Appraisals Artificially High

Here's something I had been suspicious of, but didn't have any proof for: an article at Realty Times indicates that appraisers are being pressured to keep the prices of homes high. In fact, according to October Research Corp., the principal sponsor of a national survey of appraisers, as many as 9 out of 10 are being compelled by mortgage brokers, realty agents, lenders and individual home sellers to fudge their numbers, and increase the value of homes.

As recently as 2003, only about 45 percent of appraisers had faced these kinds of pressures. In only 3 years, the percentage has doubled.

This is very bad news for buyers. It's actually bad news for mortgage brokers, realty agents, lenders and homeowners. This means that when any "housing bubble" actually breaks, the fall will be much greater. We are putting off the pain -- which usually means the pain will be bigger.

Yet, while everyone is talking "housing bubble", we continue to see good consumer confidence and good retail sales. The media is generally reporting that even the housing market correction is much less than expected. But are they reporting the whole story?

The Housing Doom Blog doesn't think so, and "twist" (one of the writers there) has done some interesting research. You know how you often hear that "figures have been revised down" but you don't hear the rest of the story? Well, "talk" media will often stick to talking points, and omit critical analysis that "read" media can cover. Case in point: According to twist, "Last month's 3.2% price increase- one of the "signs" we were told showed the market was improving- apparently didn't happen.  The November median price was revised from $251,700 to $232,200 for a 7.7% downward revision." In other words, the prices of houses has been dropping. According to Housing Doom, for the US market, the price of houses has either dropped or stayed the same, month over month, since August of last year. Based on their numbers, the prices of homes has dropped overall about 4 % on a month over month basis. The site mentions that they are using US Census Bureau statistics.

The lender Implode-O-Meter is still at 18 lenders that have gone bust or otherwise severely scaled back, sold off, merged or pulled out of the mortgage market since just last December.

Michael Chantrel

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