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Home appraisals no longer derailing sales

By Les Christie

This Jacksonville Beach, Fla., townhouse appraised for $5,000 more than asking price.

NEW YORK (CNNMoney)

Consider this one more sign that the housing market is heating up: Appraisers are putting higher values on homes again, allowing for more deals to go through.

During the housing bust, sales were often derailed by low-ball appraisals that fell far shy of a home’s selling price.

For example, if a home cost $500,000 and required a 20% down payment of $100,000, the buyer would need to finance $400,000. But if the appraiser valued the home at $450,000, the buyer would only be eligible for a $360,000 loan — making the home too costly for some buyers.

But now, as home prices climb and housing inventories shrink, appraisers are valuing homes at or above their selling prices, according to Lawrence Yun, chief economist for the National Association of Realtors.

Between 2008 and 2010, appraisals for more than a third of Seattle-based real estate agent Michael Ackerman’s sales came in below the selling price. So he had to get creative.

“I started pulling out the key boxes at the homes so the appraisers couldn’t get in,” said Ackerman. “They had to call me to let them see the home. I would bring a packet of comparables along and explain what I used to price the home.”

But now, with home prices posting such strong gains, those strategies may not be necessary anymore.

“I’ve closed 15 homes so far this year and none of the appraisals have come in below the selling price,” said Ackerman

He was certain a recent deal in Wallingford, Wash. was going to fall through when the buyer agreed to pay $755,000 — well above the average $690,000 other homes in the area had sold for. When the appraisal came in at the full selling price “everybody’s jaws dropped,” he said.

And in some of the hottest markets, appraisals are coming in well above the selling price.

Agent Eric Tan said one appraiser did a “drive-by” of a West Covina, Calif., home he was selling in April.

“He didn’t ask for any comps, to see the inside of the house, or even schedule a time to meet with me. He wrote up the appraisal right at the purchase price,” he said. “I was able to sell the client’s home for about $40,000 more than I thought the appraiser would value it.”

In Jacksonville Beach, Fla., where prices have soared 15% over the past 12 months, agent Cara Ameer was “holding her breath” when it came time to get an appraisal on a two-bedroom townhouse she sold for $5,000 more than its $189,000 asking price.

“It was FHA financing and [the FHA is] typically much more strict,” she said. That appraisal too ended up coming in above the selling price.

CNNMoney

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Where Home Prices Have Risen Since 2009 [MAP]

Rob Wile

San Diego real estate god Jim Klinge points us to this map showing the three year price changes for all U.S. metros from Mortgage News Daily.

On balance, more areas are growing than not. Texas, southern California and south Florida are all particularly strong. Declines are largely concentrated in the northwest and southeast.

But Klinge warns the trend will not continue:

…the strong investor demand for foreclosed properties, record levels of housing affordability and other demand factors that have driven recent double-digit price gains are unlikely to persist throughout the year.

Check it out:

Mortgage News Daily

Business Insider

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Permits, Not Starts, Tell Story of Housing

By NICK TIMIRAOS  and ALAN ZIBEL

Construction of new homes fell in April amid a big drop in the volatile apartment sector. But building permits hit their highest levels in nearly five years, a sign that the housing rebound—while choppy—still appears to be on course.

Housing starts fell 16.5% in April to a seasonally adjusted annual rate of 853,000 units, the lowest level since last November but still up 36% from the level of a year earlier.

Multifamily homes with at least five units plunged 37.8%. Single-family home construction dropped by 2.1% to an annual rate of 610,000 units in April, the second straight monthly drop and the lowest level reported this year. Housing starts can be volatile, due in part to weather, and can be subject to large revisions.

Building permits, which are less volatile and serve as a leading indicator of future construction, rose to the highest level since June 2008. They increased 14.3% to an annualized rate of 1.02 million in April.

“Permits have been sending us a cleaner message, and what we saw in April was a pretty decent rise in permits,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.

The pullback in housing construction comes amid reports from home builders that they are deliberately slowing their rate of expansion in order to boost prices at a time when inventories of homes for sale are already extremely low. Rising land costs in some markets, higher costs of building materials, and difficulty in finding skilled workers have also cut into their margins.

Nearly 60% of builders in April said that they had slowed their sales pace in at least one new-home community by limiting the release of new homes or boosting prices, according to a survey released earlier this week by research firm Zelman & Associates. That dynamic isn’t limited to solely California and other Western markets that have witnessed the strongest price growth, according to the Zelman report. Builders in less-heated markets from Texas to the Carolinas to Detroit have also been managing sales.

Home prices have been on a tear in recent months, largely because demand has outstripped supply. Economists have been increasingly voicing concerns that home prices could rise sharply, eroding affordability for buyers, if there aren’t more homes made available for sale.

The government data showed new home building fell most sharply in the South, by about 28%, compared to declines of 13% in the Northeast and 6% in the West. Construction in April rose by 11% in the Midwest.

The Wall Street Journal

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