Home Value Archives » Larry & Kathy Reichle

Are you waiting for house prices to drop during the next recession? Why you could have a very a long wait

February 25, 2020 by Kathy Reichle Leave a Comment

It’s unclear when the next recession will come. But a recent report argues that when it does the U.S. housing market is unlikely to adversely affected in any major way.

Researchers at First American Financial Services FAF, -0.71%, a title insurance company, examined how the country’s housing market has fared historically during recessionary periods. Based on what’s happened in past recessions, the report argues that the next recession is unlikely to prompt a major downturn in housing.

“While the housing crisis is still fresh on the minds of many, and was the catalyst of the Great Recession, the U.S. housing market has weathered all other recessions since 1980,” wrote Odeta Kushi, deputy chief economist at First American and the report’s author. “In fact, the housing market may actually aid the economy in recovering from the next recession — a role it has traditionally played in previous economic recoveries.”

Using its own data along with information from Freddie Mac FMCC, -2.13% and the National Association of Realtors, the report maps out how the housing market has traditionally fared in economic downturns. In most other cases, home price appreciation continued at an even pace, and existing-home sales growth only edged downward slightly, Kushi wrote.

On average, U.S. house prices fell approximately 33% during the Great Recession.

So what made the Great Recession different? The housing boom that preceded the last recession was largely driven by an explosion in both home-building activity and mortgage credit. Home buyers were able to get mortgages with no documentation of their income and no down payment, and many loans had introductory 0% interest periods that made them cheap to start but more expensive as time wore on.

These homeowners were over-leveraged. “The housing crisis in the Great Recession was fueled heavily by the fact that job loss was paired with a significant share of homeowners who didn’t have much equity in their homes,” Kushi wrote.

And because developers constructed so many homes, their home values quickly sank when the bubble burst, exacerbating the situation further.

The growth in home prices seen during the current economic expansion has not been fueled by increased access to mortgage credit. Rather, it’s a simple reflection of supply and demand: Many Americans want to become homeowners, but the supply of homes available for sale is very low, pushing prices upward.

While this has made the prospect of buying a home unaffordable for millions of Americans, it has also meant that those who are homeowners have seen their home equity grow substantially in recent years. That decreases the likelihood that they would be underwater on their loan if home prices were to dip in a recession.

“Were we to have a recession, I’d argue housing would provide a cushion because the shortage of supply at the entry-level suggests builders could actually continue to build,” Doug Duncan, Fannie Mae’s chief economist FNMA, -3.00%, told MarketWatch in December.

There still are red flags that homeowners should be on the lookout for when it comes to how a potential recession might affect the housing market. For starters, many Americans have taken out cash-out refinance mortgages on their homes as their home values have grown. That’s whittled away the equity these people have in their property, leaving them more vulnerable to owing more than their home was worth in the potential event the home prices drop.

Another issue: Many Americans who fell behind on loan payments and modified their mortgages in the wake of the recession to avoid foreclosure have since redefaulted. Were these people to lose their jobs in a recession, they could easily fall into foreclosure. Research has shown that foreclosures exacerbate economic downturns — and they can have a ripple effect through a local market, causing other homes to drop in value.

And at the local level, certain local housing markets could prove more resilient in the event of recession, depending on the strength of the local economy relative to what’s going on at a national level.

By: Jacob Passy

As a Washington State Resident, How Do I Appeal My Property Assessment?

June 26, 2019 by Kathy Reichle Leave a Comment

Values have gone up dramatically in recent years, so you’ll want to know it’s all accurate.

Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.

Q: I live in King County, Washington. I want to appeal my property assessment. How do I go about doing so?

A: This year’s notices of the assessed value of homes in King County, Washington, which includes Seattle and Bellevue, are mailed between May 2019 and November 2019, according to the Department of Assessments’ website.

Homeowners then have 60 days to file an appeal of the assessment, said Waverly Cassill, a real estate broker and the lead residential appeal specialist at Harley H. Hoppe & Associates, Inc., a property tax appeal firm based in Bellevue.

The effective tax rate in King County is .91%, according to Irvine, California-based ATTOM Data Solutions, and homeowners pay an average of $6,865 a year in property tax.

Residential property in Washington is taxed at 100% of its market value, Ms. Cassill said. And values have been going up about 1% a month in recent years, she added.

With that in mind, “you can assume that your value will go up by 12%” from one year to the next, she said. However, homeowners who don’t think they could sell their home at that assessed value can appeal.

For starters, if a mistake has been made in assessing the home, like if the square footage or other details have been recorded incorrectly, that should be brought to the attention of the Department of Assessments before starting an official appeal, according to its website.

Otherwise, the Department of Assessments allows homeowners to appeal either online or through the mail, Ms. Cassill said.

“You need to do the leg work and find the evidence in support of a reduction,” she explained. And it needs to be strong evidence, because the burden of proof is on the homeowner.

“Under Washington state law, the assessor is deemed correct,” she said. “That makes it really challenging…the proof has to be very strong.”

That evidence could be proof of the purchase price. If a homeowner made his or her purchase close to the end of the previous year, then the appraised value is not likely to go up very much. In that case, any large increase could be grounds for appeal, Ms. Cassill said.

Or a homeowner could have an independent appraisal or a realtor market analysis done, she noted. If either determined the assessed value to be too high, it would be useful for the appeal.

The step-by-step appeal process includes selecting comps—or recent comparable sales of homes in the same area—and stating the reasons for the appeal. Location, condition and amenities, as well as things like traffic and noise issues, are all part of the equation.

“There’s a lot involved when you’re looking at comparables,” according to Ms. Cassill.

After filing, homeowners will be notified by Board of Equalization that their appeal has been received. The Board of Equalization will ultimately determine if a reduction is warranted.

“But it’s not something that happens overnight,” Ms. Cassill said. “It can take six months, even up to a year….and by that time, you’ve already paid your taxes, so you’ll be getting a refund or a credit to the next year.”

BY V.L. HENDRICKSON | ORIGINALLY PUBLISHED ON JUNE 13, 2019 | MANSION GLOBAL

Simple DIY Projects That Will Increase the Value of Your Home

February 28, 2019 by Kathy Reichle Leave a Comment

Looking to boost the value of your home without spending hundreds of thousands of dollars? You can! Making changes in certain rooms, like the kitchen and bathroom, is more beneficial than in others. These simple DIY projects will help increase your home’s value the most.

Modernize Fixtures

Replacing outlet covers can cost less than a dollar each, but if they have paint or other things on it, it’s a good change. While you’re at it, consider updating the outlets themselves. For about $25-$30 you can buy an outlet that also includes two USB charging ports. With all the smartphones, tablets and other electronic devices lying around, just a few of those, well-placed, can make a big difference. Think about the rooms in your home that don’t have enough outlets and the rooms that are most used for charging.

A less expensive upgrade? Doorknobs. Mismatched, broken, and dingy doorknobs can be a major deterrent. For a small amount of money per knob, you can update the look and make the whole house more visually appealing.

Lighten It Up

The more light you can add to your home, the better. Freshening up or removing curtains can brighten your home and make it more inviting.

Replacing windows is also a great way to add value to your home, particularly true if you live in an older home that has a lot of windows that stick or that let in the heat or cold. Installing energy efficient windows can also get you a nice tax break. However, poorly-installed windows can let in water, which can lead to mold and cracked foundations, so this isn’t for everyone.

Old light fixtures, or light fixtures that are dim or unappealing should be replaced to brighten the house.

Makeover the Bathroom

Bathrooms consistently get a high return on the investment. If you have a small budget and you’re DIYing, start small. A new vanity. New sink. A nice ceiling light. A spa-like shower head. A nice towel bar. None of these things have to cost over $100, but they all add value to your home by freshening it up, providing simple conveniences, and making it nicer. Who doesn’t want one of those fancy shower heads?

If your bathroom floor is falling apart, suffering from water damage or is just outdated, you can restore it yourself pretty inexpensively. Many home improvement stores offer a class so you can learn what you don’t know, which might enable you to choose a more expensive flooring. Stick with a neutral shade to add the most value.

Freshen Up the Kitchen

The kitchen is one of the biggest things that will turn potential buyers on or off to a house. It’s also one of the places where you can get the most money back for your investment. What’s the single best DIY change to make in the kitchen? A fresh coat of white paint on the cabinets. Go ahead and change out the knobs, too.

Storage is another change to consider. Add more shelves, possibly with space underneath to hang coffee mugs. Kitchen islands are in demand now and building one with storage will add value.

Keeping Up on Maintenance

A home in good repair is always going to be more valuable than one with a leaky roof. If the siding is old or falling apart, replace it. Consider getting a home warranty, to ensure the value of your appliances. Also make sure to maintain the appearance outside, sweep up the leaves, trim the bushes, and keep fences in good repair.

Adding value to your home doesn’t have to be expensive or difficult. Sometimes, the simplest DIY can be the best place to start. Start by considering your budget and your home’s most pressing needs, and update from there.

WRITTEN BY DAMIEN JUSTUS