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What Is An MSV Estimate?

The Maximum Stable Value, or MSV, estimates the maximum value a neighborhood can support AND SUSTAIN given the neighborhood’s median income. You can think of it as a market value ‘cap’ or ‘ceiling’. It is an innovative new home value tool to help buyers, home owners, investors, and even lenders, make better, more rational decisions.

Why You Need to Know the MSV?

Remember that market values are determined by what people have recently paid for nearby, similar properties. The problem is that what people were able to pay was determined, 99% of the time, by how much of a mortgage they qualified for.

Mortgage companies ‘leveraged’ borrowers incomes through unsafe and unwise loan practices since the late 1990s, enabling larger loan amounts. (See Income Leveraging.) This has skewed market values in many areas to a dangerous extent. If you have tried to get a mortgage recently and had to put up with (and pay for) multiple appraisals and appraisal reviews than you have seen evidence of this. Even banks don’t trust market values!

The problems in lending and real estate that led us to this point have not been adequately addressed. Even if we  somehow manage to take just the right steps to fix things, it will still be many years before the market and values stabilize.

MSV Estimates allow us to make an end-run around these problems by correcting for the lunacy of banks and mortgage lenders.

How to Use and Interpret MSV Estimates

Think of the MSV as a reality check on appraisals, market value estimates, and home purchase prices. It can also be a useful tool for determining the potential for value appreciation.

The MSV is NOT a market value estimate or appraisal. It only estimates the highest stable value for any home in the neighborhood. The MSV estimate is the same for all homes in the neighborhood.

A home buyer would want the MSV to be higher than the purchase price and appraised value of the home. The higher the MSV in relation to current market value the better, because there is more room for the value to appreciate.

Homeowners considering refinancing, loan modification, home improvements, or selling can feel more secure in their decisions by checking the MSV for their neighborhood.

You wouldn’t want to mortgage your house for more than the MSV, because there is a good chance you would find yourself underwater on that mortgage in the future. Likewise you wouldn’t want to do home improvements hoping to increase your home’s value, if your target value exceeds the MSV.

If you have been up in the air about whether to sell, knowing the MSV can make your decision a little easier. If you can get near or even above the MSV for your home now, there may be no better time to sell. In fact if you wait, you may find yourself upside-down on your mortgage and unable to sell in the future.

Homeowners in trouble and considering a loan modification can make better choices with the MSV. Will a loan modification solve your problem in the long run, or will it just put it off and perhaps drag it out for a few years? That depends to a large extent on the future value of your home. If the MSV indicates that you are likely to be underwater in the future, then selling now – perhaps with a short sale – might be a better option for you.