The housing market is still struggling because appraisers are being too tough assessing the value of homes.
That's the self-serving argument being made by realtors who are complaining that lower appraisal values of homes are delaying deals, ruining sales and prolonging the housing crisis.
Their solution? Delay reforming the appraisal industry for another 18 months, then we can worry about the real value of a home. Until then, they argue, what's wrong with a few inflated prices?
Well, as Barry Ritholz puts it:
Appraisal fraud was an enormous contributor to the unsustainable run up in prices during the boom period. Many (but not all) mortgage brokers and realtors referred buyers to appraisers that ALWAYS hit the number of the home purchase price.
New York Attorney General Andrew Cuomo, in an attempt to prevent this kind of appraisal fraud, instituted the Home Valuation Code of Conduct, which took effect May 1. According to the Wall Street Journal:
The code covers any mortgage that can be guaranteed by Fannie or Freddie, which means the majority of all home loans. It bars loan officers, mortgage brokers or real-estate agents from any role in selecting appraisers. The idea is that people who are hungry for commissions shouldn't be in a position to lean on the appraiser.
Now, NAR and other real estate lobbying groups, who are trying to maintain stay in business despite the total destruction of their market, are mobilizing a major effort to reach out to Congress and housing officials.
As NAR economist Lawrence Yun said earlier this week, "Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales." Instead, Yun and his bunch want appraisers who won't be too tough. As Yun puts it, "There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected."
With so much going on in Washington, it may be an uphill battle drumming up support for delaying reforming the real estate market in the wake of one of the worst housing crisis in modern history. Hey, but that's just us.