Archive

RAC member Byron Miller, Valuation Magazine upzoning expert

Many cities see upzoning as an effective way to increase density and affordable housing, but how does it affect property values and land use?  Join RAC member Byron Miller, SRA, AI-RRS, RAA, as he lends his expertise, along with insight of his home town of Minneapolis, to In the ZONE by Peter Haapaniemi.  

In Minneapolis, according to Mr. Miller, traditionally, highest and best use for a single-family residence could be readily determined by using the two basic criteria of legal permissibility and physical possibility. But the potential to build multifamily units makes it necessary to factor in financial feasibility and maximum productivity.  

Read the full Valuation Magazine article here.

The Con – Featuring The appraiser’s side of the story

The Con is an in-depth investigation into the 2008 financial crisis.  Hollywood has already told the stories of Wall Street and the lenders.  This series tells the stories of the people and the appraisers.
 
The 5-part docuseries, released last week, features RAC member Jonathan Miller and three other independent appraisers interviewed and credited in Episode II. View the premiere for free and the remaining episodes can be seen in virtual cinemas across the country. 
 

Orange County Market Summary

by Craig Gilbert, CRP

If Orange County, California, were a separate nation, its economy would rank as No.42 in the world, with a $306.5 billion gross county product in 2019.  Its population of 3.2 million exceeds that of that of  22 U.S. states, and it is the sixth most populous county in the nation and the third in the state, after Los Angeles at 10.1 million and San Diego County at 3.3 million.

Commonly known as “The OC” or “OC” it is part of the Greater Los Angeles Region and is a major contributor to the state’s economic base.  Geographically, the OC borders the Pacific Ocean on the west, Los Angeles County on the north, San Diego County on the south, and the Inland Empire (Riverside and San Bernardino counties) on the east.

Join RAC member Craig Gilbert as he continues to discusses Orange County.  The full article can be found here.

Tulsa Market Summary

Mobility Magazine of the Worldwide ERC, June 2020

By Tom Allen, SCRP

Tulsa, the second-largest city in Oklahoma and the 47th-most populous city in the U.S., is situated on the Arkansas River between the Osage Hills and the foothills of the Ozark Mountains in northeast Oklahoma, a region of the state known as “Green Country.” For most of the 20th century, the city held the nickname “Oil Capital of the World.” It also features one of the nation’s largest concentrations of art deco architecture, since the city’s success in the energy industry prompted construction booms in the popular art deco style during the first half of the century. Profits from the oil industry continued through the Great Depression, helping the city’s economy fare better than most economies in the U.S. during the 1930s.

Join RAC member Tom Allen as he discusses Tulsa, Oklahoma, the town in which he has been appraising since 1971.  The full article can be found here.    

RAC Authors Featured in Mobility Magazine

Delaware Market Summary

Tom Reynolds, SRPA, CRP, has written about his home state of Delaware, the Diamond State.  Learn more about the real estate market in the first state to ratify the U.S. constitution (in 1787) and  the corporate home or place of incorporation for more companies than any other state.  See the entire article here.

The Relocation Appraisal

Paul M. Lewis uses his 25 years of residential appraisal experience to offer some perspectives on the fundamental differences between a relocation appraisal and other residential appraisal types.  Don’t miss the feature on the annual Report Writing Contest, which will kick off this summer.  This contest is a joint effort between Worldwide ERC and RAC to find and recognize the best relocation appraisal report writer.  Paul Lewis won the contest last year and the 2019 winner will be announced at the RAC conference in Plano, TX, held September 19-20th.  See the full article here.

RAC Members selected Fidelity Appraisers of the Year

Fidelity Residential Property Services Division (FRPSD) announces their 2018 Relocation Appraiser Awards.

Each year FRPSD reviews the performance of their appraiser network by analyzing volume, turn time and variance, as well as the working relationship with the FRPSD team.

A special recognition this year went to three Relocation Appraiser & Consulting (RAC) members who were the award recipients of their region:

Southeast Region – John Warren

Mid-West Region – James Gargano, Jr. IFAS, SCRP

West Region– Marie Robbins-Marine, SRA, CRP

FRPSD is thrilled when these appraisers are chosen by homeowners, as their files are consistently on time and well written; additionally, these appraisers are easy to work with and responsive. FRPSD customers appreciate the timeliness, professionalism and accuracy of these reports as well.

West Virginia Market Summary

Mobility Magazine of the Worldwide ERC, November 2018

By Lori Noble

In West Virginia, geography and rugged terrain pose physical limitations that simply can’t be changed, but the mountain highlands and low river valleys are the character and charm that make Appalachia unique. The nickname “the Mountain State” and the state motto Motani Semper Liberi (“Mountaineers are always free”) are most appropriate, and the characteristics of the region prove the statement true.

West Virginia is not unique, as it shares similar demographic and market nuances with other natural-resource economies. It is true that nearly all rural counties across the U.S. face challenges with slow to no long-term economic relief. Historically, most economic growth has occurred in larger metropolitan areas, in contrast to the West Virginia economy. The constraints observed over time are best served in the long term by fiscal responsibility and a deep understanding of the economic differences that make up the Mountain State.

LOOKING BACK

West Virginia has received considerable press about the perils of coal and population declines. Coal exports were down a reported 40 percent by 2013 and nearly one-half between 2008 and 2016. Although the losses affected the state’s southern coal fields most, the energy sector is a main driver of West Virginia’s economy, and the downturn put significant strains on the economy and municipal governments. Steep declines in severance tax collections from the coal and gas industries created significant problems for government operations. On the commercial side, office buildings in major metropolitan statistical areas (MSAs) such as Charleston, the state capital, saw record-high vacancies due to big corporate bankruptcies and failures. It is also true, however, that economic performance varies extremely from county to county. The Northern and Eastern panhandles were not as affected by the downturn.

CURRENT TRENDS

West Virginia has lost more than 25,000 residents since 2012; this is the largest percentage of loss in population since the late 1980s. According to the U.S. Census, 47 of the state’s 55 counties lost residents between 2015 and 2016. The largest decline was in Kanawha County, home of the state capital. Charleston is addressing the gray cloud with optimism, however. The capital city is the second-largest MSA in the state, behind Huntington, and the decline wasn’t the fault of the city, but a commercial downturn brought on by the collapse of coal and many companies going out of business at once. To offset the woes, Charleston is laying the groundwork for a rebranding and expansion. The development strategy is long-term planning with a time frame most likely in 2020 to 2025 in the downtown area.

Although an economic uptick is showing, the downward population trends in certain regions can’t be denied. Additionally, the population losses and exits from the labor force have helped drive the decline in unemployment rather than actual job gains. Overall, total population trends for the state will continue to contract slightly, with most losses occurring over the next couple of years. An anticipated improvement in the state’s economic performance is likely to at least help slow the decline observed in recent years.

The seasonally adjusted pace of homebuilding has been volatile over the past several years, but residential construction activity shows an upward trend since bottoming out a couple of years after the Great Recession ended. The average rate observed in the first two quarters of 2017 is 11 percent ahead of the prior year’s and marks the best read on new single-family home starts since 2008. Multifamily homes are a smaller share of the overall residential market in West Virginia, due to low population density and a high homeownership rate. Overall, apartment construction peaked in 2007 and was relatively limited in recent years. Monongalia County saw the most notable increases in recent years due to several West Virginia University (WVU) housing projects.

The rate of home price deflation was much smaller in West Virginia than in most other U.S. states after the housing bubble. Since bottoming out in 2011, prices for single-family homes have rebounded about 13 percent. Given the deep population declines and slow recovery status, the state housing sector is about equal to pre-crash conditions and values.

Local house prices vary greatly throughout the state’s regions relative to local supply and demand. According to the Federal Housing Finance Agency, the Beckley and Charleston metro areas have seen price declines in the past two years, while the Morgantown, Hagerstown-Martinsburg, and Huntington MSAs recorded cumulative price gains of just 2 to 3 percent since 2015. These low rates reflect a slowdown in appreciation after significant increases in house prices in those regions from 2011. West Virginia counties in the Washington, D.C., metro area experience consistent and fast growth in house prices. Southern counties are in a different submarket where home values are expected to remain relatively flat, with no major trends anticipated.

West Virginia shows one of the smallest annual appreciation rates nationally. Residential permits are up from the previous year, mostly in metro areas. Home prices depreciated in the spring but are up year over year. Mortgage delinquencies are down from the previous year. Overall, small but distinctive positive shifts are occurring, with trends expected to proceed at a slow pace.

LOOKING AHEAD

Expectations for the U.S. and global economies will directly influence West Virginia’s economic performance. If global demand for the state’s energy commodities and manufactured goods deviates from the expected path, growth could exceed or underperform expectations. Natural resources are expected to see jobs increase 9.6 percent per year during the outlook period.

West Virginia’s construction sectors are expected to slowly recover from lackluster performance in the past several years. Activity is expected to grow at the fastest pace between now and 2020. The energy sector will drive most of the growth with several pipeline projects and natural gas-fired power plant that are expected to wrap up in the short term. Infrastructure has been depressed for an extended period due to budget challenges. Manufacturing is expected to show job growth of about 0.9 percent per year. The largest sources of job creation are expected in the chemical industry and general manufacturing sector. Income projections forecast an increase in annual wages of almost 2 percent per year through 2022 but still lag behind the national average.

There has been an upturn in recent coal production and job levels as the industry enters a period of relative stability. However, risks exist, as observed between 2008 and 2014. West Virginia’s population has declined significantly, and although a stabilization is anticipated, more loss is likely over the long term due to a larger share of elderly residents. A positive shock of inward migration would be highly beneficial, as would economic strategies to improve education and business retention in the state. Southern counties are expected to see some job growth during the next few years.

Commercial expansion outside the energy sector will bolster performance going forward. The $500 million Procter & Gamble facility in Martinsburg will continue to develop. The expansion by WVU Medicine as well as a buildings and athletic facility upgrade will help the Monongalia County region. WVU Institute of Technology also opened a campus this fall in the Beckley MSA, putting the university back on the map and making a great addition to the city’s landscape.

Lori A. Noble is a professional appraiser and consultant in southern West Virginia and member of RAC (Relocation Appraisers and Consultants). She can be reached at +1 304 573 2357.

 

 

Minneapolis-St. Paul Market Summary

Mobility Magazine of the Worldwide ERC, June 2017

by Byron Miller, SRA, AI-RRS, RAA

Minneapolis and St. Paul, Minnesota, represent a tale of two cities. Known to the locals as “the cities” or the “metro area”—“the metroplex” to hipsters—each city has its own personality and draw. Minneapolis is viewed as the younger city, with many modern skyscrapers, while St. Paul maintains an Old World charm in contrast to Minneapolis’ cosmopolitan feel.

Minneapolis is the largest city in Minnesota, with a population of 410,939 as of the 2015 U.S. Census estimate. St. Paul is the state capital and has a population of 300,851. Statistically the cities are known as the Minneapolis, Bloomington, St. Paul, Western Wisconsin Statistical Area.1 MN-WI MetroSA, as it is known, consists of 16 counties, including two in western Wisconsin, with 3.52 million people.

LOOKING BACK

Minneapolis and St. Paul are two very different cities, built by two different industries that share a common thread—water. The cities abut each other in some places and are separated by the Mississippi River in others. In the early days, the mighty Mississippi provided a means of shuttling flour and lumber from the city of St. Anthony, which would later become Minneapolis. Minneapolis’ development is tied to early milling and lumber companies that went on to become international powerhouses such as Pillsbury Company, as well as General Mills, which shipped more than 14 percent of America’s grain at its peak. Further downstream, St. Paul developed as a transportation center, first by shipping goods via the Mississippi and later by the vast railroad network built by James J. Hill.

snapshot

Minneapolis was influenced by early Nordic immigrants such as Norwegians, Swedes, and Finns. St. Paul was influenced more by other European immigrants such as French, Irish, Italians, and Germans. Both cities are influenced by an influx of immigrants to this day—Minneapolis–St. Paul has the largest Somali and Hmong populations of any U.S. city. This welcoming atmosphere still holds true for modern-day transferees.

TODAY

The cities have diverse industries as well as long histories of job creation and innovation. Sixteen Fortune 500 companies have a presence in the area, attracted to the highly educated local workforce. A partial list of major employers includes United Health Group, Honeywell International Inc., Cargill Inc., Target Corp., Best Buy Co., 3M Co., U.S. Bancorp, Ecolab Inc., Xcel Energy Inc., Thrivent Financial, Ameriprise Financial Inc., SuperValu Inc., General Mills Inc. (including Pillsbury), Land O’ Lakes Inc., Medtronic PLC, and St. Jude Medical Inc.

These companies make up key industries such as agricultural, biomedical, engineering, finance, health care, and information technology (IT). The diverse industries buffer the metro area from market cycles, providing economic stability. The climate can be challenging. However, for those who enjoy the outdoors, the area has much to offer. More than 10,000 lakes offer fishing, hiking, and water sports in summer, and skating and skiing in winter. Hunting options are available in each season.

market-at-a-glanceThe Twin Cities host major professional teams for baseball, basketball, football, hockey, and soccer. The cities have much to offer culturally as well. The Minneapolis Institute of Art has a permanent collection of famous artists and hosts traveling art shows from other major metropolitan art institutes. The Walker Art Center has its own permanent collection and hosts more contemporary art exhibits. The cities have well over 100 theater companies, ranging from the world-renowned Guthrie and Fitzgerald theaters and the Ordway Center for the Performing Arts to smaller regional theaters. There is a wide range of live music options as well—after all, the cities are where Bobby Zimmerman, aka Bob Dylan, and Prince first played before stepping onto the national scene.

The local economy is still recovering from the mortgage meltdown of the mid-2000s. Like most of the country, the cities have seen both high and low economic tides over the past decade. However, variations in this area have not been as dramatic as in the rest of the country, due to industry diversity. At the market’s peak in 2007, the average sales price was $302,845. In contrast, the market’s low sales price was $211,580 in 2011. Recovery from the low point continues today, and the market has increased over the past three years. For example, the average sales price (ASP) of a single-family home in 2016 was $282,997, up 4.1 percent from 2015. Year-to-date ASP for 2017 is showing another 5 percent increase over 2016, with an ASP of $297,230. Days on market have decreased over the same period, from 83 days in 2015 to 68 days in 2017. Similarly, inventory has decreased from 4.2 to 2.7 months over the same period. Local unemployment has been steadily decreasing over the last decade. The seasonally adjusted unemployment rate for February 2017 was 4 percent, in contrast to the national rate of 4.7 percent.

Additionally, since the bottom of the last recession, the cities have seen a significant increase in new construction, from starter homes in suburban development to the high-end condo segments in the downtown districts. While there is some multifamily construction, affordable multifamily housing continues to be in short supply.

LOOKING FORWARD

Although still in recovery from the last recession, the cities’ vitals look promising. Low interest rates and unemployment, zero inflation, and a recovering housing market fuel an optimistic tone. However, the caveat to the recovery is that rising interest rates and prices of key staples such as food, clothing, and energy could stall the recovery in the next chapter of this tale of two cities.

1 MN-WI MetroSA: State of MN Employment & Economic Development:

en.wikipedia.org/wiki/Minneapolis%E2%80%93Saint_Paul#Counties.

2 A portion of these statistics supplied by BM Appraisals.

3 Unemployment data: mn.gov.

4 North-Star Multiple Listing Service, February 2017 (Single-Family Homes).

Byron Miller is with BM Appraisals in Minneapolis and is a member of RAC (Relocation Appraisers and Consultants). He can be reached at +1 612 822 5985 or byronmiller@rac.net.

 

Express Yourself

One of our new RAC members, Rachel Massey, SRA, is a prolific writer of appraisal-related topics. She loves appraising and is passionate about appraisal education. The following is something she shared with our members, that had appeared on WorkingRE. We thought it was something we should share with you.

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Massey, RachelExpress Yourself
By Rachel Massey, SRA

The appraisal was good. In fact, it was really good. The logic was sound and the comparables used and analyzed were the best available. It was a complex property and the appraiser did a terrific job considering the likely buyer and what their alternatives would have been. Unfortunately, there was a problem.

The problem was that the report was bad. In fact, the report was really bad. None of the appraiser’s logic and analysis came through in writing. The complex property appraisal looked like a jumble of disconnected sales that had nothing to do with each other, let alone the subject property.

The disconnect was simple. The thought process that was involved in developing the appraisal did not make it from the appraiser’s head to the reader. While all the steps in the appraisal process had been followed and a logical result occurred, communicating the result, the last leg of the process, was weak. It was weak because the appraiser was unable to adequately communicate what was going on.

The house was unusual for the market. The market was rural and there were few comparable properties to choose from. There were sales in the area but the sales were just that, sales. The best sales were distant, older, and looked dissimilar with the exception of a couple key features. The key features in this instance were acreage properties with large pond sites, far from any town and close to areas with recreation land.

Start at Beginning
When you begin a report, think about the intended users, as well as the reviewers who will be viewing the report and step back to see if it contains sufficient information for them to be able to understand what the complexities of the situation are. Where do you start? Start at the beginning by describing what the problems are. Why is the property complex? How is it unusual? How many sales are there in the competitive market over the past year? How about two years? What is the competitive market? What would drive the buyer to consider this property and what would their alternatives logically be?

Had the appraiser laid out the problems unique to this property at the start of the narrative, the logic would follow that the client should not expect a pretty report. If the property was rural and unique and the market from which the likely buyer would consider properties broad, then say it. Spell it out so that the client knows what to expect. If the typical buyer for this property would only consider acreage properties with large pond sites, and eclectic style houses that were secluded from all neighbors, then perhaps the market includes properties thirty miles apart.

Convince the client that this is the case. If the typical buyer is a horse enthusiast who wants to be able to take their horse out for trail riding, then the likelihood is that they want to be within a short ride of the horse trails. Talk about it. These are very real considerations for many buyers and may be the overarching drivers as to which properties get considered.

Even on complex properties, there are usually sales that can be located, and those sales are either superior, inferior, or equal to the subject property. If the appraiser steps back and looks at the bigger picture of these sales and logically details why one is better than the subject and one not as good, without any adjustment at all, the appraiser can lay out a logical value range. Watch almost any house hunting show on television and you will see this is very much what buyers do. If buyers do this and appraisers try to reflect the actions of the market, this kind of logic can help present an answer to a difficult appraisal assignment. Even with very imperfect sales data, we can still tell the story of what makes the property unusual and how the sales we choose compete and rank in comparison. From a logical standpoint, simple bracketing with inferior and superior properties can help convince our client that the property is worth more than X and less than Z, with the telling of the “why” being up to us.

Remember that no matter how good the appraisal is in our heads, if we don’t communicate it in the report, our client may well think we have presented nothing more than a jumble of sales. It is up to us to tie everything together into a cogent and compelling story and convince our client that our value opinion is sound. After all, that is what they are paying us for.

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