I have a few things on my mind today. Let’s talk about square footage rules changing, crazy gas prices, and recession buzz.
1) NEW SQUARE FOOTAGE STANDARDS FOR APPRAISERS:
If you didn’t know, Fannie Mae is adopting some changes with the way appraisers measure square footage (pdf). In short, as of April 1, 2022, appraisers are going to be required to measure square footage per ANSI standards (American National Standards Institute). The idea is to standardize the way things are measured to help increase uniformity in appraisal reports. In my mind, this isn’t poised to revolutionize the way appraisers report square footage, but there will be some fine-tuning. Keep in mind this does not apply to private appraisals for tax purposes, divorce, etc…
NOTE: So far we don’t know for certain if FHA and VA will adopt ANSI.
Some things to know about ANSI:
- Appraisers will now be required to round to the nearest tenth of a foot (basically, the nearest inch).
- Below-grade area doesn’t count in the square footage (but it can count in the value).
- There will be more of an emphasis on “below grade” instead of “basement.”
- At least 50% of the ceiling height needs to be seven feet or above to count in the square footage (it can still count in the value as non-square footage if it’s below seven feet).
- Area below five feet doesn’t count in the square footage (I have a blog post 10 years ago about this).
- Stairs count for square footage for the level from which they descend.
- The space below stairs also counts in the square footage. I completely get this if there is a closet with accessible space, but it seems illogical to me to count the space below if there isn’t any access. In my mind this can inflate the square footage by 30 square feet or so.
Keep in mind builders and public records may not use ANSI measuring standards, so it’s possible we can see more minor discrepancies between the square footage in appraisal reports and public records. Of course, Tax Records is not always right. Anyway, I’ll keep talking about this as needed.
2) GAS PRICES AREN’T DRIVING THE HOUSING MARKET:
Gas prices have been unreal lately, and all of us are feeling it (besides Tesla owners flexing right now). Anyway, what do gas prices mean for the housing market? Here’s an absurd graph to compare the median price in Sacramento with gas prices in the state. Honestly, this is a ridiculous visual, but I wanted to share it to say there isn’t likely a correlation between gas prices and home prices. In other words, people don’t say, “Gas prices are low, so I’m going to buy a house,” or “Oh dang, gas prices are rising, so I’m going to wait to buy a home until gas comes down.” I’m not diminishing the pain of the lofty cost of gas, but fuel prices aren’t likely the deciding factor on whether someone buys a home or not. Yet, if gas and other goods and utilities keep rising, that can start to affect buyer behavior.
By the way, I went to Death Valley a few weeks ago, and here were gas prices at the time. I would guess they’re maybe a dollar higher now because this was before the war started. Keep in mind this station is in the middle of nowhere. Here are some pics of our trip.
3) HOME PRICES DON’T ALWAYS DIP DURING A RECESSION:
I’ve heard some economists talk about a coming recession. I’m not making predictions, but I wanted to mention some thoughts about home prices. It’s easy to think real estate collapses during or after a recession, but that’s not always the case. The truth is not all recessions are created equally, so there isn’t any one rule for how the housing market will react. In short, if people start to struggle financially and uncertainty increases, that’s where we can tend to see an impact to home prices. Here’s a presentation I put together a few years ago called Deep Recession Thoughts (pdf).
RECESSION VIDEO: Here is a video of my recession presentation too.
MARKET STATS: I’ll have lots of market stats out this week on my social channels, so watch Twitter, Instagram, LinkedIn, and Facebook.
Thanks for being here.
Questions: Have you started to drive less lately? Has your behavior been affected in any way by inflation? What do you think about ANSI square footage measurements?
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