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April 2006 |
A Publication of ELLIOTT®
& Company Appraisers |
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RISING FORECLOSURE
RATES UNDERSCORE IMPORTANCE
OF ACCURATE APPRAISALS |
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 According to RealtyTrac, an online marketplace for foreclosed real
estate property, foreclosures in this country are increasing
dramatically. The company’s "2005 U.S. Foreclosure Marketing Report"
revealed a 25% increase from the number of foreclosures in the first
quarter to the number of foreclosures in the fourth quarter of last
year.
"Overall U.S. foreclosure numbers climbed steadily over the course
of the year, with more new foreclosures reported in every quarter,"
said RealtyTrac CEO James Saccacio. "Even with almost 850,000
properties entering some stage of foreclosure across the country
over the course of the year, this represents less than 1% of all
U.S. households. And the increase in U.S. foreclosures from the
third quarter was just below 5%."
According to the company’s report, Florida had the country’s highest
foreclosure rate last year. In 2005, 121,843 Florida properties,
1.67% of the state’s households, entered some stage of foreclosure.
Florida was followed in this dubious category by (2) Colorado, (3)
Utah, (4) Texas, (5), Georgia, (6) Arizona, (7) Indiana, (8) New
Jersey, (9) Ohio and (10) Tennessee.
This year, RealtyTrac issued another report, which said that 103,540
U.S. properties entered some form of foreclosure in January. This
was a 27% increase from the previous month and a 45% increase from
the previous January.
This might be just the tip of the iceberg. According to Moody’s
Economy.com, about 25% of all mortgages outstanding are adjustable
rate mortgages that will reset either this year or next year. First
American Real Estate Solutions projects that about one eighth of the
households that originated adjustable-rate mortgages in 2004 or 2005
will default on these loans.
If there were no foreclosures, there would be little use and no
requirements for real estate appraisals. Appraisals let the lender
know how much the real estate collateral is worth. If the real
estate has been overvalued on the appraisal, the lender faces
serious financial loss is the property winds up in foreclosure.
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FARM LAND PRICES
GROWING AT RECORD RATE |
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 The average price of U.S. rural real
estate grew at 11% last year to $1,150 per acre. That’s the largest
price gain since 1981.
In the 1970s, farmland escalated rapidly in price as food prices were
doing the same. By the late 1980s, farm income dropped and farmland
prices dropped accordingly.
This period of increasing rural-land prices is being fueled by
investors, often interested in purchasing the land for non-agricultural
use. Farmland that is ready for development averages $6,050 per acre,
according to the U.S. Department of Agriculture.
"We’ve seen considerable off-farm investors interested in farmland, in
part a lingering result of the stock market performance in recent
years," said Mark Drabenstott, director of the Kansas City Federal
Reserve Bank’s Center for the study of Rural America.
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HOME PRICE GAINS
SHOULD SURPASS
OVERALL INFLATION THIS YEAR |
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 Although the prices of homes are not
expected to increase as much in 2006 as they did last year, they
should continue to grow faster than the overall rate of
inflation, according to a study conducted by the National
Association of Realtors (NAR).
"Annual price appreciation is still running at double-digit
rates, but the cause of those sharp increases is going away,"
said David Lereah, the chief economist at NAR. "As the market
readjusts, price appreciation should return to more normal rates
of growth this year."
The NAR study projects the national median existing-home price
to rise 5.8% this year to $220,300. The median new-home price is
expected to go up 5.4% in 2006 to $250,200. Meanwhile, the
Consumer Price index is projected to grow 3.3% this year. |
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'DANGEROUS CITY'
SEES PROPERTY VALUES SKYROCKET |
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In November 2004, Camden, NJ, was
named the most dangerous city in the U.S. by Morgan Quitno
Corp., a company that publishes an annual reference book called
"City Crime Ratings." Has this dubious distinction had a
negative effect on property values in this city across the Delaware River and
Pennsylvania state line from Philadelphia?
Apparently not. According to Prudential Fox & Roach, which
analyzes housing prices in five New Jersey counties, the median
sales price for homes in Camden rose a whopping 81% between 2003
and 2005. Fox & Roach Senior Vice President Steve Storti
compared Camden to Hoboken, NJ, where property values of the
once unfashionable town have risen steadily during the past
quarter century. Homes in most parts of New Jersey are becoming
more and more unaffordable, which is resulting in the increasing
popularity of Camden. |
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MOBILE HOME PARKS
DISAPPEAR WITH RISING LAND PRICES |
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As land prices, particularly those of real estate property on
the outskirts of cities and towns, continue to increase, mobile
home parks are becoming more endangered. The high prices being
offered for the land are persuading the park owners to sell to
developers.
Many of these parks started out as travel-trailer camps, during
the period following World War II, before becoming parks where
mobile-home owners rented their home sites. Three percent of
homeowners currently live in mobile homes and rent the land
under and around them.
According to the Federation of Manufactured Home Owners of
Florida, 10,000 mobile home lots have been converted to other
usage in the past seven years in that state. In Minnesota, 12
mobile home parks have closed since 2000. |
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REAL ESTATE BUST
FOLLOWS RAPID PRICE HIKES IN CHINA |
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After the doubling of real estate
prices during the last three years, housing prices have suddenly
come tumbling down in China.
"The entire industry is scaling back," said Mu Wijie, a regional
manager for Century 21 China.
Wijie estimated that 3,000 brokerage offices have closed in
China since last spring. Developers are drastically reducing
prices of the homes they built on speculation, while the housing
market was still hot there. In some instances, the values of new
homes have dropped below the debt on these homes. Some of these
irate homeowners are suing to get their money back on these
suddenly devalued houses. |
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QUOTES OF WIT &
WISDOM |
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"The hardest thing in the world
to understand is the income tax."
-- Albert Einstein
"People everywhere confuse what they read in newspapers with
news."
-- A.J. Liebling
"Bureaucracy defends the status quo long past the time when
the quo has lost its status." --Laurence
Peter
"Unethical advertising uses falsehoods to deceive the
public, while ethical advertising uses truth to deceive the
public." -- Vilhjalmur Stefansson
"A celebrity is a person who works hard all his life to
become well known, then wears dark glasses to avoid being
recognized." -- Fred Allen
"One person with a belief is equal to a force of 99 who have
only interests." -- John Stuart Mill
"An honest man can feel no pleasure in the exercise of power
over his fellow citizens."
-- Thomas Jefferson
"Under capitalism, man exploits man. Under communism, it’s
just the opposite."
-- John Kenneth Galbraith
"Envy can be a positive motivator. Let it inspire you to
work harder for what you want." -- Robert
Bringle
"A goal without a plan is just a wish." --
Antoine de Saint-Exupery
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