Housing Market Hamstrung by Low Appraisals
Existing-home sales fell 0.8 percent to a seasonally adjusted annual rate of 5.05 million in April, down from 5.09 million in March, according to the National Association of Realtors.
Compared to last April, when buying activity spiked due to the homebuyer tax credit, sales in are down 12.9 percent. Still, the housing market has managed six gains in the past nine months.
"Although sales are clearly up from the cyclical lows of last summer, home sales are being held back 15 to 20 percent due to the very restrictive loan underwriting standards," said NAR chief economist Lawrence Yun in a statement released Thursday.
A direct result of those tighter lending practices is a growing number of buyers backing out of sales due to lower than expected lender appraisals. During the housing boom, lenders were accused of inflating home values. Since the bubble burst, many buyers in the housing market are now wary of the opposite.
A parallel NAR survey showed 11 percent of Realtors reporting in April that a contract was canceled due to an appraisal coming in below the negotiated sales price. Additionally, 10 percent said that the appraisal delayed the contract, and 14 percent said that it forced the seller to renegotiate a lower sales price.
The median national existing-home price in April was $163,700, or 5 percent below the April 2010 price. Ultimately, Yun said, home price stability is key to housing-market recovery.
"Home values, despite month-to-month volatility, have been remarkably stable in the range of $160,000 to $170,000 for the past three years," he said. "Stable home prices in turn will steadily lower loan default rates, including strategic defaults."
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