residents these days (well, not for so many years anyway). I’m anxious to see migration stats in a couple of years from now when we have a much better idea of who moved from where and how many people moved. We are just at the beginning of things for now in terms of actual stats.
A huge problem with California is regulations. To illustrate I was following a story about county regulations that stipulated, “….that the property must slope toward the street. Without getting into the details this was to raise the back of the lot by 1 foot and shore up the neighbor’s fences with a 10-foot concrete retaining wall. The homeowner stated, “Before we put one stick in the ground, we had spent $100,000 on soil preparation,” challenges that were beyond anything that they had anticipated. This was in a coastal community that I’m well acquainted with. A lot of these restrictive regulations are cost-prohibitive–making it not accessible to many homeowners.
Likewise, I followed another story about ADU’s. An ADU built in 2014, referred to as a 674 square foot cottage in the San Francisco–Bay area cost $500K. The architects website in 2019 states the following: “If you’re adding an accessory dwelling to your home in the San Francisco Bay Area, expect to spend between $225,000 and $550,000 for design, permitting, and construction.”
Insane prices.
Thanks for sharing. The idea of an ADU is really popular, but they’re so expensive to build. I actually have a friend who is getting bids right now and so far they’re hovering around $100,000. I’ve heard quite a few estimations between $100-125K. Though I had someone who called me angry that an appraiser ONLY gave a $100K adjustment for an ADU that was super custom. So the cost really can be exponential depending on the finish work, size, etc… There is no mistaking the huge cost of permits here though. It’s prohibitive to building and it makes the allure of ADUs and tiny homes pretty much unattainable for common folks without deep pockets. There just might be a reason we see all those tiny home HGTV shows in other states… 🙂
I suppose I’m an onlooker as I find this subject matter interesting and appreciate the commentaries.
Regulations are cost prohibitive–I mean $100K to move an inch of soil is probably not what most people without deep pockets could afford. I’ve also seen some “tiny homes” selling for $100K, but new builds in Calif. are way over a million along the coast and they are catching up here where I live and unfortunately elsewhere. I don’t see smaller homes here–some people see 300,000 sq ft as a smaller home. I do see older stock homes being scrapped off for massive homes. They change the neighborhoods and inflate prices–over a million. I know a lot of people who would like to downsize, but they cannot afford the price of a smaller home and it doesn’t make sense too. Many stay in place despite not needing all of the space.
The focus on racial bias is meant to deflect from the real issues at play–just my two cents. Seems much more about class as these prices make ownership unattainable for the “common folk”. Yet there’s a layered and nuanced discussion here about all the problems associated with the reasons. I’m well acquainted with regulations in coastal areas given my background.
These prices are nuts to me, although I’d love to build.
I hope you dont mind, but I am going to jump back in here and chime in on the disparity in values from one appraiser to the next. I spend a lot of time doing reviews of lending appraisals, looking at my peers work. My takeaway from doing this for years is this: The system of assigning appraisal lending appraisal orders does not appear to award appraisal assignments to the most competent and qualified appraiser. When a lender sends an appraiser to your property that is not the most competent available, value disparities occur. This system was designed in the wake of the financial crisis. Bringing a middle man in to assign appraisals was designed to keep the loan originator from hand picking their appraiser and eliminate undue influence. The middleman (AMC) is in the game to generate income. The more they can sell an appraisal for, and the less they can get the appraisal completed for, maximizes their profit margin.
News alert to borrowers!!! That fee you pay for the appraisal…it seems high, I know. Guess what? The appraiser that shows up to your property does not get all of that fee. They get a percentage of the total fee, sometimes an unfair percentage. Your lender is required, in most cases, to outsource the appraisal assignment. The company that they outsource that duty to (AMC) takes a nice piece of your appraisal fee, for their part in the process. This process has diminished the pool of appraisers. Some appraisers are greedy (and smart), and dont want to share the fee-so they have left the AMC party and the mortgage origination side of the business (see Ryan Lundquist LOL). I am not saying that bias doesnt exist, it exists in all of us. We all have likes and dislikes. A professional appraiser should not take those to work with him, but it is not out of the realm of possibility. I think that the problem lies, in some cases, partially in an undereducated, undertrained, less than competent pool of appraisers working for the AMCs. The AMC process has done more damage than good in protecting the public trust.
One last point to this long winded diatribe-in addition to appraisers leaving the lending world because their fees have been reduced-lets add a layer of risk to the equation. The public is now hyper aware of these new stories and the attention that “low appraisals” have garnered. Any appraiser that arrives at a property and the homeowner has a different pigmentation of skin, should be aware that the possibility of being accused of bias is now greater than ever. The threat of those claims, unfounded or not, might make an appraiser think twice about accepting assignments. Take a chunk of our fees, and put the bias bug in our ear, and wonder why the appraiser population is shrinking. Its a strange time to be an appraiser or a police officer. Sorry for the long post, I have been following this from the sidelines for quite some time. Best wishes to all.
Thank you Mark. I appreciate your commentary. Yeah, I don’t do lender work any longer on purpose. It’s a disaster on too many levels. I think you’re right about appraisers wondering. On the positive side hopefully appraisers will note the increased scrutiny and be aware of doing a solid job. That’s the positive takeaway for me here in the midst of lots of negative stuff.
For onlookers, Mark is right about lacking education and training to produce competent valuations. This is an issue.
Great topics, Ryan. A big concern I have with the issue of racial bias is that some policymakers will enact laws to fix the problem that totally go against appraisal methodology. For example, comparable sales from the same competitive market area of the subject property should be used because they reflect the market forces in play. From what I have read, some people that do not understand the appraisal profession believe that comparables from different areas with higher selling prices should be used, however, this appears to be cherry-picking sales to achieve a predetermined outcome. I don’t mean to get heavy here but I think this is a great time for leaders in the appraisal profession to explain to lay people how the appraisal process works. I agree with you, Ryan that the appraisal profession needs to be more diverse. And one last comment I would like to make is that in my 30-year career as an appraiser I have never met an appraiser that I believed was racially biased. I think that variances in appraisal value for the same property probably have more to do with competence and education than racial bias.
Thank you Tom. I always appreciate your take and thank you for shooting straight. I’m also deeply concerned here. While my tone is diplomatic and I’d like the profession to grow in a few ways, I”m really concerned about how this narrative is playing out. Last month the Biden administration put out a press release stating racism in appraisals would be addressed. https://www.whitehouse.gov/briefing-room/statements-releases/2021/06/01/fact-sheet-biden-harris-administration-announces-new-actions-to-build-black-wealth-and-narrow-the-racial-wealth-gap/ The problem is the Brookings Institute study was cited within this conversation about the devaluation of black neighborhoods. That study did not actually look at appraisers at all, but instead focused on the price difference between black and white neighborhoods based on data from Zillow. Unfortunately at times I think we are mixing up the result of systemic racism in real estate through redlining (which is likely a strong reason why the Brookings study shows a difference) and actual appraisers who have their boots on the ground. I am open to any changes to the way comp selection works if someone has a better solution and I have a posture of listening also, but in terms of comp selection it cannot in any way show advantage or disadvantage to any one group. It has to be a neutral process that does not favor or disfavor anyone and ends up reflecting the value of the real estate for that particular location. The thing is no matter what we cannot escape that buyers purchase real estate based on the location and not every location has the same value. Even in the highest-priced areas value is not the same on every street. There are simply some streets able to command higher prices.