The Home Value Rollercoaster: Wheeeeeeeeee!
Many Realtors nationally are experiencing what the media are calling a "real estate roller coaster." Home prices, which dived in the last few years are starting to rise. On a national average, we've gotten back about a third of the home values that were lost to the housing debacle.
Well good for you, national average home owner. Unfortunately in New York, things aren't quite so rosy.
I'd like to be the first to lay the blame for this underperformance of our housing values squarely on the doorstep of New York lenders. Yup. Same guys who started it all with indiscriminate lending practices. Same guys who we bailed out when it all went bust. Same guys who used illegal tactics and robo-signings to foreclose on thousands of homeowners after it all hit the fan. Those guys.
Those guys now are tinkering with home sale appraisals.
Here's what happens. After a buyer and seller agree upon a price and sign a contract on a property, lenders appraise the current market value of the house, to see if it's worth what the buyer and seller have agreed upon. If it doesn't appraise, the lender will refuse to authorize the loan unless the buyer pays more up front or the seller takes less, to bring the amount of the loan down.
But lender appraisals have gone crazy lately. A recent deal on a lovely home I valued at $550,000 appraised by the bank at $420,000. Woah! That's a lot of estimate to be off by. On another deal, a property had had two appraisals, one from a professional appraiser for $1.2 million, but the lender appraisal came in at $630,000. I've heard from Realtor after local Realtor. This isnt' just me. This is happening all over the state.
And what it's doing is driving prices further down, like a rollercoaster hurtling forever down. First, for whatever reason, lenders are making these ridiculous appraisals, they are preventing sales. Deals don't happen and buyers go away to rentals, other neighborhoods or just decide not to buy at this time. The other effect low-ball appraisals have is actually DRIVING DOWN HOUSING PRICES. When a home is purchased at a price much lower than it should be, it drops the value of all similar homes in similar neighborhoods in the area. Home owners find out that all the equity in their home is gone! Many are now under water on their mortgages and instant candidates for a short sale.
The only thing I can't figure out is why our lenders are taking this position. Property prices in free-fall can't be good for banks, can they? Are lenders making so much on refinancing that they don't want to waste their time on new sales? I'd love to know. And when I do, you'll be the first people I'll tell.
Riding the Trillion-Dollar Real Estate Recovery Roller Coaster.
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