Home Value Articles, Etc...

I will be posting interesting articles that I come across here that deal with home value across the US. If you know of any or would like your article included, please contact me.

Thanks,

Mike

Real Home Value Not Found Online

This one's good. It's from RealtyTimes...

Real Home Value Not Found Online
by Broderick Perkins

Appraisers are cautioning consumers to be aware of the difference between online home valuation services and an eyes-on, hands-on appraisal.

Internet home valuation sites, such as the recently-launched Zillow.com, and older sites like HomeGain.com and Domania.Com provide an estimated value of residential property based on information available largely from public records, but also other sources.

While the valuations can be a handy house-to-house comparison tool, a source for past sales prices or as a guesstimate of home value growth, they won't pass muster with lenders who need a certified appraisal to grant a home loan.

They also aren't reliable enough to use to set a sales price.

That's because they can't pinpoint a specific home's current value.

The sites use computerized data crunching tools called "automated valuation models," or AVMs. The crunching typically begins with public records -- tax assessments, deeds, demographics, property characteristics and sales price trends, but can also include data from mortgages, multiple listings and appraisals.

AVMs run an address and ZIP code through mathematical models to compare the home with others recently sold in the same area. Historical trends may be considered and some of the most sophisticated can take into account a home's unique characteristics -- number of bedrooms, baths, etc. -- and compare it with similar properties.

The results can vary widely, however, because:

• Each site interprets data differently.
• The websites don't all use the same pool of data.
• There's lag time before a sale is available as a public record that can be used in the data pool and those lag times vary from state to state and even from individual filing to individual filing.
• In some states property records are not available to the public.

The Los Angeles Times recently reported that each of three online AVMs came up with a different valuation for one five-bedroom Pasadena, CA home. The valuations ranged from $351,177 to $700,000 and two of the valuations were value ranges, not specific values.

Such a value spread is of questionable use, especially if you are trying to set a home's sales price.

Even real estate agents' "comparable sales" or "comps" go further.

Real estate agents use comps to set sales prices. Whenever possible, comps are culled from the most recent sales and listings in the same neighborhood as the house due to put up for sale. Typically the data is obtained from the local multiple listing service. The data can be insider information available only to real estate agents, including data that hasn't yet been filed as a public record or data that may not make it to public records. Comps are also homes as similar as possible to the home being valued, in terms of age, size, features, number of rooms, even floor plan and lot size.

An appraisal goes even further and can include a visual inspection to account for factors even comps can overlook, including recent upgrades, modernized appliances, floor-plan utility, and the age and condition of not just the home, but specific areas in the home such as a basement or detached garage.

"Internet valuation sites lack the experience and judgment of a professional appraiser," said Don Kelly, a spokesman for the Appraisal Institute.

"They only give users a 'ballpark figure' of what their home is worth rather than a well-researched and unbiased opinion of value," Kelly added.

Using AVMs to set real prices or value is a lot like expecting a word processor to crank out a writer, tax software to generate accounting prowess or a blog to conjure up a journalist.

The real danger said Appraisal Institute president Richard Powers, "... is that someone will make a real estate decision based on the site rather than getting someone to perform an actual appraisal. A free Internet valuation might be adequate if you want a quick estimate, but when making decisions about your largest investment, there is no substitute for an appraisal."

Published: March 1, 2006

Older homes are gaining value faster?

Here is one I came across on The Seattle Times webiste:

Sales show older homes are gaining value faster
By Elizabeth Rhodes and Justin Mayo
Seattle Times staff reporters

Surrounded by luxurious neighborhoods of large new homes, Stuart and Lisa Carson's 30-year-old rambler was nowhere near the handsomest home in its Sammamish neighborhood.

Still, there were frequent hints that the three-bedroom house, all of 1,560 square feet, might not be the wallflower it seemed.

"We had a note, probably every three months, on our door saying, 'Call me if you're interested in selling,' " Lisa Carson recalled. When that time came early last year, it sold immediately, delivering 9 percent annual appreciation on the home the couple had owned five years.

Meanwhile, 5-year-old homes nearby — bigger homes with fancy new amenities that the Carsons' home didn't have, on streets with sidewalks, which the Carsons' street lacked — also were selling. And predictably, they were going for many thousands more than Stuart and Lisa Carson got.

But the profit their owners realized told a different story. In case after case, these newer homes dotting the Sammamish Plateau realized significantly less annual appreciation — usually 2 to 4 percent — than the Carsons' nearby rambler did.

A Seattle Times analysis of last year's home sales shows that this was no fluke. New homes may have the latest of everything, but as an investment, a new house simply does not bring the returns that an older home does. Countywide over the past five years, new houses have posted 4.8 percent annual appreciation, while older homes saw about 7 percent.

In the past year, new houses appreciated 7.5 percent compared with old houses' 10.4 percent.

Based on cost per square foot, the most accurate measure of home appreciation, King County's new houses are actually 20 percent cheaper than older resales.

So if you want more house for your money, buy new. If you want something that will appreciate faster, buy a resale.

This apparent "old house premium" is contrary to what the National Association of Realtors considers customary. It calculated that existing-home prices throughout the country rose 9.3 percent last year, while new-home prices rose 12.6 percent.

The question is why King County is different, particularly when new houses are scarce and logically should be more valuable.

Last year, builders added 3,577 new houses in the county, according to Hanley Wood Market Intelligence, a California-based housing research firm. If all sold during the year, they would comprise 1 percent of single-family home transactions.

Last year, the median price of a new house was $383,010, and that house measured 2,590 square feet, The Times analysis found. ("New" is defined as any single-family home that was sold either the year it was built or the year after.)

Resale houses were smaller — 1,720 square feet — and cost less — $314,900. All numbers are median, meaning half are higher, half lower.

But here's the surprise:

Old houses had a median square-foot price of $186.59, significantly above new construction's $156.11.

It didn't used to be that way. A decade earlier, both were slightly less than $100 a square foot and less than a dollar apart. Starting in 2000, resales' square-foot price began pulling ahead, and the gap has been growing since.

Gopal Ahluwalia, research director for the National Association of Home Builders, knows of no national research into the relationship between new and resale house prices. But he was surprised to hear what The Times analysis found.

"I would think new would appreciate better than old because you don't need to replace the floor or the roof, and the design is better," Ahluwalia said. "There's more openness in those homes, and you pay for that."

Still, he and others said there are plausible explanations for the disparities between new and resale.

The reasons range from the size of new-home lots — as small as 3,000 square feet — to the charm of vintage, detail-rich houses. (Another Times analysis revealed that homes built between 1900 and 1930 cost the most per square foot.) Others point to builders' efforts to keep new homes' costs down.

But the two reasons mentioned most often are location and demand.

Redmond-based real-estate appraiser Alan Pope said neighborhoods within the urban core, which he defines as downtown Seattle, Bellevue and West Redmond, "have a greater number of buyers vying for houses than in outlying areas, whether it's Kent, the Sammamish Plateau, Marysville or Monroe."

There's a practical reason for that. Urban cores, which have the most houses to choose from, are where jobs and major highways meet, meaning shorter commute times.

Also found in urban cores are old homes that, thanks to updating, are old in name only. Remodeling is a $200 billion-a-year industry and so prevalent here that it can easily skew old-house values upward. Just ask John Gaynard.

Last year, Gaynard sold his 25-year-old South Bellevue home. Judging by the sales price, the house registered 12 percent annual appreciation in the five years he'd owned it. Meanwhile, nearby new houses appreciated from 2 to 6 percent annually.

But Gaynard believes that 12 percent is misleading "because we put $150,000 into it," replacing the windows, roof, siding, cabinets and doors.

"It was all name-brand stuff, too," Gaynard said.

The other thing about urban-core neighborhoods, Pope said, is that many are 100 percent built out. Indeed, last year only a small fraction of King County's 3,577 new homes were built within Seattle or Bellevue. Most were in outlying areas, particularly South King County and areas east of Lake Sammamish.

"Where they are building new homes, they can add more supply, and that can keep prices down," said Matt Deasy, general manager of Windermere Real Estate East. "But they're not adding any more houses in the Central Area by Garfield High School, where you have huge appreciation."

According to The Times analysis, areas with plentiful new houses have seen the lowest five-year appreciation rate. In the Preston-Fall City area, for example, 42 percent of the homes are new; in the Novelty, Ring and Union Hill areas on the Eastside, 32 percent are new. Their appreciation rates are on the lower end: 3.9 percent over five years on a square-foot basis, compared with the county average of 6 percent.

Finally, appraiser Bob Chamberlain, a senior associate with Bruce C. Allen & Associates, thinks the difference in new and resale appreciation can be explained partially by the sales prices of each and the number of buyers vying for them.

New homes tend to attract repeat buyers who have the equity to swing big down payments. Renate Gordon, a sales agent in the new Talus community near Issaquah, where new $600,000-plus homes are going up, said all the buyers she sees previously have owned one or more homes.

Older houses tend to be priced lower, in part because they average 870 square feet smaller than new ones. This makes them affordable to more buyers, particularly first-timers struggling to gain a toehold in an expensive market. Lured by low interest rates, they're buying homes in record numbers.

"Starting five years ago, we've had ongoing pressure on entry-level housing," Chamberlain said.

Lisa Carson thinks that pressure is exactly why her 1,560-square-foot Sammamish rambler appreciated so much and sold so quickly.

"It was a good layout, and it was small, so it appealed to first-time buyers and empty-nesters," Carson said. "There aren't many homes that size and on half an acre of property in that area."