Appraisers are supposed to be impartial third-party arbiters of value. If appraisers do their job right, prices can’t get out of control and rise too rapidly. For quite a while, this system worked. However, probably on instruction from lenders, appraisers are now “hitting the number” and ceasing to be a brake on home price appreciation. Lenders want prices to go up. Appraisers are ostensibly there to protect lenders and buyers by ensuring loans and prices are in line with prevailing values. However, since lenders do want prices to go up, they aren’t coming down on appraisers when the appraised value [Read More...]

After 30 years of falling interest rates, Americans have become addicted to cheap credit and personal Ponzi schemes. People have learned they can take on large debts, consolidate them at lower and lower interest rates, and service that debt with a portion of their income. It’s a bit like learning to live with a lamprey slowly sucking your financial juices. Often it’s not enough to kill, so it’s a parasite people learn to live with. Oftentimes when people get in trouble with debt, they stop using it. As Jesus would say, “sin no more.” Through falling interest rates, loan consolidations, [Read More...]

There are two main barriers to home ownership: how much a potential buyer can borrow, and how much they have to put down. Today, I want to focus on the impact of down payment requirements. There are many more potential buyers with little or no savings than there are those with hundreds of thousands in cash in the bank. The size of the potential buyer pool rises or falls dramatically with changes in down payment requirements. A high down payment requirement greatly reduces the potential buyer pool whereas a low down payment requirement greatly increases it. This basic fact is [Read More...]

One of the many misperceptions that emerged from the housing bubble and its associated collapse is the idea that house prices during the bubble were normal and sustainable and that the lower values today represent a depressed value from which the housing market must “recover.” In the case of asset bubbles, prices become greatly elevated from fundamental values, and the price collapse merely restores prices to their fundamental values. In reality, the housing market “recovered” during 2007 and 2008 when prices crashed back down to price levels sustainable by local incomes. Since a true “recovery” with pre-bubble prices also means [Read More...]

Pending sales are up, and economists who use pending sales in their calculations are proclaiming a price rally is in the works. There is one inconvenient fact holding back the bulls: record cancellations. Borrowers are unable to close the deal, and properties are falling out of escrow at increasing rates. Snags leading to more real estate contract cancellations April 01, 2012|By Kenneth R. Harney WASHINGTON — What’s behind the unusually high rate of contract cancellations and settlement delays in the real estate market? With signs of recovery emerging in many parts of the country, shouldn’t deals be zipping along with [Read More...]