One might think the decision is made by just one person, but that is not the case.

The Federal Reserve Chairman does announce interest rate changes (or that there will be no changes) eight times a year, so the decision process appears to be just his. One might imagine him alone, in a white-walled sterile office, scouring data and perhaps throwing a dart at a bulletin board wall filled with thumb tacks and yarn connecting newspaper clippings and line graphs.

That idea is far from the truth.

The truth is the chairman, along with the Board of Governors and Federal Open Market Committee (FOMC) members, review extensive economic data and research prepared by Federal Reserve economists. He then writes a proposal, they debate the proposal, vote on it, the majority wins, and the chairman makes the announcement about their decision.

During meetings of the chairman and FOMC, the Chairman Jerome H. Powell
Chair Jerome H. Powell 
leads discussions among the committee members, where each member presents their views on the economy and monetary policy. This collaborative discussion allows for a thorough examination of different perspectives and considerations.

Chairman's Proposal to the Group
Based on the discussions and data, the chairman often proposes a course of action regarding interest rates and other monetary policy tools. This proposal reflects the chairman’s assessment of the best policy to achieve the Federal Reserve's dual mandate of maximum employment and stable prices.

Internal Debate
The FOMC members (pictured in order below: Philip N. Jefferson, Michael S. Barr, Michelle W. Bowman, Lisa D. Cook, Adriana D. Kugler and Christopher J. Waller) then deliberate on the chairman’s proposal, offering their support, suggestions, or concerns. This debate is critical in reaching a consensus or majority view on the appropriate policy action.
Philip N. JeffersonVice Chair for Supervision Michael S. BarrGovernor Michelle W. BowmanGovernor Lisa D. CookAdriana D. Kugler Governor Waller

A Majority Vote Decides the Course of Action
Following the discussions, a formal vote is taken. Each voting member of the FOMC (the Board of Governors and the rotating Reserve Bank presidents) casts their vote on the proposed policy action. The majority vote determines the outcome.

After the meeting, the FOMC issues a statement summarizing the policy decision and the rationale behind it. This statement is critical for guiding market expectations and providing transparency.

Press Conference
The chairman holds a press conference to explain the decision, answer questions, and provide additional insights into the FOMC’s economic outlook and policy considerations.

The chairman’s influence is significant due to their leadership role, expertise, and the ability to guide discussions and build consensus. While the chairman does not unilaterally set policy, their views and recommendations carry substantial weight in the decision-making process. Through careful analysis, leadership, and communication, the chairman helps the FOMC navigate complex economic conditions and implement effective monetary policy.

Posted by Troy Sifford on June 3rd, 2024 6:54 AMLeave a Comment

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May 17th, 2024 6:59 AM

People consider FHA loans for good reasons:

  1. Lower Down Payment: FHA loans typically require a lower down payment compared to conventional loans, making homeownership more accessible for individuals who may not have substantial savings.Credit Flexibility: FHA loans may be available to borrowers with lower credit scores or less extensive credit histories compared to conventional loans. This can be beneficial for first-time homebuyers or those who have had financial setbacks in the past.

  2. Fixed Rates: FHA loans offer fixed interest rates, providing stability and predictability in monthly mortgage payments over the life of the loan.

  3. Assumable Loans: FHA loans are assumable, meaning that if you sell your home, the buyer may be able to take over your FHA loan, potentially making your property more attractive to buyers.

  4. Streamlined Refinancing: FHA offers a streamline refinance option, which can make it easier and more affordable for borrowers to refinance their existing FHA loans, potentially lowering monthly payments or interest rates.

  5. Flexible Qualification Criteria: FHA loans have more lenient qualification criteria regarding income and debt-to-income ratios compared to conventional loans, making them accessible to a wider range of borrowers.

Several reasons may disqualify individuals from obtaining FHA loans:

  1. Credit Score: While FHA loans generally accept lower credit scores compared to conventional loans, there is still a minimum credit score requirement. If an applicant's credit score falls below this threshold, they may not qualify for an FHA loan.

  2. Income Requirements: Borrowers must have a steady income and demonstrate their ability to repay the loan. If an applicant's income is insufficient or unstable, they may not meet FHA loan requirements.

  3. Debt-to-Income Ratio: FHA loans have specific debt-to-income ratio (DTI) requirements, which determine the percentage of a borrower's monthly income that goes toward paying debts. If an applicant's DTI exceeds the allowable limit, they may not qualify for an FHA loan.

  4. Property Requirements: FHA loans have property standards that must be met, including minimum property condition requirements. If the property does not meet these standards, the loan may not be approved.

  5. Previous Foreclosure or Bankruptcy: FHA loan guidelines include waiting periods for borrowers who have experienced foreclosure or bankruptcy. If an applicant has not completed the waiting period, they may not qualify for an FHA loan.

  6. Outstanding Federal Debt: Borrowers with outstanding federal debts, such as delinquent taxes or student loans, may be ineligible for FHA loans until these debts are resolved.

  7. Mortgage Insurance Issues: FHA loans require mortgage insurance premiums (MIP), which can affect a borrower's eligibility based on their ability to afford these additional costs.

  8. Loan Limits: FHA loan limits vary by location and property type. If the loan amount exceeds the FHA's maximum limits for the area, the borrower may not qualify for an FHA loan.

  9. Illegal Activities: FHA loan applicants with a history of illegal activities, such as mortgage fraud or identity theft, may be disqualified from obtaining FHA financing.

It's crucial for prospective borrowers to review FHA loan requirements thoroughly and work with a knowledgeable lender to assess their eligibility and explore alternative financing options if needed.

Posted in:FHA and tagged: FHA
Posted by Troy Sifford on May 17th, 2024 6:59 AMLeave a Comment

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So, you bought a Condo. You outright own the air space between the walls but just a stake in everything else, including the land, along with your neighbors. What could go wrong?

Condos have many benefits, but they have more complex ownership situations than a traditional detached house. Anytime you add more humans to your ownership mix, there is a greater possibility for conflict. The good news is that while condo ownership has fallen off the Humpty Dumpty wall in the past, there are protections in place. In fact, something called the UCA is the law that keeps things in balance.

The Uniform Condominium Act (UCA) was developed by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in response to several issues and challenges that arose in the realm of condominium developments across different states.

  1. Rapid Growth of Condominium Developments: During the 1960s and 1970s, there was a significant boom in condominium development across the United States. This rapid growth led to a multitude of legal issues and disputes related to the governance, operation, and management of condominiums. The need for a standardized legal framework to address these challenges became evident.
  2. Inconsistent State Laws: Prior to the UCA, state laws governing condominiums varied widely, causing confusion and uncertainty for developers, unit owners, and associations. The lack of uniformity made it difficult for parties involved in condominium projects to navigate the legal landscape, especially when dealing with cross-border issues. The UCA aimed to establish a consistent set of rules and regulations applicable across states.
  3. Rights and Responsibilities of Unit Owners: Disputes and conflicts arose regarding the rights and responsibilities of individual unit owners within condominium communities. Issues such as the allocation of common expenses, the use of common areas, and the enforcement of rules and regulations required clarification and standardization. The UCA sought to address these matters and provide a clear framework for resolving disputes.
  4. Condominium Association Governance: Problems related to the governance and operation of condominium associations also prompted the need for the UCA. Associations are responsible for managing common areas, collecting assessments, and making decisions that affect unit owners. However, issues such as lack of transparency, inadequate financial management, and conflicts of interest could arise. The UCA aimed to establish guidelines to ensure effective and accountable association governance.
  5. Consumer Protection: The UCA was designed to provide a level of protection for purchasers of condominium units. It aimed to ensure that developers adhered to certain disclosure requirements and provided accurate and comprehensive information to potential buyers. This was particularly important to safeguard the interests of purchasers in an environment of rapidly growing condominium developments.

These situations and challenges were key factors that influenced the development and eventual passing of the Uniform Condominium Act, and the UCA is formidable security we have to feel good about condo ownership -- to keeping Humpty on the wall, where the community wants him.


Posted in:Condos and tagged: condominiumcondoUCA
Posted by Troy Sifford on July 3rd, 2023 2:27 AMLeave a Comment

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February 23rd, 2023 3:24 AM

Well known PUDs in the Fredericksburg, Kerrville and LLano areas are:

Boot Ranch: a luxury residential and golf community located near Fredericksburg
Comanche Trace: a golf and residential community located in Kerrville
Horseshoe Bay Resort: a large resort community located on the shores of Lake LBJ, near Llano
Escondido: a luxury residential and golf community located near Horseshoe Bay, in Llano County.

A Planned Unit Development (PUD) is a type of real estate development that allows for a combination of different land uses, such as residential, commercial, and recreational, within a single project or subdivision. PUDs are typically developed on large parcels of land and are designed to offer a variety of housing options and amenities to residents.

The history of PUDs in the United States dates back to the 1960s and 1970s, when developers began to explore alternative approaches to traditional suburban development. At the time, there was a growing concern about the negative impacts of sprawl and the need to preserve open space and natural resources. PUDs offered a way to create more sustainable and livable communities by incorporating green space, mixed land uses, and walkability.

In terms of market value, a PUD property typically differs from a non-PUD property of the same size in several ways. First, PUDs often offer a wider range of amenities and services than traditional subdivisions, such as parks, community centers, and shopping centers. These amenities can enhance the quality of life for residents and make the property more desirable, which can increase its value.

Second, PUDs often have more flexible zoning regulations than traditional subdivisions, which allows for greater diversity in housing types and styles. This can attract a wider range of buyers and increase demand for the property, which can also increase its value.

Finally, because PUDs are often developed on larger parcels of land and incorporate a variety of land uses, they can offer more opportunities for developers to increase density and build more units than would be allowed in a traditional subdivision. This can lead to a higher overall value for the property.

Overall, while there is no guarantee that a PUD property will be worth more than a non-PUD property of the same size, the combination of amenities, flexible zoning, and potential for increased density can make PUDs a desirable and valuable option for both developers and homebuyers.

Posted by Troy Sifford on February 23rd, 2023 3:24 AMLeave a Comment

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A "catalytic event" or a "catalyzing force" is the term used to describe something that drastically accelerates progress during the process of evolution. It refers to a sudden change or trigger that stimulates a rapid and significant advancement or transformation, much like a catalyst in a chemical reaction.

Are there catalytic events on the appraisal industry horizon? Appears so.

There have been advances in the appraisal industry in the past 10 years, and while some have significantly advanced the industry processes, none arguably rise to the level of a catalytic event:

1. Automated Valuation Models (AVMs): AVMs are computer-generated estimates of a property's value, which can be produced in a matter of minutes. They have increased the efficiency of appraisals and improved their accuracy, as they are based on real-time data on recent sales and market trends. They are often used by appraisal districts for property value assessments, for property tax levies.

2. Geographic Information Systems (GIS): GIS technology allows appraisers to create interactive maps of properties and neighborhoods, giving them a comprehensive understanding of the local real estate market. This technology has made appraisals more accurate and efficient, as appraisers can easily access and analyze data on property values, demographics and market trends.

3. Big Data Analytics: Big data analytics tools allow appraisers to analyze large amounts of data in real-time, which helps them to make more informed decisions about property values. This technology has improved the accuracy of appraisals and has made the appraisal process more efficient by reducing the amount of time and effort required to analyze data.

4. Cloud Computing: Cloud computing technology has allowed appraisers to access their data and software from anywhere, at any time, using any device. This advancement has made the appraisal process more flexible and efficient, as appraisers can work from anywhere, without the need for specialized hardware.

These four innovations have been significant advancements but they haven't changed the game. On the other hand, there are three recent innovations that could catalytically impact the appraisal industry and possibly eliminate the need for many appraisers altogether.

1. Artificial Intelligence (AI): AI technology has the potential to significantly improve the accuracy of appraisals by providing more accurate and up-to-date data on property values and market trends. AI-powered appraisals could also be completed much faster than traditional appraisals. Truly, the bottom line here is the removal of human effort in the writing of the report. What this means is the substitution of flesh and blood appraisers writing reports with artificial-evolving-intelligence taking their places.

2. Virtual Reality (VR) and Augmented Reality (AR): VR and AR technology could be used to create virtual tours of properties. The typical evolution advancement perspective is that this technology allows appraisers to conduct appraisals remotely, without the need for on-site visits. However, this advancement could in reality be a catalytic event as appraisers become the VR gofers, or not even that. The realtor or non-real estate licensed photographer could be the person who uploads the VR data so that the AI can recognize the property materials and conditions to incorporate and correlate with construction handbook costs and accessible market data, then do the  analysis, write a report and email its flawless results to a client.

3. Blockchain: Blockchain technology could be used to create a decentralized database of property records, allowing appraisers (or AI) to access accurate and up-to-date information on property values and ownership. This resource could greatly improve the accuracy and efficiency of appraisals and reduce the risk of fraud. This little advancement could moderately change how multiple listing services operate and store records or it could just replace them in general. How exclusive is the data? That's a good question because realtors have vigorously protected the data in MLS systems for a long time. Owning the information enables the realtors to make exclusive matches, which enables commissions. If the blockchain real estate records is open, it negates realtor power -- which throws real estate agent leverage, in general, into questionable relevance, and that change would qualify as catalytic.

AI working in tandem with blockchain could eliminate the need for realtors and/or appraisers.

Market demand drives change in a capitalistic society, and consumer benefits drive ever expanding innovations, like iPhones, battery powered cars, indeed.com and eharmony.

These three new innovations (AI, VR and Blockchain) are poised to benefit the consumer with faster appraisal production, information transparency and fewer errors. So, they consequently benefit lenders (lenders are the typical appraiser client). Skeptical of the impact? The impact trajectory on appraisers and the appraisal industry will likely be obvious in an evolutionary graph 10 years from now. It's a meteorite in the sky that just hasn't collided with us yet, and our way of life is as normal as it was yesterday, so we're generally, blissfully unalarmed. Don't look up.

An independent appraiser's appraisal process differs from an appraisal district's process in several key ways. An appraisal district is a government entity responsible for determining the value of properties for property tax purposes. An independent appraiser, on the other hand, is hired by an individual or company to provide an appraisal for a variety of purposes, such as loan underwriting, property sales, and estate planning.

An appraisal district's appraisal process is known as a mass appraisal, which is designed to value large numbers of properties quickly and efficiently. Mass appraisals are typically performed once a year and are used to determine the taxable value of properties for property tax purposes. The process of a mass appraisal is as follows:

1. Data Collection: Appraisal districts gather data on all properties within their jurisdiction, including information on location, size, age, and condition. This data is collected through physical inspections, public records, and sales data.

2. Model Development: The appraisal district uses the collected data to develop a model that predicts the value of each property. This model is based on the sales price of similar properties, the cost to replace the property, and the income generated by the property.

3. Property Valuation: The model is then applied to each property in the appraisal district, resulting in an estimated value for each property.

4. Review and Adjustment: Appraisal districts then review the estimated values and make any necessary adjustments based on any discrepancies between the estimated value and the actual value of the property.

5. Notification: The appraisal district then notifies property owners of their estimated value, which becomes the taxable value for property tax purposes.

In contrast, an independent appraiser's appraisal process is more individualized and tailored to the specific property and purpose of the appraisal. An independent appraiser will conduct a thorough examination of the property, including a physical inspection, research of public records and sales data, and an analysis of the property's unique characteristics and condition. The appraiser will then use this information to determine the property's value, which may be based on the sales price of similar properties, the cost to replace the property, and the income generated by the property.

In summary, an appraisal district's appraisal process is a mass appraisal designed for speed and efficiency, while an independent appraiser's appraisal process is more individualized and tailored to the specific property and purpose of the appraisal.


Posted by Troy Sifford on February 10th, 2023 9:13 AMLeave a Comment

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What leading economists have said:

The recent interest rate increases have left many economists wondering how long it will take for buyer confidence to rebound. While there is no definitive answer, there are several expert economist theories that can provide insight into this question.

One theory is that of John Maynard Keynes, who believed that buyer confidence is closely tied to the overall state of the economy. According to Keynes, when the economy is strong, buyers tend to feel more confident and willing to make big purchases, such as buying a home or a car. However, when the economy is weak, buyers tend to be more cautious and less likely to make these types of purchases.

Another theory is that of Milton Friedman, who believed that interest rates play a major role in determining buyer confidence. According to Friedman, when interest rates are low, buyers tend to feel more confident and willing to make big purchases, as they can borrow money at a relatively low cost. However, when interest rates are high, buyers tend to be more cautious and less likely to make these types of purchases, as they will have to pay more in interest.

A third theory is that of Robert Shiller, who believed that buyer confidence is closely tied to the overall state of the housing market. According to Shiller, when the housing market is strong, buyers tend to feel more confident and willing to make big purchases, such as buying a home. However, when the housing market is weak, buyers tend to be more cautious and less likely to make these types of purchases.

Based on current trends, it is likely that it will take some time for buyer confidence to rebound after the recent interest rate increase. According to the theories of Keynes, Friedman, and Shiller, the overall state of the economy, the level of interest rates, and the state of the housing market will all play a role in determining how long it will take for buyer confidence to rebound. While it is difficult to predict exactly when this will happen, it is likely that it will take several months or even years before buyer confidence returns to pre-interest rate increase levels.

In conclusion, the recent interest rate increase has left many economists wondering how long it will take for buyer confidence to rebound. While there is no definitive answer, the theories of John Maynard Keynes, Milton Friedman, and Robert Shiller can provide insight into this question. Based on current trends, it is likely that it will take some time for buyer confidence to rebound, with the overall state of the economy, the level of interest rates, and the state of the housing market all playing a role in determining how long this will take.


Posted by Troy Sifford on January 26th, 2023 9:06 AMLeave a Comment

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