Appraisal Air Pocket

Housing Market Circular Reasoning

The reason more upper bracket homes aren't selling . . . is because more upper bracket homes aren't selling.

Huh?

Once a deal is struck, the lender's appraiser seeks to substantiate the value of the collateral -- the home being sold -- by looking to other, similar homes that have sold recently.

The preferred number is three, within the last six months (more recently, if possible).

But what if there aren't three good comp's?

Increasingly, lenders in CYA mode appear to be filling that vacuum with the most conservative assumptions possible -- scuttling more than a few local deals.

The result is . . . . even fewer upper bracket deals.

That's certainly not the whole story with respect to upper bracket housing -- the tiny little recession we're experiencing, elevated unemployment, a weak stock market, etc. are all contributing factors, too.

However, "appraisal issues" are increasingly exacerbating the problem.