LOANS AND APPRAISALS

Q: What factors will affect loans next year, and why?

Cary Cox, Flagstone Financial Services: The overall economy will keep interest rates low. I think that with more demand, there’s more job growth. We’re not going to have as much demand, especially on the purchase side. I think you may see it pick up in the spring, because I think rates will go even lower. I’m a bit contrarian on this.

Brian Martucci: It’s all the same things. We talk about the rates, the stagnant to lower income. Not a lot of that is a recipe for increased growth in lending, but I think loans in general, it’s the same old thing with underwriting guidelines they’re trying to put in place and buybacks and putbacks. It’s not going to work. The banks are running scared.

Q: What other lending changes should agents expect next year?

Cary Cox: There’s demand that you’re going to see a continued surge in the non-QRM or nonqualified mortgage grant where you see lots of bank statement programs coming out and asset-based lending.

Brian Martucci: I don’t foresee any changes, just more of the same. Underwriting guidelines and I think Realtors will have to be more and more involved in helping their buyer make the right choice of lender. You have buyers think they can get a loan anywhere, and all they’re shopping is price. It’s not difficult to get a loan, but they never take into account experience, execution. All they care about is the bottom line, and I think agents are going to have a tough time trying to convince them that they need to focus on quality as well as price.

Q: What do you see happening with interest rates in 2015? Will low interest rates continue to drive the market, even if they increase by a small percentage next year?

Cary Cox: I think that interest rates will stay low for a while. If there’s any financial raise on the interest rate, the interest payment on the U.S. debt and corporate debt, it won’t be a pretty sight.

Brian Martucci: Interest rates need to go up, the question is how much. There’s a mathematical principle called reversion to the mean. The mean, the average by whatever measure you want to use, is 6.5 to 7 percent in this country over time. There’s an infograph somewhere on my blog that shows 120 years of recorded history of interest rates. These rates that we have now are a fantasy, a gift served up by the Fed. Next year is probably going to be the year that changes. Interest rates are due to change. It’s just a question of to what degree.

Q: Will appraisals give home sellers issues in 2015?

Robyn Jones: Yes. I think appraisal issues are one of the toughest issues we have to get around these days. It’s not the initial negotiation and the negotiation for repair, if you’re still alive after that you’re supposed to get the appraisal. In an area like Houston that’s booming, there’s not enough appraisers in an area, so they start borrowing them from other areas and you start getting really bad appraisals. You could send them every piece of paper, they will never change that initial appraisal.

Cary Cox: In Houston we’ve seen values appreciate so much that I don’t think there’s going to be a slight decrease in value. If you’re buying a house, it probably won’t appraise for as much in 2015 as in 2014.

Brian Martucci: Most of the markets I lend in, particularly urban markets – Houston, L.A., San Francisco – I think values are pretty good there and going up and appraisals haven’t been a problem. I haven’t had a low appraisal in a while, but I think that’s going to get harder. They’re refusing to appraise when real estate values are going up, but when real estate values are going down or shifting, I think sellers are behind the curve and realistically pricing their homes is difficult and I think appraisers are going to be the ones delivering the bad news next year. Things are shifting a little bit.

Q: Are foreclosures, REOs and short sales a thing of the past?

Cary Cox: I think they’re going to be a force in the real estate market. I think there’s still a lot of shadow inventory out there that has not been flushed out by the major banks.

Brian Martucci: There’s a RealtyTrac article from Nov. 13, so it’s really fresh, and it said U.S. foreclosure activity increased 15 percent in October driven by a 17 month high in scheduled foreclosure auctions. It went on to say foreclosure filings were reported as 123,109 in October and that was a 15 percent increase, but they’re still down 8 percent from a year ago. So, 123,000 sounds like a lot, a 15 percent increase sounds like a lot but 8 percent down year over year. Do I think it’s past? It seems to me it’s not over by a long shot. But are we on the tail end of the decline? I guess so.