Real estate appraisers are the industry’s professional party poopers.
They’re paid to keep an eye on valuations so buyers, lenders – and even sellers – know a home price is within logical boundaries. If appraisers get skittish about the housing market, deals and loans get harder to complete.
I watch a curious regional home-price index from the Real Estate Research Council of Southern California, a group of property industries analysts and insiders operating out of Cal Poly Pomona.
The group produces a housing touchstone by having volunteer appraisers go out every six months to value the same 308 homes in the seven-county area to gauge pricing patterns. The group has done this since 1943, with a major revision in 1990.
To me, when you compare the appraiser indexes to traditional touchstones – say, CoreLogic’s widely quoted median selling price – you get a sense of whether broad valuation trends are consistent with the logic appraisers use. Look, appraisers are human and have their own faults. But computer-created valuations missed badly in the last housing boom-to-bust, too.
I tossed the appraisers’ indexes and CoreLogic data into my trusty spreadsheet, with the caveat that the council tracks one extra county – seven, including Santa Barbara – in their regional math vs. the six counties followed by the Southern California area median. Here are five things I learned:
1. Values are up
Appraisers are by nature stingy and often slow to change their math.
But the index shows regionwide values are up 7 percent in the year ended in October. That’s the biggest gain since October 2014.
By county, October’s annualized gains were, high to low: Riverside, 8.4 percent; San Diego, 8.0 percent; Orange County, 7.2 percent; Los Angeles, 6.5 percent; San Bernardino and Santa Barbara, both at 6.4 percent; and Ventura, the low at 6.2 percent.
All October county gains were above previous results for October 2015 and April 2016.
2. Reasonable median
The region’s appreciation gain topped the corresponding increase in the area home price median, 7 percent vs. 6.9 percent.
That’s pretty insignificant and may be more appraiser skepticism catching up slowly to market conditions. This is the first time since October 2014 the appraiser index’s gains topped the area median.
Only Riverside County’s latest appraisers index report showed a larger year-over-year gain (8.4 percent) than the respective county median (8.1 percent.)
3. Mixed neighborhoods
Regional or county measures don’t speak to what’s happening on your block.
Gains may seem geographically universal, but not on a house-by-house basis. Another interesting fact from the appraisers is the share of houses with falling valuations.
Regionally, 8 percent of the homes revisited by appraisers were valued less this time around vs. October 2015. That’s down from 10 percent last April and 12 percent a year ago.
This share of “losers” ran in October on a county basis from a high in Los Angeles at 14.0 percent; to Orange County’s 10 percent; Ventura, 6 percent; San Bernardino, 3 percent; San Diego, 2 percent; and none in Riverside and Santa Barbara.
4. Long-run upswing
A longer-term view suggests only thin skepticism of regional appreciation.
When you look at price changes since October 2013, the appraisers’ regional index averaged 8.2 percent year-over-year gains.
On the county level, similar gains run from a high of Riverside at 10.6 percent; then Los Angeles, 8.7 percent; San Bernardino, 8.4 percent; San Diego, 7.2 percent; and Ventura 6.7 percent; to a low in Orange County of 6.4 percent.
5. Regional variances
Ponder gaps between housing appreciation rates derived from the appraiser index and the area median.
Regionally, gains averaged 8.2 percent annually for three years. That’s 0.6 percentage points above what the area median is telling us. That form of “approval” was also found in Riverside (by a regional high 1.6 percentage points) and Los Angeles (plus 0.6 percentage points.)
Conversely, appraisers seem to doubt pricing changes in San Bernardino (where appraisers put pricing gains 1.3 percentage points lower than the median) and Ventura (0.5 percentage points lower.) Gains in Orange and San Diego counties were basically the same by either count.
These too many numbers prove one thing: Housing is very local.
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