Decoding Knob and Tube Wiring: How It Impacts Your Home's Value

If you own or are looking to purchase an older home, there might be lurking in your home something that could affect its value – knob and tube wiring. Due to the age of many homes in Westmoreland County, I still see plenty of homes with some functioning knob and tube wiring. This old-school electrical setup was once a popular way to install electricity in a home. But now, it's like the outdated ancestor of today's electrical systems, and it comes with some problems.

What Is Knob and Tube Wiring?

Back in the late 1800s to the early 1900s, knob and tube wiring was the go-to for electrifying homes. It used ceramic knobs and tubes to keep wires in place. Fast forward to today, and it's not holding up so well.

Example of Knob and Tube Wiring

The Hidden Dangers

The materials used in knob and tube wiring, like rubber or cloth insulation, have probably seen better days. That means a higher risk of fires. Plus, there's no grounding conductor, which makes the chance of getting a shock higher and incompatible with three prong plugs. Insurance companies see these homes as risky, making it harder and more expensive to get coverage.

How It Affects Your Home's Value

Now, let's get to the point – how does knob and tube wiring impact your home's value?

Safety Worries

People worry about safety when they hear about knob and tube wiring. The fear of fires or electrical problems can make buyers think twice, lowering your home's value due to the smaller buyer pool. This can also have a negative impact on the insurability of the home due to the safety concerns. Many insurance companies will not cover a home with known functioning knob and tube wiring due to the known safety concerns.

Cost To Upgrade

Upgrading from knob and tube to a modern electrical system is a big job and can be costly. Buyers might consider this cost when deciding on a home, potentially lowering its value.

Appraisers Take Notice

When appraisers are on site to look at the property, they're likely to consider the knob and tube wiring in the overall quality and condition rating of the home. Homes that are not updated from systems installed almost 100 years ago have a lower quality and condition rating which, when compared to a home that is updated with newer systems, have a lower value.

If there are safety concerns when it is inaccurately spliced into a more traditional wiring system (I’ve seen this many times), frayed insulation on the wires, or being wired to newer 3 prong outlets, an appraiser might call these out to be repaired as a part of the loan process.

What Can You Do?

If you find yourself dealing with knob and tube wiring, it's not the end of the world. Get a qualified professional to check it out and fix any problems. Upgrading your electrical system can make your home safer and more attractive to buyers.

Will A House With K&T Wiring Qualify For A Mortgage?

The underwriting guidelines for all the major mortgage agencies (Fannie Mae, Freddie Mac, FHA, VA, and USDA) all allow for knob-and-tube wiring as long as the system is deemed to be safe, functional, and typical for the area. Just understand that while many loans will allow for this type of wiring, the house still might not qualify to be insured or there might be safety concerns that need to be repaired in order to qualify.

 In the world of home values, knob and tube wiring is like an old family secret – it can affect things more than you realize. Knowing the risks and doing something about them can make your home safer and keep its value strong. So, whether you're a homeowner or looking to buy, understanding this hidden issue is key to making smart decisions about your home.

Does an Appraisal Have an Expiration Date?

Appraisals do not expire. Every appraisal report is required to have an effective date which reflects the date the value opinion relates to. This date is important because it is the date that becomes the benchmark reflecting the research and analysis of the market trends that impacted the development of value. If at any time after that effective date the market trends change, then the value result could be impacted proportionately.

It is important to note that while there is technically no expiration date, lenders may have their own designated time period for which an appraisal is good for. Most accept an appraisal for 90 days, however, in a rapidly changing market, this time period often can be reduced to 30 days.

Reducing the Stress of Divorce: The Vital Role of an Experienced Appraiser

We understand that going through a divorce is an incredibly challenging experience, both emotionally and legally. In these turbulent times, it becomes crucial to alleviate some of the stress involved in the process. One effective way to achieve this is by engaging the services of an experienced and qualified appraiser who has been established as an expert witness in divorce litigation. In this blog post, we will delve into the significance of hiring an appraiser with expert witness testimony experience for divorce appraisals, offering invaluable support during this trying period.

Understanding the Legal Process

An appraiser with expert witness testimony experience possesses an in-depth comprehension of the legal process involved in divorce appraisals. They are well-versed in the intricacies of presenting their findings in a clear and concise manner, ensuring that their testimony carries maximum weight in the courtroom. Their familiarity with legal procedures enhances the likelihood of a favorable outcome.

Credibility and Reputation

One key aspect of hiring an appraiser with expert witness testimony experience is the credibility and reputation they bring to the table. By engaging such an appraiser, you can rest assured that their testimony will be taken seriously by the court. Having established a track record of providing objective, unbiased opinions, I have successfully demonstrated my expertise in numerous courtrooms located in Armstrong, Westmoreland and Indiana Counties, thereby earning the reputation of a reliable and trustworthy appraiser.

Crucial Role in Court

In my professional opinion, the importance of hiring an appraiser with expert witness testimony experience cannot be overstated in divorce appraisals. The appraiser's opinion often serves as pivotal evidence in supporting one party's claims over the other, making it imperative for their testimony to withstand rigorous cross-examination. By selecting an appraiser with this specific experience, you minimize the risk of having your clients' arguments weakened or dismissed.

Reducing Stress During Divorce

Navigating through a divorce is an emotionally taxing experience. By ensuring that you choose an appraiser with the necessary qualifications and expertise to provide expert witness testimony, you can alleviate some of the stress associated with the process. The knowledge that your appraiser is capable of delivering accurate and unbiased valuations to support your case will provide you and your clients with peace of mind, allowing you to focus on other crucial aspects of the legal proceedings.

In the event that you require an appraisal during the course of a divorce, we invite you to contact our office, where we guarantee the utmost standard of excellence in appraisals, coupled with the professionalism necessary to deliver expert witness testimony, should the need arise.

ADU's- What are they and how do they impact the appraisal process?

Accessory Dwelling Units (ADUs) are secondary residential units on the same property as the main dwelling. They provide homeowners and potential buyers with opportunities to enhance property value, generate income, or accommodate multi-generational living. It's important to understand how ADUs can impact property value and financing options, particularly considering the restrictions set by Fannie Mae and FHA lending guidelines. Let's explore further.

First, what is an ADU? An ADU is a separate living space, often with a kitchen, bathroom, and sleeping area, located on the same property as the main residence. It can be a detached structure, converted basement or garage, or an addition to the primary dwelling.

Benefits of purchasing a property with an ADU:

• Extra income potential through renting the ADU as long as there are no zoning restrictions.

• Flexibility for multi-generational living arrangements especially when they might be older and need some moderate assistance.

• Versatile space for personal use, such as a home office or guest suite.

• It can have the potential to increases property value.

There are some financing fonsiderations that need to be considered when attempting to purchase or build a property that has an ADU with money from the bank. Fannie Mae Restrictions and FHA have very similar restrictions. These include:

• The ADU must have its own entrance, kitchen, and bathroom.

• The property must be appraised as a single-unit with an additional value attributed to the ADU. (The living area of the ADU cannot be combined with the living area of the primary residence.)

• The rental income from the ADU may be considered for loan qualification purposes, subject to specific criteria.

If you are considering a property with an ADU, they are a powerful asset that can increase property value and offer financial opportunities. However, it's important to consider the restrictions imposed by lending guidelines. By understanding these guidelines, buyers can make informed decisions about financing options and ensure a smooth transaction when purchasing a property with an ADU. With the ability to generate income, accommodate changing needs, and contribute to affordable housing, ADUs remain an attractive feature in today's real estate market.

Is A Convicted Felon Inspecting Your Home?

In recent years, Fannie Mae has been working towards what they call Valuation Modernization. This process involves allowing for the gradual progression of a bifurcated valuation product to make the home valuation process more efficient and accurate. However, what Fannie Mae did not explicitly state is that they were also trying to combat the growing shortage of appraisers in the industry. The increased qualifications to become an appraiser, along with the the numbers of appraisers leaving the profession, contributed to this shortage.

The newest product Fannie Mae just rolled out is called valuation acceptance + property data. This is when someone, most likely not an appraiser, inspects the property for the lender and provides them with the property data. The lender uses this property data in conjunction with valuation models to determine if a traditional appraisal is needed. However, this is unsettling on many levels. For example, did you know that these property inspectors have no oversight or regulations as of right now? It is up to the lender to demonstrate the credibility of these property data collectors.

In contrast, licensed appraisers and their trainees who are bound by ethics, vetted and background checked by their respective states should be used for all property data collections going forward. But that most likely isn't going to happen because then lenders will have to address the entire reason why we don't provide this service - the fee. The dirty little secret in all of this is that lenders use these data collectors because it is cheap.

Here is an example of what can go wrong when using a property data collector that was not vetted. In one such case, a major Appraisal Management Company hired an individual who stated on his LinkedIn page that he was a "videographer." This same individual was convicted along with two other individuals for staging an armed robbery. It is reported that it was during this conviction that he was hired as a data collector. Is this the type of person you want in your house?

https://appraisersblogs.com/amc-hires-a-convicted-felon-as-property-data-collector

https://www.justice.gov/usao-wdmi/pr/2022_1102_Uchendu-et-al

Cases like this one (and possibly others) raise the concern that criminals, convicted or otherwise, will use property data collections as an opportunity to "case" homes for criminal activity. This creates liability for lenders, the GSEs/taxpayers, homebuyers, and others who rely on these products.

In conclusion, while Fannie Mae's Valuation Modernization process aims to make the home valuation process more efficient and accurate, the use of unlicensed property data collectors raises concerns about the security and safety of homeowners. It is essential that lenders and regulators ensure that these collectors are vetted and regulated, to avoid the possibility of criminals infiltrating the industry. Using licensed appraisers and their trainees, who are bound by ethics and vetted by their respective states, should be the preferred option for property data collections going forward.

Clean and Green- From the appraiser's point of view

Clean and Green is a preferential tax assessment program enacted in 1974 under the stated goal of “protecting the Commonwealth's valuable farmland, forestland, and open spaces.” It bases property taxes on use values rather than fair market values. This ordinarily results in a tax savings for landowners..

https://www.agriculture.pa.gov/plants_land_water/farmland/clean/pages/default.aspxPA Clean & Green Program

Once enrolled, the general rule is that the landowner is obligated to continue using the land in a qualified use indefinitely or face the penalty of roll-back taxes for the most recent seven years, PLUS 6% of that difference per year. If a landowner sells a property enrolled in Clean & Green, the buyer will be obligated to continue using the land in a qualified use or pay roll-back taxes and interest.

Clean & Green also has limitations as to subdividing the property. No more than 2 acres can be split off (3 acres where municipalities require a 3 acre minimum lot size) per year for the purpose of building a residence. The total of these types of subdivisions can never exceed a total of 10 acres. These split offs would be subject to the roll back tax but only for the portion that is being split off.

A subdivision can can be made dividing the property into parcels that are more than 10 acres minimum. As long as they remain the same use, it would then not be subject to the roll back taxes.

While enrolling in the Clean and Green program may be free and save thousands in taxes in the short run by reducing the annual tax rate, make sure you are aware of how this impacts your land value. It will limit the use of the property unless you take the steps necessary to remove the enrollment and pay the mandatory differences in the taxes plus a 6% interest rate. If you are thinking of selling the property, it could also limit the size of your interested buyer pool.

Where do you want 3rd degree burns?

Water heaters come from the factory set to 140 degrees, which is hot enough to produce 1st degree burns after 3 seconds of exposure. However, pressure relief valves aren’t set to trigger until 150psi, or when the water temperature reaches 210 degrees. That’s hot enough to instantly produce 3rd degree burns. Prior to tanks being designed with a pressure relief valve, when the water pressure would get too high, the tank would explode.

Many hot water tanks are installed in areas like laundry rooms where the chances of the pressure relief valve releasing this damaging steam is likely to happen when someone is nearby. In some models, the pressure relief valve is located on top of the tank… at face level. Many others are located on the side… at chest or hip level. Some models are at ankle height, but all of them allow for a pipe to be installed to direct the water/steam directly and harmlessly at the floor.

“The discharge piping serving a pressure relief valve, temperature relief valve or combination thereof shall Not terminate more than 6 inches above the floor or waste receptor. (504.6 Requirements for discharge piping)”

— International Association of Certified Home Inspectors

For some reason, water heaters do not ship with an extension pipe for the pressure relief valve to direct this boiling steam away from homeowners. PLEASE, spend the $15 it takes to install an extension pipe on your pressure relief valve to protect yourself and family. It might even help prevent repair issues the next time your property needs appraised.

Great news! No need for an appraisal... Or is it really??

Fannie Mae recently announced in their Selling Guide (SEL-2023-02) update that “as part of the valuation modernization” they are transitioning to a “range of options to establish a property’s market value”.

Click on this link to view the actual document as released by Fannie Mae on March 1, 2023 https://singlefamily.fanniemae.com/news-events/announcement-sel-2023-02-selling-guide-updates

They have changed the term “Appraisal Waiver” to “Value Acceptance”. According to FNME, this is being changed to “better reflect the actual process of using data and technology to accept the lender-provided value”. Wait a minute… read that again!!! Yes- you read it correctly- “Lender-provided”. This can’t have the possibility of ever going wrong.

In FNME’s release they describe the valuation modernization process as a way to enhance the management of collateral risk, making the process more efficient for lenders, borrowers, appraisers and secondary-market investors. They also stated that it benefits consumers via greater accuracy, lower costs and increased speed. Here is another “wait-a-minute-moment”! I was told long ago “You can have it fast, you can have it good, you can have it cheap: pick two”. This is a long standing principle that applies to just about every service you pay for. Fannie Mae is saying that, for once, there is a way you can have ALL THREE!

Then there is the option of Value Acceptance plus Property Data. This is a combination of the “lender-provided data” plus a “new option that utilizes property data collection by a third party who conducts interior and exterior data collection on the subject property.” It is then the lender who confirms based on this information if the property is eligible and an appraisal is not required. Again, the lender decides this.

Lets add another layer to these already troubling changes. FNME will now allow a borrower to provide an attestation letter to verify repairs were made if they were required or for a builder to provide an attestation letter to verify a new construction is 100% complete. How could this go wrong? There have been plenty of times I have showed up to complete a repair inspection or final inspection on a new construction and it was not completed.

The Appraiser Blogs that I follow published a letter that was written by the Massachusetts Board of Real Estate Appraisers that points out the issues regarding this and the question of consumer protection. This letter was written to the Consumer Finance Protection Bureau and asks them to consider the answers to some very important questions. Value acceptance does not offer the consumer protection that they seem to elude to as part of the FNME modernization process. Please read through their letter because it asks some very important questions and asks the CFPB to consider making Consumer Protection more important than the speed and cost of an appraisal. You can read the full letter and blog post at https://appraisersblogs.com/fannie-mae-appraisal-waiver-option-is-eroding-consumer-protection

Spring Cleaning That Can Add Value

It’s that time of year when spring cleaning gets added to your “To Do” list. Here are some tips that can help not only freshen your home but add some value. If you are looking to sell soon, these ideas will make your home more marketable.

• Declutter- A clean and organized home looks more valuable and appealing to potential buyers. Start by decluttering your home and getting rid of any items that are no longer needed.

• Deep Clean - This includes carpets, floors, walls, and windows.

• Upgrade your lighting - Updating your lighting fixtures can make a big impact on the overall look of your home. Consider replacing outdated light fixtures with modern ones and use energy-efficient LED bulbs to save money on your energy bills.

• Fix minor repairs - If I had to point out the most important simple tip for maintaining the value in your home, take the time to fix minor repairs, such as leaky faucets, loose doorknobs, defective paint surfaces and scuffs on walls. These small repairs can make a big difference in the overall appearance and functionality of your home.

• Landscaping - Landscaping can make a huge difference in the curb appeal of your home. Trim bushes, mow the lawn, and plant flowers to make your home look more attractive and well-maintained.

• Paint - We all know that fresh paint does not necessarily add value. However, painting your home can significantly improve its appearance and make it look fresher and newer. Consider painting your front door, walls, and trim in neutral colors that are attractive to most buyers.

• Upgrade your kitchen and bathroom - While this might be one of the more expensive items you would consider, upgrading your kitchen and bathroom can significantly improve the value of your home. For budget friendly ideas, consider replacing outdated fixtures and consider painting cabinets. If you have a little more money in your budget, replacing countertops and floor coverings can make a big difference in the appeal of these rooms.

By taking these steps, you can improve the value of your home without breaking the bank. These minor improvements can make a big difference in the overall appearance and appeal of your home.

Are You Housing a Silent Killer?

Radon is a naturally occurring radioactive gas that is colorless, odorless, and tasteless. It is considered to be the leading cause in lung cancer deaths in non-smokers and the second cause amongst those who smoke which is why it is referred to as the silent killer. It is formed by the decay of uranium and thorium, which are present in most rocks and soils. The U.S. Environmental Protection Agency (EPA) recommends that homes be tested for radon, and that homeowners take steps to mitigate radon levels if they are found to be high.

The Environmental Protection Agency (EPA) recommends that homes be remediated if the radon level exceeds 4 picocuries per liter (pCi/L) of air. However, the World Health Organization (WHO) recommends a lower action level of 2.7 pCi/L. It's important to note that while the recommended action levels vary, there is no safe level of radon exposure. Radon is a known carcinogen, and the risk of lung cancer increases with higher levels of exposure. Even radon levels below the recommended action level can pose a risk over time.

Reducing radon levels in buildings can help to reduce the risk of lung cancer and other health problems associated with radon exposure. The process of radon remediation involves identifying the source of the radon, typically through testing, and then taking steps to reduce the amount of radon in the air.

Radon remediation can include sealing cracks and openings in the foundation, improving ventilation, and installing a radon mitigation system, such as a fan or other equipment that can help to vent the radon gas from the building. The specific approach used for radon remediation will depend on the nature and severity of the radon problem, as well as the characteristics of the building.

Overall, radon remediation is an important step to protect the health and well-being of those who live and work in buildings that may be affected by radon.

For Better or For Worse? FNME vs GPAR

Over the years, I have provided appraisals for properties owned by individuals going through divorce proceedings and have had the opportunity to be used in several counties as an expert witness. Whenever I am providing an appraisal for marital dissolution purposes, there are a few things I keep in mind. Most important is the possibility that my report might end up being used as part of expert witness testimony in a formal court proceeding. For this reason, it is important to know the correct form to use.

Most appraisers complete their reports on Fannie Mae produced forms as the majority of the work completed is for lending purposes. It is important to understand that these forms were created by and expressly for Fannie Mae purposes. There are pre-printed certifications which clearly indicate the use of and purpose for these forms.

Unfortunately, using Fannie Mae forms for litigation work is a mistake. While an appraiser should be aware of this, I have found in reviewing opposing counsels “expert” appraisal reports that many use the wrong form. Legal authorities have advised and forewarned that the use of the 1004 URAR appraisal form for litigation purposes carries the risk of having that report thrown out and ultimately, that side losing their case.

Per Jody Bruns, CDLP, using the wrong form could be a costly mistake and can jeopardize a case. Check out the full article here:

http://digitaleditions.walsworthprintgroup.com/publication/?i=286075&article_id=2358305&view=articleBrowser

In the future, if you are looking to have an appraisal completed for divorce purposes, be sure that you engage the services of an appraiser who has the experience and knowledge to know that using the correct form can make all the difference in your case.

Appraisal Racial Bias.... Pardon our Interruption

Part 2 has been written and was ready to drop today except for the necessity to provide you important information regarding fast approaching upcoming hearings. Earlier this year, the CFPB’s (Consumer Financial Protection Bureau) Fair Lending Director, Patrice Alexander Ficklin, stated that they were going to prioritize resources to focus on the role of racial bias in home appraisals

The CFPB has announced that they will be holding a hearing with the ASC (Appraisal Subcommittee) specifically to discuss this issue. This hearing is open to the public but it requires an RSVP.

For information regarding this hearing and to RSVP, visit the CFPB’s website or click on the image below to follow the link:

A Most Embarrassing Experience

I might not look like the picture of health, but over the years, I have tried to take my health seriously. Since I’m not a morning person, I like to find simple ways to balance rushing around in the morning that includes getting my caffeine intake and breakfast. The caffeine is mandatory. Breakfast tends to be optional. One of those options includes protein smoothies since they are healthy and portable.

One particular morning, I made myself a smoothie that included a protein powder and fresh blueberries. My dual cup holder in the car is perfect for this. Driving to my first appointment, I alternated between the two. By the time I arrived at the house, I was happily caffeinated and the smoothie was gone. Perfect start to my day…. Or so I thought.

As is customary when I pull up to a house, I knock on the door and introduce myself as the professional that I am, do my best to make them feel comfortable by informing them of how I will be proceeding with the inspection and giving them a rough estimate of how long I expect it to take me. Traditionally, I do my measurements and take my pictures of the exterior first. Once completed on the exterior, I proceed to the interior. I will start with the main level, work my way up if there are more levels and then conduct my inspection of the basement last. Once I’ve seen everything, I will set my tablet up on a kitchen counter where I work my way through my checklist while asking them all the important questions such as when they might have replaced the roof last or how old the furnace is. This conversation usually lasts about 5 -10 minutes long. While having this conversation with the owner, it usually involves a small amount of chit chat just to be personable and this was no different. Once completed, I thanked them, gave my typical “have a good day” and walked back to my car.

As I get back into my car, I caught a glimpse of myself in the mirror and to my horror, saw myself staring back at me with bits of blueberry skins from my smoothie stuck all in between my teeth. I couldn’t help but laugh at myself and wondering about what must have gone through their mind. If it had been me in their shoes, I would have argued intensely with myself as to whether or not to say something. Say nothing won the argument. Lets just say that I look in the mirror before leaving my car now.

If you have a real estate funny story to contribute, please send it to me and I would be more than happy to add it to my blog.

Lead Based Paint Can't Be THAT Bad... or Can It?

Homes built prior to 1978 have the potential to have lead based paint contained in it. In many of the areas I appraise such as Greensburg, Delmont, Export, Derry, Irwin, etc., that is a lot of homes. Probably 80% or more of the homes in these areas were built prior to 1978.

When lead based paint peels and cracks, it creates paint chips and dust. You can tell a deteriorated paint surface possibly contains lead when there is a pattern to the cracking termed “ alligatoring”. It creates a pattern that looks a little like scales or a grid. Another sign is if it creates a chalky residue when it rubs off. Also, any surface covered with lead-based paint where the paint may wear by rubbing or friction is likely to cause lead dust including windows, doors, floors, porches, stairways, and cabinets.

When performing appraisals for loans that are for FHA/USDA or VA financing, one of the issues that we as appraisers need to pay specific attention to is what is termed “defective paint surfaces” in houses that were built prior to 1978. Any paint that is found to be peeling, bubbled, flaked or chipped needs to be called out as a necessary repair to be professionally addressed due to the risks associated with lead based paint. To some it sounds like overkill. In fact, I used to think years ago, how can it be that bad?

So, why is this so concerning?

Is this something you should even be concerned about?

The very short answer is yes.

If you don’t read anything further in my article, please click on this link to read what the Cleveland Clinic has to say about lead poisoning. If you are like I was, this information might change your mind about the seriousness associated with lead poisoning.

https://health.clevelandclinic.org/lead-paint-dangers/

When lead is absorbed into the body, it can cause damage to the brain and other vital organs like the kidneys, nerves, and blood. Lead may also cause behavioral problems, learning disabilities, seizures, and in extreme cases, death. While it is harmful to all ages, lead presents the most danger to children. Infants and young children are more likely to be exposed to lead than are older children. They might chew paint that flakes off walls and woodwork, and their hands can be contaminated with lead dust. Young children also absorb lead more easily, and it's more harmful for them than it is for adults and older children.

According to The Cleveland Clinic “For a child, even the smallest amount of lead can cause developmental problems.” If there is one thing that is most important to understand about the risk of lead poisoning, it is this… The effects of lead poisoning CANNOT be reversed. The best way to avoid the danger is to minimize the exposure to the risk.

How do you limit your risk to lead poisoning when it pertains to real estate? You can avoid it almost entirely by choosing to purchase or rent a home that was built after 1978. If that isn’t possible, then you can either have all the lead based paint removed or treat existing lead based paint by using an encapsulent. Encapsulants are materials that are applied over lead-based paint to seal the paint to a surface and prevent the release of paint chips or dust. The material may be either a liquid or an adhesive. Encapsulation provides a barrier between the paint and the environment. Conventional paint is NOT an encapsulant. There are specific types of paint that are classified as an encapsulant.

In short, know the risks and be informed. Living in a home built prior to 1978 has the possibility of having lead based paint. You can limit your risk for the potential of having lead poisoning by having a good maintenance program addressing any known existing lead based paint, having it removed and/or having it encapsulated.

How will increasing mortgage rates affect you and your investment?

You would have to be living under a rock to not know that interest rates have been steadily rising and are currently at levels we have not see in many years.

According to the latest article as of this writing dated 10/21/2022, the 30 year fixed rate mortgage remains just shy of 7%. This is having a direct impact that is negatively impacting the housing market.

https://www.cnn.com/2022/10/20/homes/mortgage-rates-october-20

Image taken from bankrate.com

In the past month, I have started to see increasing supply that will soon be balanced and in my opinion, if the current environment remains the same or rates continue to rise, we will see the balance at best or the oversupply at worst we are used to seeing.

What happens when you have decreasing demand and higher supply?

This negatively impacts sales prices. In turn, this causes values to decline.

Unfortunately, this is not good news. It is difficult to know how far this decline will go or how long it will last. According to the CNN article I referred to, home sales have been falling month over month and we are in the longest housing sales slump since October 2007. They also state that applications for home purchases are down 38% and those for refinances have fallen off of a cliff.

This might not be the case for home appraisals and the home sales in our market area, but as is historically accurate in the past, we tend to be on the back end of the national curve. If what they say is true, then we are in the very beginning of this same slump and need to be prepared for the ride.

If you are in the market to purchase a home, refinance or require a home valuation for other purposes such as estates and divorces, you need to be prepared for the value of the property to possibly show a decline from the past 2 years.