HBAA Legislative Alert, March 17, 2017

HBAA Legislative Alert

HBAA Places Spotlight on Appraisal Issues

The HBAA this week addressed the Alabama Real Estate Appraisers Board (AREAB) over the ongoing issues with low appraisals on new construction. Joined by 2017 HBAA President Dan Taylor, the HBAA proposed a rule change, that if adopted, will reinforce the Uniform Standards of Professional Appraisal Practice (USPAP) guidelines expectation that a cost approach appraisal will be conducted on new construction.

Builders across Alabama continually express their consternation over the failure of values to rebound following the downturn. In an effort to address those concerns, the HBAA has focused on finding ways that Alabama can encourage better appraisals while not violating the USPAP standards. One of the ways to do this is to ensure that cost approach appraisals are conducted on new homes. There is no other time that a cost approach is more appropriate than with new, previously unoccupied homes. The USPAP guidelines are clear. Under USPAP, an appraiser is not required to conduct a cost approach appraisal, but the appraiser must give a valid and convincing rationale for not including it.

On Thursday, the HBAA requested that the AREAB consider a rule change that would reinforce that portion of USPAP by adding a new section to 780-X-13-.01 to read:

(2) A cost approach to value is presumptively deemed reliable in cases of previously unoccupied new construction of 1 to 4 family residential properties and applicable to the valuation process for this type of construction. An appraiser is responsible for the decision to determine what is required for credible assignment results, and it is incumbent on the appraiser to provide a convincing explanation for the decision to exclude the cost approach for an appraisal that is in question.

The board is expected to take the rule change up for consideration at its next meeting in May.

The HBAA would like to thank the members of the AREAB for their efforts to ensure compliance with USPAP and to reinforce those requirements through its rule making process.

HBAA Addresses Democratic/Black Caucuses

The HBAA received a warm welcome as it addressed the Democratic/Black Caucuses on Tuesday to help educate the members on the provisions of HB 341 and SB 268 (Home Builders Licensure Board Revisions). Members of the Caucuses expressed support for the measure, including the consumer protection portions and the provisions that will lead to the creation of an alternative path to full licensure. As envisioned, a limited licensee who works for a period of years with a clean record and who successfully completed a prescribed series of courses would be eligible to become a full licensee without having to sit for the exam. Consumers would be assured that smaller contractors would hold a bond and that they would have some recourse in the event the contractor failed to perform as expected.

The HBAA will be visiting with each member of the House and Senate over the next two weeks to explain the bill and answer any questions that may be lingering.

Melson Bill Promotes Disclosure/Consumer Protection

Senator Tim Melson (R-Florence) introduced a bill this week that will require a builder to disclose to a home owner whether he has general liability insurance. SB 319 will require the disclosure to be in writing so that a homeowner is fully informed as to his exposure in the event of an unforeseen problem during construction.

The HBAA met with Senator Melson this week to express its support for his efforts. There are a few tweaks that were discussed that need to be made to the bill in order to avoid other statutory conflicts. Those changes have been drafted and will be fine-tuned with Senator Melson's help over the next week.

NAHB Update: Builder Confidence

Hits 12-Year High

Builder confidence in the market for newly-built single-family homes jumped six points to a level of 71 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the highest reading since June 2005.

"Builders are buoyed by President Trump's actions on regulatory reform, particularly his recent executive order to rescind or revise the waters of the U.S. rule that impacts permitting," said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.

"While builders are clearly confident, we expect some moderation in the index moving forward," said NAHB Chief Economist Robert Dietz. "Builders continue to face a number of challenges, including rising material prices, higher mortgage rates, and shortages of lots and labor."

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three HMI components posted robust gains in March. The component gauging current sales conditions increased seven points to 78 while the index charting sales expectations in the next six months rose five points to 78. Meanwhile, the component measuring buyer traffic jumped eight points to 54.

Looking at the three-month moving averages for regional HMI scores, the Midwest increased three points to 68 and the South rose one point to 68. The West dipped three points to 76 and the Northeast edged one point lower to 48.

Editor's Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at housingeconomics.com.

Cowabunga!

Like so many college students from around the nation, Alabama's Legislature has officially begun its spring break. Legislative spring break will run for the next two weeks, officially returning on April 4.

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