Low Home Appraisals Are Still A Problem

A couple of weeks ago, I posted an article about the dominance of refinances in the mortgage market (see here).

This trend is likely to continue, at least for the near term, as housing values continue to delay, cancel, and generally drag down home purchases.

Here’s Why…

The National Association of Realtors (NAR) conducted a survey of its members in September.  The results indicated that 65% of agents claimed no problems, but 35% experienced delays and cancellations of their deals due to low values.  See related article here.

Although 35% is less than 65%….35 is still a large number when you consider the sheer number of real estate purchases that are transacted (attempted to transact) on a daily/monthly basis.  35% is enough to keep the housing market from a full recovery.

Why are refinances able to work then?

Government programs such as HARP and FHA Streamlines allow homeowners with little (or no) equity in their homes to refinance to a lower rate.  These programs are popular right now, and make up a large portion of the total refinances been underwritten.

The idea behind these refi programs, is to help struggling homeowners make their payments on time, by allowing then to reduce their monthly obligation to a more affordable one.

This helps to limit foreclosures and short sales, which only further the downward spiral of lower property values.

Do you have an opinion on this?  Post it here.

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