Housing Market Hamstrung by Low Appraisals

housing marketThe housing market stumbled again in April, as tight lending practices continue to hamstring buyers.

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."

More on AOL Real Estate:
Find out how to calculate mortgage payments.
Find homes for sale in your area.
Find foreclosures in your area.
Get property tax help from our experts.

Add a Comment

*0 / 3000 Character Maximum

1 Comment

Filter by:
My Six Percent

@Latoya....seems like a situation where you can get yourself into trouble...a little too shady for me. The more complicated you make things, the more likely it won't turn out well for you. If you are having problems selling, I would suggest becoming a land lord. With increased renting rates, and more demand for rental units, you can create a monthly cash flow, and continue to work on increasing the equity in your property. Just make sure to do credit checks....

My Six Percent is a web based platform that guides users step by step through the home buying / selling process, similar to what Turbo Tax does with tax preparation. We are free; organized; and intuitive. Stop by and check us out if you're considering buying / selling.

My Six Percent - Because You Don't Need an Agent

July 17 2011 at 9:03 AM Report abuse rate up rate down Reply
Latoya Rutledge

Seller financing can be a great way to get a house sold without slashing the price. By recognizing the millions of people who can't get traditional financing as potential buyers, resourceful property sellers (and their real estate agents) can minimize their time investment in getting a property sold. Even better, sellers who offer financing can usually get a higher asking price for their property, even in the slowest markets. Clearly this is a win-win situation.

May 20 2011 at 5:33 PM Report abuse rate up rate down Reply