OfflineSentiment Says More Price Rises Coming
The majority of Americans today are expecting home prices to continue to rise, with only about a third believing they will fall in the near future. Just a year ago, 49% of Americans expected prices to continue to fall. Analysts say that crossing the 50% threshold marks a significant milestone in consumer sentiment.
Home Appraisals Not Killing Home Sales as Much Anymore
Appraisers aren’t killing as many home purchase deals these days. In the previous five years, ultra-conservative appraisals and too many foreclosures contributed to failed home purchase deals. Homes appraised for less than the selling price, in many cases far less, killed the deals by keeping the lender away. Even if the seller would be willing to drop the price to the appraisal, it was usually less than the mortgage balance, so the deal died anyway.
These days there are fewer foreclosures, but more importantly, more sales of occupied homes to be used for comparables in the valuation process. Appraisals are rising, and more deals are making it to closing as a result.
Apartment Construction Slows Sharply
While new single family home construction is increasing, apartment construction has taken a recent fast drop. Analysts aren’t giving us reasons for it, but it should contribute to the long term lack of rental inventory and increased rents.
One of the reasons that appraisals were coming in so low was the fact that the high volume of foreclosures was actually setting market value. If you had 100 properties for sale and 80 of them were foreclosure property that was sold at 60% below the 2008 market value, you now have a new market value.
Since a typical buyer is going to opt for the cheapest of two exact homes, appraisals needed to reflect that active market. As more traditional sales occur and the market rebounds, we will see it reflected in new appraisals.
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anita Page
some appraisers are still using foreclosures for their comps... it is very irritating when trying to refinance! and I'm not so sure about the prices rising... there still seems to be many properties in the banks shadow inventories; and also, how much longer will the interest rates remain this low? once the rates start rising, we will see the home prices stabilize...
Valerie
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Because many markets have had more foreclosure properties than traditional sales, the foreclosures have actual created market value. The reasoning behind this is that a typical buyer is going to purchase the cheaper of the two identical homes. If a traditional seller wants to sell their home in the current market, they are going to have to price the property to compete with the current inventory of REO homes.
Do not worry though, this trend is quickly changing. There is a diminishing shadow inventory. Most of the REO properties are now selling close to traditional market values. Plus, prices are increasing due to a shortage of supplies. This will also increase market values.