Even the Appraisers are Seeing It

What’s the opposite of a canary in a coal mine?

I’m looking for that phrase that means indicator of good things to come.

Oh, I know: property appraiser.

At least for now, that is.

I saw the following quote in an appraisal that my client got for her new home purchase yesterday –a home that appraised at $35,000 above sales price.

“Over the past year the sales prices in this area have fluctuated. The prices have increased since a year ago and are now starting to stabilize. The data collected reflects homes in the subject’s market area that are considered comparable to the subject in design, size, age, and quality. It appears the market is stabilizing in this market area and the absorption rate is declining.”

OK. So, hurray, right? My client has $35,000 of instant equity. I don’t think she could have bought at a better time.

But, let me put this in to context for you.

1 year ago –We agents were seeing data that indicated that home prices (especially in Central Phoenix areas) were stabilizing. The press stuck to the chicken little narrative, of course.

9 months ago –Appraisers were consistently coming in low on their appraisals, by wide margins, even though buyers and sellers were valuing property higher. This was great for some of my buyers, as I could then get the seller (usually the bank) to drop the price for us. This was a pain for sellers, of course. It also seemed terribly unfair for sellers of historic homes. See, as of about 2008 appraisers are assigned to appraisal jobs from a blind pool, and we often got appraiser from the suburbs who did not know the first thing about historic homes and completely undervalued them.

4 months ago –We were seeing much more evidence that the market had turned, with fewer foreclosures and multiple offers, but the appraisals were still coming in low. I think the appraisers were reading the Arizona Republic.

Today — Appraisals are coming in on the nose (more so in Central Phoenix real estate areas). And, like the one above, they are actually recognizing the shifts toward recovery. I also started noticing when I did comparable analyses for people that the “sold” prices were showing up as higher than the listing prices.

So, my client got the absolute sweet spot for buying this house: the prices are going up, but not everybody sees that, so she could get a great deal. Then, the appraisal comes in over asking price so the bank is happy to lend money and my client has built-in equity.

Does this mean that appraisers are going to drive a price spike? Not likely. See the problem during the bubble years was that appraisers were told with a wink an a nod what market value the buyer needed to close the deal. (I was not an agent then.) They can’t do that now because you will never know who your appraiser is going to be.

Anyway, this is a good omen. I’m sure it is more applicable to historic homes and CenPho than the burbs, but this is a milestone in my book.