The NAR on Existing Home Sales and Low Ball Appraisals

The National Association of Realtors is out with their monthly report. Overall sales rose but less than expected. Their take on things was upbeat.

Here are the details:

Single-family home sales rose 1.9 percent to a seasonally adjusted annual rate of 4.25 million in May from a pace of 4.17 million in April, but are 3.0 percent below the 4.38 million-unit level in May 2008. The median existing single-family home price was $172,900 in May, down 16.1 percent from a year ago.

Existing condominium and co-op sales increased 6.1 percent to a seasonally adjusted annual rate of 520,000 units in May from 490,000 in April, but are 8.9 percent below the 571,000-unit level in May 2008. The median existing condo price4 was $173,800 in May, down 21.9 percent from a year earlier.

Regionally, existing-home sales in the Northeast rose 3.9 percent to an annual level of 800,000 in May, but are 10.1 percent below a year ago. The median price in the Northeast was $243,600, which is 12.5 percent below May 2008.

Existing-home sales in the Midwest jumped 9.0 percent in May to a pace of 1.09 million but are 4.4 percent below May 2008. The median price in the Midwest was $145,800, which is 10.4 percent lower than a year ago.

In the South, existing-home sales were unchanged at an annual pace of 1.74 million in May but are 8.9 percent below a year ago. The median price in the South was $157,400, down 9.9 percent from May 2008.

Existing-home sales in the West slipped 0.9 percent to an annual rate of 1.14 million in May, but are 11.8 percent higher than May 2008. The median price in the West was $197,700, down 30.6 percent from a year ago.

As usual, I recommend that you go to Calculated Risk for an in-depth analysis of these numbers. That’s who I rely on to tear them apart. I make my own evaluation but it’s usually not much different than CR’s.

I do want to comment on one part of the NAR report. Lawrence Yun, NAR’s chief economist, spent some time whining about appraisals. Here is part of his plaint:

“Historically low mortgage interest rates clearly drew buyers into the market, and housing remains very affordable even with a recent uptick in rates,” he said. “First-time buyers also are being drawn off the sidelines by the $8,000 tax credit, which is helping to absorb inventory. However, the increase in sales is less than expected because poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.”

There has been off and on bitching about low appraisals for the past couple of months but it hasn’t managed to get much traction. It looks like the NAR is trying to gin up the issue again.

I’ve written about this before (here). The real estate community is miffed that appraisers are not ignoring or severely discounting foreclosure sales in arriving at an opinion of value. Traditionally distressed sales were not used to arrive at a value because they were rare, did not represent market realities and there were plenty of good comps from which to derive a value. That’s not the case now. In many markets, foreclosures are the market and there is no valid reason they should be discounted.

Crooked appraisers and over-valued appraisals contributed significantly to the housing bubble. In my opinion it’s unseemly that the NAR and others are now trying to use the same old pressure tactics on appraisers in order to inflate values. Significant and good reforms have been made to the appraisal process. It’s out of order for the NAR or any other real estate professional to attempt to undermine those improvements.

About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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