An Appraiser's View

Do mortgage interest rates affect or effect appraised values? The simple answer is no, and yes. Confused? Let me explain. 
Assuming you are aware of how an appraiser arrives at his or her opinion of value, lets take a look to see if interest rates "affect" appraisal values. Affect is a verb and describes current action, which means something that AFFECTS the appraiser's selection of comparable properties, ie; the presence of a pool, the size of the house, number of baths, location, condition, etc., the appraisers reconciliation of the cost to build a similar home, or the appraisers selection of comparable rental properties. And although changes in the market can make the selection of more recent sales important, that is due to the price they sold at, which may or may not be from the interest rate the buyer received.
But do interest rates EFFECT appraised values? You bet they do. EFFECT is a noun, descriptive after the fact, so current mortgage interest rates AFFECT how much a buyer can afford to borrow, which EFFECTED how much they were able to pay for a home. This is similar to the current job market in a an area. A borrowers employment status AFFECTS how much they borrow, so if an area is depressed, this will EFFECT the values in the area. Understand? No?
Hmmm. That's ok, just try and think of it this way. Appraisers do not determine how much you will buy or sell your house for, or how much the bank will loan you against your house. We report current market conditions like increasing or decreasing values, supply, and demand, which AFFECTS the banks lending decision, and EFFECTS your buying decision.
One last thought. Did you know yo can get an appraised value based on what a property will be worth at a selected future date? It's called a *Prospective Appraisal. It's a handy tool when you are looking at flipping, renting for market appreciation, subdividing, spec building, or holding paper on a loan. One aspect of prospective appraising is determining where the market will be on the chosen prospective date, and historical interest rate trends are part of that equation. So as in all things involving the English language, prospective appraisals are the exception to rule. 

Up next. Math, the English method. 

*If interested in a prospective appraisal or you would like prospective appraising explained, feel free to contact me directly. 
    

  

Home prices are cooling, does this mean values are declining? No, it does not. Home price cooling can mean many things, the list price vs. sell price to be dropping, the percentage increase in values to be slowing, the median home price is lower than it was, or, in some cases, homes selling for less than comparable homes sold for recently (a.k.a. "declining values"). Typically when you hear in the media that home prices are cooling only one or two of the above circumstances are happening in your specific market, verses when market values are actually declining all four are present. 

The issue with broad statements of increasing, declining, or stable values is they are not specific to individual properties. The data the media, home owners, government agencies, etc. presented is based on National, State, county, and city wide market data and may vary significantly from what individual neighborhoods are experiencing. And even within neighborhoods fixer homes, move up homes, move down homes, etc. can experience significant differences in percentage of increase or decline.  Even when all housing markets are headed in the same direction, the percentage of increase or decrease differences between individual markets can be as much as 50%!      

Given the lack of information on all of these indicators specific to your market, how can you find out if your homes value is going up or down? The answer depends on the reason for the question.
If you need to know because you are considering selling, interview 2-3 experienced real estate agents. They are your best resource for the direction of market price. If you have a unique property, find an agent who deals in those properties. If you do end up selling, they provide the most likely route to top dollar for your property.
If you are planning on selling the property yourself, considering buying a property to flip, or considering building on vacant land to sell, hire an experienced real estate appraiser, one that has experience in the type of property you are needing the data on. You might even ask for a prospective opinion of value, but make sure you fully understand what it is based on before doing so. 
And if you want to know before taking out a loan against your home for some home improvement projects, why? You can either afford to make the payments or not, what your home is worth only matters for your LTV, and that will determined by the appraiser the bank hires, not your loan officer, a real estate agent, or even another appraiser you hired. For more on my opinion of home values for reasons other than buying or selling, subscribe to my blog.