New York Real Estare Tanking
NEW YORK (CNNMoney.com) — For real estate appraisers, determining what a house is worth has become increasingly difficult, which is making it even harder for buyers to purchase homes or for homeowners to refinance. 0:00 /1:07Plan to aid ailing homeowners The main tool in the appraiser’s kit is the sale prices of homes in the…
NEW YORK (CNNMoney.com) — For real estate appraisers, determining what a house is worth has become increasingly difficult, which is making it even harder for buyers to purchase homes or for homeowners to refinance.
0:00 /1:07Plan to aid ailing homeowners
The main tool in the appraiser’s kit is the sale prices of homes in the area. If they can find similar houses nearby in similar condition that sold recently for, say, $300,000, they can assume that the home they are appraising is worth a comparable amount.
But with sales volume falling, there are fewer homes with which to compare. In fact, sales of new homes crashed in January to the lowest level in 45 years, and existing home sales fell to a 12-year low.
And even when there are recent sales figures, they often don’t hold up as a reliable baseline. Appraisals are estimates of market value at a given time, and with prices in free fall, values “age” quickly.
“We just don’t have a flow of transactions to be able to come up with credible values,” said Jonathan Miller, president of Miller Samuel, a noted New York appraisal firm. “Closed sales are now largely irrelevant because they’re so far behind the market.”
In fact, Marc Savitt, president of the National Association of Mortgage Brokers, recently had a bank underwriter object that none of the appraiser’s comparable homes were near enough.
“They told him they wanted comps within a mile,” said Savitt. “But, the market the way it is, there haven’t been many sales and there were no recent comps within a mile.”
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So in lieu of good sales figures, appraisers often consider contract prices, the ones first agreed to between buyers and sellers. But those are not much better because many sales don’t close.
And listing prices are “hit or miss,” Miller said, because most sellers overestimate the value of their homes. Columbia business professor Eric Johnson calls that the “endowment effect,” which causes people to place higher values on properties once they own them.
Sellers set their listing prices far too high, as a result, and that leads to a big chasm between list and sale price. In the New York region, for example, there’s a 16% gap, on average.
During the boom, pressure was put on appraisers to inflate values so that sales would go through. Sellers, buyers, real estate agents, loan officers and mortgage brokers all had a vested interest in getting the sale completed. So if appraisers weren’t cooperative and raise their values, they often got frozen out of deals.
What is keeping the New York real estate market afloat are the rents and the securitization of capital. Well now we are marketing to market and even if we get rid of the mark to market practice banks will not be able to leverage anywehere near what they did a few years ago. We are in deep water. We even have countries like Russia and China telling us how to do capitalism.
I appreciate Hannible’s postings. They’re far more interesting than the endless housing price cheerleading (ie “Prices have held up pretty well vs. the rest of the country” that most folks bark repetitively on this website like broken records.
The fall in NYC prices will likely be far larger then most other parts of this country since its rise was so much greater to begin with, and the underpinning of our local economy (Wall Street jobs) have been massacred.
If you folks think wild federal government debt financed spending will save NYC, you’re nuts. In the long term, it will could bankrupt this country.
Team Bear seems nervous with all this posting of “what-ifs”, perhaps & maybe speculation. Prices have held up pretty well vs. the rest of the country.
Hannible-
I sympathize with you. It is an affront that your tax dollars are being used for something that you do not have a financial interest in.
I would suggest that you stop paying taxes immediately — when you eventually go to jail, you can live and eat for free, and have the comfort of knowing that your tax dollars, including your jail wages, are going directly towards subsidizing your own housing and nutrition.
Here’s another idea- this blog puts money in the hands of a property owner who is also a landlord. When you post here, you are drawing ad revenues to this person and helping to perpetuate the culture of others who support the whole ponzi scheme of property ownership. You should consider no longer posting to this site.
It does and did not only effect flippers. It effected renters too because we had to pay more money in rents because we had to cover the idiot who bought the house at an overinflated prices. Now our goverment is asking us to help these poor homebuyers! I say let them foreclose and go live under a bridge.
and this affects me how? I am not going to sell my house or buy second house any time soon. By the time I will sell (or pass it to my children) market will be all different (or we will live in Chinese colony).
Otherwise it does not add to the number of foreclosures in BayRidge – still 0. It will keep cowboys from getting in debt though refinancing – I am Ok with this.
It affects people who tries to flip a house. Good. These m&*(f(*&s got house prices to this level in the first place.
Or you want to feel “rich on paper”?
Anyone who considers the stock market “savings” doesn’t belong in it to begin with.
It’s understandable that home owners don’t want to hear about their property values tanking. No matter how bad things get, owners on this site will try to come up with reasons why their houses are still worth millions even though so few people can get jumbo mortgages anymore, not to mention that the stock market decline has wiped out trillions in savings.
Oh I know you can surf the net and read but I have a hard time wirh some brownstoners that are always yelling that home prices will never come down in Brooklyn. Maybe thanks to articals like this some blind homeowners might now see the light of truth.