Friday, November 2, 2007

Bad press for WAMU

The front page headline of Friday's P-I (11/2/7 - sorry, no link available) reads, "WaMu faulted on home loans." In the second paragraph of the story, the writer admits, "The suit filed ... doesn't name Seattle-based WaMu as a defendant." I guess they knew that the WaMu name would grab local attention. Whatever involvement WaMu does or doesn't have, the concern over inflated appraiser evaluations is a legitimate one.

When a typical potential buyer makes an offer on a home, it is usually conditioned upon their ability to obtain a home loan for the purchase price. In order to approve the loan, the buyer's lender requires an appraisal of value equal to or greater than the amount of the loan. This provides the lending institution with assurance that it can recoup the amount of the loan if the buyer should default. If the appraised value of the home is less than the price a buyer has offered, they are unlikely to get the loan and would have to find another source of funding, or reduce or rescind their offer.

Problems arise if the appraiser feels pressured to deliver an unrealistically high appraisal (estimate of value). This can happen if the institution paying the appraiser's fee benefits from an artificially high result. In the short run, the buyer might seem to benefit by getting their loan approved, but in the long run it causes the buyer to overpay for the home and the loan.

It will be interesting to see whether this story marks the tip of the iceberg or disappears in the mist.

Is the glass half full or half empty?

The front page of Wednesday's P-I (10/31/07) reads, "Mixed news on home prices:
Seattle increase leads U.S.; not all is positive." http://seattlepi.nwsource.com/business/337376_housing31.html The article notes that, "the area's annual increase (5.7%) was the lowest in four years and August was the 18th consecutive month of declining annual appreciation. Also, prices decreased nearly one-tenth of a percent from July." What they are describing is a very strong and vibrant market, but they have somehow managed to make it sound threatened. Prices decreased less than one-tenth of one percent??!! At that rate of decline it will take a dozen years to get back to a NORMAL market, let alone a slow market! And the 5.7% figure quoted (again, a very strong showing) conflicts with their own previously published estimated of over 8% for last year.

The bottom line? The sky is still not falling.

Tuesday, October 30, 2007

Back to Normal?

Is the real estate market up? down? sideways? After 10 or so years of favoring sellers, the Seattle market is leveling out so that both buyers and sellers can breathe a little easier. Appreciation is no longer in the double digits, but is still running a VERY healthy 8+ percent, which outperforms most any other investment you are likely to make. Inventory is up by almost 50% over last year at this time, giving buyers substantially more options than they have had in the recent past. Even so, sellers are able to command a fair price for their homes. Best of all, no one has to act at the breakneck speed that was required when immediate multiple offers were common. Appropriately-priced homes still sell quickly (though, perhaps not overnight) and over-priced homes still languish on the market. Visit the home page of my main website to see statistics about King County home sales. http://www.alicekuder.pnwrealty.com/