North Dallas/Richardson/Plano Real Estate

Many of you have probably never heard of the Home Valuation Code of Conduct (HVCC) but if you are buying or selling a home you may encounter appraisal problems due to this change in appraisal standards.

On Thursday The National Association of Realtors chief Economist Lawrence Yun released the following statement:

"In the past month, we have suddenly been bombarded with many stories of, at the last moment, transactions falling apart because appraisals are coming in unrealistically low. As a result it opens up a new round of negotiations between a buyer and a seller or in many cases the buyer just steps away."

The HVCC went into effect at the beginning of May as a result of a lawsuit by New York State Attorney General Andrew Cuomo against Washington Mutual, Fannie Mae and Freddie Mac agreeing not to buy any loans that did not comply with the code. Since Fannie and Freddie are the largest purchasers of loans, the rest of the lending industry had no choice that to go along.

The HVCC creates a firewall between lenders/brokers and appraisers. This is supposed to keep lenders and brokers from putting pressure on appraisers to meet a certain value. Lenders are no longer able to pick up the phone and call an appraiser that they know does quality work. The appraisal work must be assigned on a rotating basis by someone who is not the loan officer.

Most lenders have turned to appraisal management companies. Appraisers sign up with these companies and give them a list of zip codes the appraiser will accept assignments in. When the appraisal management company gets an order from a lender, they send out a blast e-mail to all the appraisers that have signed up for the zip code of the property. The first appraiser that accepts the assignment gets the job.

There are several problems with this approach. The appraisal fees are now being shared between the appraiser and the appraisal management company. The appraiser is getting about half the fee he uses to get. This means that the appraiser has to do twice as much work to earn the same money and in order to get the jobs, he is forced by the system to sign up for more and more zip codes for the chance of a job.

The National Association of Realtors is reporting that Realtors are telling them horror stories of appraisers not knowing the local market, doing appraisals that use computer models that often incorporate sales that are not comparable, of not knowing that the home had extensive renovations or additions and even reports of appraisers not having access to the local MLS. I have no idea of how these appraisers are getting their sales information.

In order to compete and get jobs in this new environment, appraisers have to cut corners and this does not help either the buyer or the seller. The really good appraiser is not opting into this system.

The HVCC was designed to take fraud out of the appraisal process but it is looking like we have thrown the baby out with the bath water.

The Dallas Morning News reported Friday that there was a record number of foreclosures posted for July. Well maybe it is but there is one problem. Many of the homes posted were also posted for foreclosure in May and some of them were also posted in April. The total number reported in the Dallas News of over 35,000 home foreclosure fillings so far for this year includes these homes that have been posted multiple times. I did a quick check and found that 49 homes were posted in Richardson for July and out of these 22 had been previously posted. In the North Dallas area 158 were posted and of these 80 had been previously posted. So you can see that there is a lot of double and sometimes triple counting of the same home.

Historically about 40% of the homes posted for foreclosure are actually foreclosed on. Over the last few months however, the number actually foreclosed on has been between 20% and 25%. I can not tell you with any certainty why the numbers are down, but they were. Because of the moratoriums earlier in the year and the decrease in the number of foreclosures, the amount of foreclosed properties on the market has been dropping. Bet you didn't read that in the newspaper.

Due to the size of the north Dallas Area, I break the report into 2 sections.

North Dallas north of Northwest Hwy. and south of LBJ:

This area continues to struggle. Sales were of by 18% and the average sales price declined by 15%. this does not mean that all of the homes declined by this much. there are a great many homes in this area above $800,000 and this end of the market is having a very hard time. Interest rates are high on non-conforming loans and demand is low. The fact that the upper end is not selling is pulling the average sales price down. The number of active listings increased in May by 18% and this increase coupled with slow sales have combines to create a 19.3 months supply.

SALES: 50

AVERAGE SALES PRICE: $785,802

MEDIAN SALES PRICE: $567,500

PENDING SALES: 43

NEW LISTINGS: 125

ACTIVE LISTINGS: 739

DAYS ON MARKET: 93

MONTHS OF INVENTORY: 19.3

North Dallas north of LBJ

While sales were off by 19% in this area, the average sales price was only down by 1% and the median price by 3%. the number of active listings increase by 1% giving us a months of inventory figure of 7.5 months. the average sales price in this area of north Dallas is lower and most of the homes fall in the conforming loan category making financing much easier and at a lower interest rate.

SALES: 83

AVERAGE SALES PRICE: $325,039

MEDIAN SALES PRICE: $287,900

PENDING SALES: 68

NEW LISTINGS: 169

ACTIVE LISTINGS: 548

DAYS ON MARKET: 61

MONTHS OF INVENTORY: 7.5  

For May sales in the metroplex were off by 24% and the average sales price declined by 5%.

Richardson fared much better. Sales were down in Richardson by 13% but the average sales price was up by 2% while the median sales price was down by 2%. These 2 small changes in price really indicate a flat sales price. While the number of active listings and new listings continued to decline, pending sales saw an increase for the first time in months.

The continued decline in the number of homes on the market is creating a real shortage in the market place. The homes that are priced correctly and have been updated are going very quickly. Sometimes in 1 day. 

If you are thinking about buying a homes in West Richardson you better be prepared to make an offer on the first home you see that meets your wants and desires because if you wait for several days to make up your mind, it will probably be gone. 

MAY SALES DATA:

SALES: 90 A 13% DECREASE

AVERAGE PRICE: $181,954

MEDIAN PRICE: $162,000

DAYS ON MARKET: 54

PENDING SALES: 86

NEW LISTINGS: 143

ACTIVE LISTINGS: 307

MONTHS OF INVENTORY: 4

The last 2 weeks have seen buyers coming back into the market! I'm currently working with several buyers and Realtor I talk to says they are too. I don't know if the increase in mortgage rates have gotten buyers off center or just a better feeling about the economy but what ever it is it's a very positive sign.

If you are a buyer you better have a good agent who can get you in the homes the day they come on the market because the best homes are going fast.

Today the Federal Housing finance Agency released their property on Dallas area housing prices. The report said that housing prices in the Dallas area were up by 0.08%. You could easily call that flat.

Yesterday Standard & Poors/Case-Shiller report, the darlings of the press, came out and it said that prices were down in March by 5.6%.

Information from the Texas A&M Real Estate Center showed that the average price of a single family home was down by 8% in March.

Well is it down by 8%, or by 5.6% or up by 0.08%? the truth is that all of these reports are right and wrong. how can that be? If you want a detailed explanation take a look at my blog of May 2.

The truth of the matter is that the real estate market is very localized and by that I mean by neighborhood. there are areas that are down a little, areas that are flat, and there are even some areas that are up.

Please do not use Zillow to get an idea of prices. They really do not know. This afternoon I got a phone call from a lady in another city in Texas. She was considering moving to Dallas and had been looking up properties on Zillow. The house she called about is listed for $287,900 but Zillow said it was worth $500,000 and she could not understand why I was offering it so cheap! I had to explain to her the many problems with Zillow and why their methodology does not work in Texas. 

If you really want to know what is happening to prices in the neighborhood you live in or are interested in buying in, you need to talk to a Realtor that is very familiar with that area. Otherwise you are just guessing!

Sales continued be be soft in Plano. The Average Sales price was down by 13% and the Median Sales Price was off by 9%. Pending Sales were down by 29% which does not bode well for May. The number of New Listings and Active Listings declined helping to keep the number of Months of Inventory at a low level of 5.1 months.

Sales: 215

Average Sales Price: $258,939

Median Sales Price: $214,250

Pending Sales: 212

New Listings: 459

Active Listings: 1,301

Days on Market of Sales: 63

North Dallas north of Northwest Hwy. and South of LBJ.

April saw sales continue to be weak and both the Average and Median Sales Prices declined. To compound the problem there was a huge increase in the number of Active Listings sending the Months of Inventory to 19 months. This is a very large over supply.

Sales: 38

Average Price: $740,621

Median Price: $537,750

Pending Sales: 38

New Listings:174

Active Listings: 751

Days on Market: 86

North Dallas North of LBJ.

This area of North Dallas also experienced a continuation of declining Sales along with a decline in the Average and Median Sales Price. The number of New and Active listings declined creating a Months of Inventory number of 7 months. While this number is high, it's not as bad as some other areas of Dallas.

Sales: 69

Average Sales Price: $291,112

Median Sales Price: $252,750

Pending Sales: 59

New Listings: 166

Active Listings: 523

Days on Market: 62

In my blog of yesterday I stated that foreclosures were not impacting values in Richardson.

This morning I opened up the business section of the Dallas Morning News  to find the headline FORECLOSURE SALES DRAG PRICES DOWN. The first paragraph of the article said" An increase in foreclosure sales helped pull down Dallas-Fort Worth home prices in the first quarter".

If you took the time to read the article your would find deep down on page 5 of the paper "Along with foreclosures, median home prices in the Dallas-Fort Worth area have been pushed lower because of a plunge in the sale of high-end homes."

An example of what they are talking about is:

In April of 2008 there were 3 sales in a City. One sold for $100,000, one for $200,000, and one for $300,000. The average sales price was $200,000. Now let's jump forward to April 2009. We had one house sell for $100,000 and one sell for $200,000. The April 2009 average sales price is $150,000. The average sale price dropped 25%. Did prices really drop or did we just not have a sale at the top end of the market?

Granted this is a very simple example, but it does serve to demonstrate how sometimes statistics can be deceiving and reminds me of a quotation I believe came from Mark Twain " There are lies, damn lies, and then there are statistics."

Too many people get caught up in the headlines, don't read the whole story, and think it's about the local market when the story is really talking about what is happening in California, Arizona, Nevada, and Florida.

Yes, if you are looking in the south part of Dallas County you will find some neighborhoods impacted by foreclosures but, in general, not in North Dallas, Richardson, or Plano. What is impacting sales is the belief by buyers that there is this great pool of foreclosures on the market and that homes that are not foreclosures should sell for greatly reduced prices.

Sales continue to be weak in Richardson. For the month of April there were 56 properties sold. This represents a 52% decline over last April's sales. The average sales price declined to $155,997, a 9% decrease, and the median sales price declined to $149,500, an 8% dropoff.

The number of pending contracts fell 29% to 72. The number of new listings fell 16% to 126. At the end of April there were 299 homes for sale. This represents a 21% decline.

 Richardson only has a 3.9 months supply of homes for sale. This is an extreamly low number and if you are a Buyer you have very few homes to chose from.

I know the media says that the price decline is due to the high number of foreclosures on the market, but this is not the case in Richardson. The truth is there just are not that many foreclosures in Richardson. The foreclosures that do exist are scattered throughout the City and are not impacting any neighborhood values.