The members of the Appraisers Committee have been quite active in 2019. Besides presenting our Appraisal Forum seminar this past Aug. 22, we are planning a residential appraisal lunch and learn, please keep an eye out for the date to be announced.
We have discussed several issues important to the Appraiser-REALTOR® committee including improved communication with each other. Topics include the somewhat complex issue of accurately calculating gross living area (GLA); FHA repair issues; how to appeal an appraisal; and the bifurcated market in the Greater Columbus Area. Many of these issues were discussed in detail at the August Appraisal Forum.
In regard to calculating the gross living area (GLA) Fannie Mae states this must be above grade living area. Therefore, multi-level homes with levels that are partially or fully below grade are not included in the GLA. However, Fannie Mae does permit the deviation method for markets where it is common and accepted by buyers and sellers to include these areas. Partially below grade areas must have normal light and ventilation and be finished with the same quality materials as the remainder of the house. As a further point of clarification finished walkout basements are normally not included unless the rooms in that area are critical to the functional utility of the floor plan. Examples include a kitchen or master bedroom on the lower level.
The bifurcated market in the Columbus area continues to challenge all of us in the real estate industry. Numerous articles have detailed the severe shortage of affordable housing in the central Ohio area. Fueled by years of historically strong job growth the population is on pace to add one million new residents by 2050. Home ownership percentages have declined as the cost of housing continues to escalate. Demand for apartments continues to exceed supply as new complexes are often 100 percent occupied only weeks after completion. According to one article in the Columbus Dispatch from May of 2019, since 2004 central Ohio has added more than twice as many jobs as homes thus creating tremendous unmet demand.
The result is escalating monthly rents and rapidly appreciating housing prices. Starter and first-time homes are often sold in a few days or even hours with multiple offers and escalation clauses becoming the new normal. Appraisers who must follow normal procedures and government USPAP regulations sometimes find it difficult to adequately support the final sales price. Due to continued job and population growth these issues are unlikely to change in the near future.
However, the move-up market and houses in the executive price range are finding a shortage of buyers. Marketing times, especially in the executive price range, often exceed six months or more. Many upscale neighborhoods have a significant oversupply of houses on the market. New construction competition also may have an adverse effect on demand and sales prices of existing homes. Many potential buyers in the executive price range would prefer new construction over existing homes unless they are priced at a significant discount. There are numerous examples of executive houses with past sales histories where the original price was higher (in some cases much higher) than the recent sales price. While some executive markets are holding their own in established areas, prices remain flat.
In summary the Columbus market remains dynamic and yet challenging in many respects. The Appraiser Committee remains committed to communicating, discussing and exploring potential solutions to these and other issues with our REALTOR® colleagues. We encourage and desire your comments, feedback and ideas as we look forward to 2020.
For more information about the committee and upcoming events, visit the Appraiser Dashboard at ColumbusRealtors.com.