I. Reasons For Optimism
Most of the world’s analysts are still on the inflation-and-higher-rates train.
But there are still a lot of analysts who believe we’ll see lower rates this year, like the gentleman I referenced yesterday – James E. Thorne.
He’s back on the bandwagon today, pointing out that the bond market itself is signaling lower inflation and rates by the way it’s pricing inflation-protected securities.
There are also analysts like Kip Herriage who are predicting the fall of Iran’s IRGC, an end to the war, and $50 oil prices. He gets a lot of harsh feedback in the comments, but he is not alone in his belief.
And there are the crashing-worldwide-demand guys like Jeff Snider, and AI-bubble-popping guys like George Gammon and Ed Dowd.
I am just sharing this AGAIN because I am getting so many emails from “depressed” agents and loan officers. This is just a reminder that anything can happen, and that we well could see much lower rates this year.
And no, I’m not personally predicting it. I am just sharing some optimistic perspectives when it comes to rates.
II. Why I Hate Price-Per-Square-Foot Analyses
I asked Claude (AI) to check comps for me for a 2,800-SF home on a 1/3-acre lot yesterday to support a $1.5 million price. Claude immediately told me I was just fine because my price per square foot was well supported by a nearby comp.
What Claude failed to notice, though, was that the nearby comp was on a 1-acre lot. So, the comp’s price per square foot was inflated by the huge lot.
But don’t worry, Claude also showed me a comp on the same size lot. BUT – the house was 600 square feet smaller. So, its price per square foot was artificially inflated by a smaller home in an area with high land values.
We also frequently finance properties in Dallas and the SF Bay Area where the home prices are in the $2 million to $4 million range, and the homes themselves are 50+ years old.
In those neighborhoods, substantial updates can easily add $750,000 to a home’s value. This, too, makes price-per-square-foot analyses inaccurate, to say the least.
And lastly, there are homes in the East Bay Hills that have stunning views of San Francisco, the Bay, the Bay Bridge, and the Golden Gate Bridge.
These homes will command $300,000 to $1 million more than comparable homes without a view.
Anyway, when I used to appraise real estate way back in the day, we never correlated to price per square foot for these reasons.
The analyses don’t account for things like: (1) lot size; (2) updating; (3) views; (4) external influences, e.g., busy streets; and (5) significantly different home sizes.
III. Appraisers Call Out Condition Issues They “See”
Appraisers call out every condition and health and safety issue they see. They have to now – under the threat of losing their licenses, as I have mentioned many times.
The issues include missing railings, missing floor coverings, standing water, dirty water in pools, water stains from leaks, worn-out roofs, peeling paint (for FHA mostly), exposed electrical wiring, broken windows, mold in bathrooms, large wall cracks, uneven floors, and more.
This is another reminder to address as many of those issues as possible (even just cosmetically) before the appraiser shows up.
For “as is” purchases, this avoids repair requests and delayed closings. Appraisers don’t conduct deep inspections, so it’s helpful to ensure they don’t “see” anything that could slow down transactions.
