Many of the subdivisions that we have been active in in Houston and Northwest Houston since 1978 are stable, but not showing any appreciation right now. We had become used to annual inflation factors of up to 15% over the years. While things may not be gaining in value, for the most part they are holding. Houston has an incredible ability to do better than most of the rest of the nation when it comes to upholding home values.
The largest hurdle right now is getting things to appraise for the value asked for by the seller and offered by the buyer. This used to be what was defined as “Market Value.” Things are changing due to new rules by the lenders. Lenders have been hurt by the market collapse of recent years. It was not a total surprise. They had allowed people to purchase properties that they really could not afford and did not qualify for. When the economy got a little soft, these folks could not make the payments and the lenders found themselves holding properties that they did not wish to own. With the failing values, the properties often did not have the value they had when they were first sold to the folks who should not have bought them in the first place. This in a nutshell describes the general market mess.
Things are not as bad as the media would have you think. In fact, compared to the recession of the 1980s, it is not bad at all. It does however have its challenges. The fact that the lenders now are asking appraisers to work for less than they have ever charged for appraisals, is, in my opinion, going to be the root of a brand new evil. Think about it. If you had spent years learning your profession and now you are told what you can charge to do your job, what would you do? It is highly possible that many of the good appraisers, who had worked hard to get the sellers the best value for the properties they were selling, will now change the way they do business, or retire and go into another line of work.
Before all the trouble with the market, lenders hired appraisers that they knew, or that they had heard good things about. No one likes to have to redo the loan process. Agents who had studied the market before listing homes knew about what a subject home should sell for and priced it accordingly. If an appraisal came in below what the agents studies had shown, the agent could share the comparables they had used, and if the appraiser could not find a value close to the sale price, (without knowing what the sales price was) the agent could challenge the report. We did that on many occasions. Now, we are pretty much stuck with the appraisal report, and sellers have to sell for the appraised value, or not at all.
We believe that this is a short term problem that will work itself out as the newer appraisers get more experience and are able to do more complete work. The more experienced appraisers will not all disappear. With the lowest interest rates since the Second World War, there are homes that will sell. The foreclosures will all go away soon, and there will be a shortage of homes. This will drive the prices back up, since all of the market is driven by supply and demand. So, if you do not have to sell till mid August, hang in there. That time of the year is always a good time to sell, and this year the limbo games should be over, or at least much less prevalent.
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