This morning, when the National Association of Realtors (NAR) came out with its new existing home sales number, its chief economist Larry Yun said things would be better if it weren’t for the way mortgages are appraised:
“…Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.”
“Lenders are using appraisers who may not be familiar with a neighbourhood, or who compare traditional homes with distressed and discounted sales,” [Yun} said. “In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.”
Given that a significant part of the housing problem was caused by appraisers who signed off on exaggerated home values, it takes a lot of nerve for the realtors to demand that appraisers now ignore market prices in order to let them sell houses. “Distressed and discounted” sales are real, even if they are inconvenient.
Turning to the data, the most interesting things continue to happen in the West — which presumably includes a lot of sales in California. That is the only area where sales clearly have hit bottom and bounced back, and it is the area where prices have plunged the farthest. That fall in prices presumably reflects those distress sales that the realtors wish the appraisers would ignore.
Yes, yes. But now we’ve learned our lesson. Mark-to-market pricing is pro-cyclical. We realise that now.