Tampa Bay home values were flat from April to May, index shows

By James Thorner, St. Petersburg Times - Wednesday, July 29, 2009

Tampa Bay area home prices were flat from April to May, easing off months of decline, according to the S&P Case-Shiller home price index.

While the region's home prices fell 20.8 percent from May 2008 to May 2009, Case-Shiller suspects the worst of the housing slump is behind us.

"The pace of descent in home price values appears to be slowing," said David M. Blitzer, chairman of the index committee at Standard & Poor's.

Case-Shiller's numbers are considered especially reliable because they measure repeat sales of individual homes. Homes sales numbers published by the Florida Association of Realtors also confirm steadier home prices since about January. Since peaking in July 2006, Tampa Bay housing prices had been on a multiyear slide.

Local home sales, measured year over year, have also improved in almost every month since September. Discounted foreclosures homes have led the way. They typically sell for half to two-thirds of the price of a nondistressed property.

The month-to-month improvement in home prices wasn't restricted to Tampa Bay. On the 20-city Case-Shiller index, only four cities showed price declines from April to May: Las Vegas, Phoenix, Miami and Seattle.

But year to year, all 20 cities recorded home price drops, with Phoenix leading the list with a plunge of 34.2 percent. Las Vegas was second-worst.

"While many indicators are showing signs of life in the U.S. housing market, we should remember that on a year-over- year basis, home prices are still down about 17 percent on average across all metro areas, so we likely do have a way to go before we see sustained home price appreciation," Blitzer said.

Most Florida economists predict home prices will stay relatively flat for at least a year and won't appreciate with any strength or consistency before 2011. Stricter lending standards, including the near-disappearance of subprime mortgages blamed for sinking the housing market, have curtailed sales.

Loan balloons coming, could trigger new foreclosure 'tsunami'

By DUANE MARSTELLER - Bradenton Herald - July 27,2009

A coming wave of mortgage adjustments threatens to prolong, and possibly worsen, the foreclosure crisis, industry analysts warn.

An estimated 2.8 million option adjustable-rate mortgages are scheduled to reset in the coming years, with the peak in mid-2011. Those resets will cause those borrowers’ monthly payments to balloon, potentially triggering a third wave of foreclosures.

“We do believe there is another wave coming, and I personally believe it will be the tsunami,” said L.R. “Chip” Waterman of Hunt Real Estate ERA in Sarasota, who specializes in foreclosed and bank-owned properties. “There’s no way we’ve begun to see the end of this.”

Others question if such dire predictions are exaggerated — but acknowledge the crisis is nowhere close to ending.

“I think we’re past the absolute tsunami of foreclosures, but we still have many more to go through,” said Ken Chapman Jr., a Sarasota attorney and president of the Sarasota-Bradenton Attorneys Real Estate Council.

Foreclosures rising

As of the close of business Friday, lenders have filed 3,602 foreclosure suits this year in Manatee County Circuit Court, court records show. There were 3.034 filed at the same point in 2008, which went on to set a local record with 5,592 in all.

The state and national pictures are not much better.

More than 1.5 million U.S. properties received a foreclosure filing or were seized by lenders in the first half of 2009, according to RealtyTrac, a data firm that tracks foreclosure filings.

One in 84 U.S. homes got a foreclosure filing, which can range from a notice of default to a bank repossession. In Florida, it was one in every 33, the firm said.

And more are on their way: More than 10 percent of Florida homeowners with a mortgage were at least 30 days behind on their payments during the first quarter of 2009, the Mortgage Bankers Association said. Another 10 percent already were in foreclosure.

The national delinquency and foreclosure rate was one in every eight, the highest in records going back to 1972, the bankers group said.

And a growing number of those are so-called “prime” borrowers, who had good credit and steady income when they got the loan.

“That’s the scary part,” Waterman said.

Many took out option adjustable-rate, or Alt-A mortgages, which allowed them to buy more house than they could have afforded using a traditional 30-year mortgage during the housing boom. Under most so-called option ARMs, initial monthly payments often covered just part of the interest, with the unpaid interest portion added to the loan’s balance. After a set amount of time, the loan resets and the borrower is required to also begin paying off the balance.

That will cause the monthly payment to balloon, something many borrowers had planned to avoid by either selling the house for a profit or doing a refinance. But housing prices slumped and credit tightened, leaving borrowers owing more than their homes were worth, unable to sell them for a profit or refinance, and struggling with higher payments.

As of April, more than half of such loans in the United States were either at least 60 days’ delinquent or in foreclosure, according to First American CoreLogic. Those numbers likely will increase, as resets are not set to peak until mid-2011.

As of April, more than half of such loans in the United States were either at least 60 days’ delinquent or in foreclosure, according to First American CoreLogic. Those numbers likely will increase, as resets are not set to peak until mid-2011.

Job loss a threat

Another threat to prolong the foreclosure crisis is growing unemployment.

“You can’t make the house payment if you don’t have a job,” Waterman said.
Manatee’s jobless rate hit 11.8 percent last month, the highest since the state began calculating it in 1975. The state and national unemployment rates also are near record highs.

Economists predict unemployment levels will continue rising in the foreseeable future, as job creation usually lags an economic recovery. That likely will help keep foreclosures at elevated levels, observers said.

“Unemployment is going to be driving it,” Chapman said.

While that could fuel new foreclosure filings, there’s still the thousands of already-filed cases that have yet to make their way through the courts.

“You’ve got a buildup out there that hasn’t even happened yet,” Waterman said.

Lenders held back in pursuing judgements and taking back homes late last year and in early 2009, the result of temporary moratoriums and the rollout of government programs designed to prevent foreclosures.

But those programs have had limited success to date, and even that might not be permanent. The rating agency Fitch recently said it expects three of every four homes that the government’s “Making Home Affordable” program saves from foreclosure will end up there eventually, largely because the homeowners have too much debt beyond their mortgage.

That has led to fears that lenders will flood the market with repossessed homes and drive down prices even more, thus delaying recovery of the housing market and the broader economy.

Chapman hopes that scenario doesn’t happen, and that the foreclosure crisis will ease.

“We’re nearing the end of the down cycle, but we’ve got a long way to go before we climb out of that hole,” he said. “We just don’t know how deep that hole is and how long it will take to climb back up.”

Another threat to prolong the foreclosure crisis is growing unemployment.
“You can’t make the house payment if you don’t have a job,” Waterman said.
Manatee’s jobless rate hit 11.8 percent last month, the highest since the state began calculating it in 1975. The state and national unemployment rates also are near record highs.

Economists predict unemployment levels will continue rising in the foreseeable future, as job creation usually lags an economic recovery. That likely will help keep foreclosures at elevated levels, observers said.

“Unemployment is going to be driving it,” Chapman said.

While that could fuel new foreclosure filings, there’s still the thousands of already-filed cases that have yet to make their way through the courts.
“You’ve got a buildup out there that hasn’t even happened yet,” Waterman said.

Lenders held back in pursuing judgements and taking back homes late last year and in early 2009, the result of temporary moratoriums and the rollout of government programs designed to prevent foreclosures.

But those programs have had limited success to date, and even that might not be permanent. The rating agency Fitch recently said it expects three of every four homes that the government’s “Making Home Affordable” program saves from foreclosure will end up there eventually, largely because the homeowners have too much debt beyond their mortgage.

That has led to fears that lenders will flood the market with repossessed homes and drive down prices even more, thus delaying recovery of the housing market and the broader economy.

Chapman hopes that scenario doesn’t happen, and that the foreclosure crisis will ease.

“We’re nearing the end of the down cycle, but we’ve got a long way to go before we climb out of that hole,” he said. “We just don’t know how deep that hole is and how long it will take to climb back up.”

State sues four South Florida foreclosure rescue companies

Attorney general says operations broke the law by charging thousands in up front fees

By Diane C. Lade South Florida Sun Sentinel
6:19 PM EDT, July 21, 2009

State regulators filed a lawsuit in Palm Beach Circuit Court Tuesday against four South Florida mortgage loan modification companies they say were collecting a total of up to $1 million in monthly fees, as the Attorney General's Office cracks down on the foreclosure rescue industry.

Officials said the operations, which were related, illegally used President Barack Obama's voice in telemarketing calls and charged up to $5,000 up front to modify home loans, a violation of the 2008 Foreclosure Rescue Fraud Prevention Act. The state is seeking restitution for consumers, civil penalties and the companies' dissolution.

FHA All Day.Com, Inc., Safety Financial Services, Inc., Housing Assistance Law Center PA and Housing Assistance Now, Inc. were named in the suit, as well as Jason Vitulano, the owner of FHA All Day and Safety Financial. Attorney General spokeswoman Sandi Copes said the state has received a total of 300 complaints about the four businesses, which were based in Delray Beach, Boca Raton and Deerfield Beach.

One filing came from Kim Kyzar. She decided to try to lower the 8.1 percent interest rate on her Lake Worth house after receiving an FHA All Day marketing call featuring Obama talking about low-rate mortgages under the stimulus act.

She said she and her husband, who have an air conditioning business, paid FHA All Day $2,000 up front in March for a "forensic loan document review" plus another $500 for legal costs. But Kyzar became suspicious when the company stopped returning her phone calls in the middle of April. Going to the Boca Raton office, she found it empty.

"I have no idea if they are working on my case," said Kyzar, whose lender told her they never had been contacted by FHA All Day.Owner Vitulano said the attorney general had ordered him to close down the office, although he was worried it would generate more complaints when his customers could not find him. FHA All Day still is processing existing modifications, he said, although not taking new clients.

Vitulano said he only had rented space to Housing Assistance Law Center and denied any connection with Housing Assistance Now. He and the Attorney General's Office had discussed settling for $15,000 in investigative costs and $20,000 in restitution regarding FHA earlier this year but Vitulano said negotiations broke down when he refused to also permanently abandon the mortgage modification business.

But Copes said the attorney general decided to reinstate its investigation after receiving more complaints and learning more about the affiliated companies.

Rate of Tampa Bay foreclosures begins to ebb

By James Thorner, Times Staff Writer In Print: Friday, July 17, 2009

With the subtlety of a cement sack loosed from a bank skyscraper, another 7,200 foreclosure cases dropped into our courtrooms last month.

That's 7,200 houses — the residential stock of a typical small town — plunged into mortgage default in a single month in Pinellas, Hillsborough, Pasco and Hernando counties.

But after digging through charts put out by RealtyTrac, the California company that publishes market-by-market foreclosure data, June could be the month when foreclosures began beating a retreat.

As I've repeated in earlier columns, home sales and prices have already begun to right themselves in the Tampa Bay area. Sales have risen in nine of the past 10 months. Prices seem to have stabilized — and even risen a smidgen — since January.

What's been lacking is evidence that insolvent homeowners would bleed fewer of their deeds onto the foreclosure market. That evidence might have emerged from June's foreclosure report.

After a punishing sequence of months in which local foreclosure filings, measured year over year, rose by 30 to 50 percent, foreclosures in June posted a gain of only 12 percent.

The number was impressively modest for several reasons. Foreclosures across Florida rose 31 percent to reach 52,899 in June. Nationally, June's 336,173 foreclosure filings represented an increase of 33 percent from a year earlier.

On top of that, at the start of the year economists predicted a wave of summer mortgage defaults as unemployment deepened and the state's foreclosure moratorium petered out. But June came and went without any spikes on the chart.

Why the reprieve? The government's foreclosure prevention programs, for all the initial hoopla about helping millions of hard-pressed homeowners, have served a piddling number of mortgage borrowers so far. At last count, loan restructuring has benefited fewer than 100,000 across the country.

A better explanation lies with the housing market itself. According to the Greater Tampa Association of Realtors, home sales in June totaled 1,714. That's a decline of almost half since June 2005, but monthly home sales haven't been that high since December 2006. Sales of distressed properties — bargain priced and attractive to cash buyers — have led the way.

Nevertheless, national economists remain pessimistic about foreclosures. The latest prediction, which has grown to mythic stature among national reporters, is the wave of "Alt-A" foreclosures that's supposed to capsize our market anew.
These were loans made to middle-of-the-road borrowers. Strapped to the hilt in the recession, these homeowners are supposedly about to mail their house keys back to the bank all at once.

Or so the money gurus inform us.

Dub me unconvinced. At least in our neck of the woods, foreclosures have been far more than just a subprime phenomenon the past two years. They have already cut into many middle-of-the-road borrowers around here. Those not peddling their distressed homes on the cheap are lobbying their banks for easier terms.

Yes, foreclosures in the Tampa Bay area are still rising, but they're rising at a dramatically slower rate. If we're lucky, June will mark the start of the Summer When Losing Your Home Lost its Groove.

Bob Shiller didn't kill the housing market

He just predicted its demise. Now he's seeing some tentative signs of hope.

NEW YORK (Fortune) -- It's noon in New Haven, and Yale economist Robert Shiller and I are leaving his office to walk down the block for pizza. It was a damp morning, but now the sun is breaking through the clouds. "Do we need an umbrella?" he asks. I say I don't think so. But a few steps outside his office, he turns around to get one. "It's better to be safe," he says

That's Bob Shiller for you. He's a worrier. Well, more than that. He's obsessed with taming risk. And that means all kinds of risk -- from the chance of stray showers to a danger that's on everyone's mind these days: falling home prices. Shiller's name will forever be linked with the worst housing bust since the Great Depression and the economic slump it caused. He first warned of a housing bubble back in 2003 when bankers were merrily minting mortgage-backed securities. And it is the widely cited gauge he helped create -- the S&P/Case-Shiller home-price index -- that has heralded, in grim monthly installments, the devastating collapse of the residential real estate market.

Two years into the housing bust, Shiller finally sees some faint rays of sunshine (that's just light, not green shoots yet). When the June Case-Shiller figures were released, he said they showed "striking improvement in the rate of decline." Asked to look ahead, he says, "My guess is that prices will continue to fall for a while, but at a slower pace, and then stabilize. We've become very speculative in our attitude toward real estate, so there could be another boom. But if so, it likely won't happen for another five to 10 years."
Shiller doesn't care whether you listen to his opinion -- or anyone else's for that matter. But he does want to give you a way of protecting yourself from violent fluctuations in home values. He is a co-founder of MacroMarkets, a company that hopes to create financial vehicles for hedging a wide variety of risks.

MacroMarkets' latest offering, instruments that let you bet on the direction of home prices, just started trading on the New York Stock Exchange. Shiller hopes to make money from the venture, of course, but he also has an idealistic streak that can seem very ivory tower at times. "He cares about making the world a better place," says Karl Case, the Wellesley economics professor who helped develop the home-price index. "This is the way he has chosen to do so."
Shiller, 63, who looks like an older Hugh Grant and acts the part of the classic absent-minded professor, is much more than a real estate soothsayer. Early in his career he helped develop the field of behavioral finance. Along with University of Chicago professor Richard Thaler and others, he argued that human emotions created risks that the prevailing rational-markets dogma ignored. Many establishment economists derided those views, but today few dispute the idea that mood swings can lead to short-term price distortions. "They were really stuck on efficient markets, and now they aren't," says Shiller. "The whole profession has changed." His focus on the "irrational exuberance" (a term first uttered by Alan Greenspan and later the title of one of Shiller's six books) that can drive prices to wild extremes led him to warn that the giddy late-1990s stock market run-up was a bubble.

Intellectually, Shiller knows no fear. In everyday life, he's one of the most risk-averse people you'll ever meet. It's actually a bit extreme. He's never been drunk -- ever, he says -- and is afraid of heights, and he worries as much about other people's safety as his own. Watching his next-door neighbor and fellow Yale economist William Brainard fixing his roof, Shiller frets constantly about what he would do if his colleague got into trouble. "I know that Bob won't come up and get me," says Brainard, "but I know he'd call the right person." And Shiller is no speed demon, on-road or off. He was lapped in a go-cart race by Wharton School economist Jeremy Siegel, author of Stocks for the Long Run. (It was taped for The NewsHour With Jim Lehrer in 2002.) "I had never driven a go-cart before," he says. "What was I supposed to do -- just floor it?"

Perhaps it's Shiller's Midwestern roots -- he grew up in Michigan, where his father co-founded a company that made industrial ovens for the auto industry -- but for a guy with his forecasting track record, he is exceedingly modest. Where crash pundits like Nouriel Roubini and Nassim Nicholas Taleb trumpet their calls, Shiller disclaims any prescience. Didn't he predict the two biggest bubbles in recent years? "I only said they were possible," he says of the housing and stock market collapses. "He's very humble before his colleagues, and he's humble about how tough it is to truly understand how markets work," says Case. "Those are two different types of humility."

Whether he's talking about a theoretical inflation-adjusted currency or about the reindeer in a Medieval painting, Shiller is charming and chatty, although he rarely speaks a thoughtless word. And he clearly loves his work. He treats the world like a puzzle that is a joy to solve, preferably from the safety of his cozy academic berth. He attributes much of his success and happiness to his wife of 33 years, Virginia, a psychologist and lecturer at Yale, who has done everything from helping to edit his books to decorating his sky-blue office with dark-brown antiques. She even chose their vacation home, located on a small island just 10 miles from New Haven. No bridge connects it to shore and there is no electricity. Say, Bob, isn't that a little risky? Yes, but living just a little bit at the mercy of nature (albeit in a four-bedroom cottage) adds spice to his routine. "It's an adventure," he says. "It's like stepping back into the 19th century."

Yes, he has a playful side -- an idiosyncratic one. "I only do things because they're fun," says Shiller. "The house is fun for me, as is speaking with the Indian Parliament about the economy, as is studying data." Indeed, data mining is at the heart of everything he does. "It's considered something for lower-class economists to do -- the real leaders are the theorists -- but I like it," he says.

"What is striking about Bob is that he will consider any idea, and he takes a richer view of that thought and human nature by collecting data," says John Campbell, a former Ph.D. student of Shiller's and now chair of Harvard's economics department. "When the crash of '87 hit, he immediately surveyed people to get inside their heads. That informed his work on behavioral finance."

It was Karl Case's data, though, that formed the basis for the Case-Shiller index. In the early 1980s, while working on a paper arguing that the rapid home-price appreciation in the Boston area was unsustainable, Case constructed a rudimentary method for comparing repeat sales of the same homes. "But I knew nothing about financial bubbles," he says. A friend at Yale pointed him to Shiller, who loved the idea of applying his research on bubbles to the housing market. "We sat down at my dining room table, and he figured out how to do a repeat-sales index," says Case. "I'd done a crude version. But he added weighting and other things that made it much better."

Case and Shiller decided to look at prices in other cities to get a view of conditions around the country, and the Case-Shiller index was born. Allan Weiss, who did graduate work under Shiller, persuaded the professors to form a company to sell their research in 1991. In 2002 they sold Case Shiller Weiss to electronic data giant Fiserv (the terms were not made public, and Shiller says he is contractually bound not to disclose them). Later Fiserv (FISV, Fortune 500) struck a deal with Standard & Poor's to create tradable indexes based on the data.

Shiller serves as an unpaid adviser to S&P, but his business interests have shifted to MacroMarkets, the securities firm he founded in 1999 with Weiss (who has since left the company) and Sam Masucci, a former banker. Here's where Shiller pursues his holy grail: conquering risk. That may seem like a tainted quest. The belief that they had risk under control led a raft of storied firms -- Long-Term Capital Management, Bear Stearns, Lehman Brothers, and AIG (AIG, Fortune 500) -- to their ruin. Yet Shiller still believes in the dream. "The value of a house can fall. A hurricane might hit. An economy tied to oil prices might be very unstable. But we will create hedging markets that offset these problems," Shiller tells Fortune with surprising certitude. "We should be able to hedge everything from the rising costs of health care and education to national income risk and oil crises."

On June 30, MacroMarkets launched the first products that let investors make a pure directional bet on home prices. Called MacroShares, they trade on the New York Stock Exchange; their value is derived from changes in the Case-Shiller 10-city home-price index. If you expect home prices to rise, you'd buy the Up Metro Market (UMM); bears can buy the Down Metro Market (DMM). On the first day of trading the bears held sway: Investors bought 14,756 DMM shares, vs. only 6,204 of UMM.

"UMM and DMM will be the indicators that people will turn to when they want a snapshot of home-price sentiment," says Masucci. Shiller thinks they will have real practical value for homeowners. If you buy the DMM and the price goes down, the money you make on the investment will offset your lost home value. If prices go up, you lose money on the DMM, but your house will be worth more.

MacroMarkets has been down this road before. In 2006 it offered MacroShares that tracked the rise and fall in oil prices. But in 2008, after oil prices soared from $88 to $145 in only five months -- an event that the MacroShares were not designed to handle -- MacroMarkets wound them down. The company introduced another pair of oil MacroShares in July 2008, but they attracted few traders and were liquidated in June.

The problem, according to company executives and outside analysts, was that there are too many other ways to play oil prices -- something that's not true of real estate. Even so, some people wonder whether there will be significant demand for the housing products. You can already buy and sell futures on the Case-Shiller home index, and there has been very little interest in them. Morningstar analyst Scott Burns says that the MacroShares may do better because they are easier to trade.

WisdomTree, an investment and advisory firm founded by Shiller's go-cart rival Jeremy Siegel (the two are old friends, having met as grad students at MIT while standing in line to get chest X-rays), has a deal with MacroMarkets to publicize the products. "No other structure we know of allows the average investor to take a position in housing prices without just buying a house," says Bruce Lavine, WisdomTree's president.

Shiller and his partners believe they can create a variety of MacroShares and also other instruments to hedge a whole range of risks. What about a special currency system that makes future payments in inflation-adjusted dollars? Shiller says they're already experimenting with such a system in Chile. Or what about a GDP-linked security that would pose no inflation risk? "What the Chinese should be doing is buying shares in the U.S. economy," says Shiller. "Because if you own shares in the GDP, then inflation doesn't matter to you like it does when you buy the country's debt. But they can't right now."

Shiller's professional ambitions are so big because his fears are even larger. He worries that decades of a get-rich-quick ethos have eroded the work ethic that has been a cornerstone of U.S. economic and social stability. He is afraid that we stand at the brink of a destructive wave of populist anger, not entirely unfounded, against a financial system that has made some men centimillionaires while real income stagnated for almost everyone else. He believes that the financial industry has come to have such a big effect on the lives of all Americans that we need tools to protect ordinary people against market fluctuations. "Our sense of well-being in this country is ultimately supported by a general sense of fairness," he says. "Democracy is eroded when it's gone."

Turning to more immediate concerns, Shiller says that the economy seems to be righting itself, although his argument is, well, hedged. "People think the recession should be ending now, so the stock market is responding to that, and to some extent recovery becomes a self-fulfilling prophecy," he says. He also has what he calls a "doubt scenario" that reflects the impact of the unwinding of the greatest credit and real estate bubbles in history. "A reasonable case could be made," he says, "that even though past depression scares have proven to be unwarranted, this time it might be different."

For all his worries and warnings, he is ultimately a believer in good things happening because people want to bring them about, even in financial markets. "Financial crises are aberrations," he says. "We're learning how to create better hedging markets so that we can make finance less risky and so that we can say the triumph of capitalism was the story of our times." Considering the shambles the economy is in today, having that prediction come true would be quite an achievement. Shiller might even consider bragging about it.

Research associate Casey Feldman contributed to this article.

New rules blamed for blowing Lee County real estate deals

By DICK HOGAN - news-press.com • July 9, 2009

New rules for appraising houses have some Lee County real estate agents fuming - they say inexperienced or out-of-town appraisers are blowing deals by giving lowball values that make financing impossible.
But some in the appraisal industry say that while the new rules aren't perfect, they're not a serious problem for the industry.

At issue are rules that took effect May 1 requiring that loans picked up by mortgage giants Fannie Mae and Freddie Mac need to include appraisals by appraisers that have no connection with the bank personnel approving the deals. That means that many banks have turned appraisals over to appraisal management companies that then hire the appraisers so there's no direct connection with the banks.

The rules, which are part of a pact between New York Attorney General Andrew Cuomo and Fannie Mae and Freddie Mac, are in response to widespread complaints about inflated appraisals during the real estate boom.

But agents say at least some of the appraisers are hired by management companies looking for the lowest bid. That increases the management company's cut of the appraisal fee.
Meanwhile, legislation has been introduced in Congress that would implement an 18-month moratorium on the new rules.
I think the cure is worse than the problem was," said Suzanne Sherer of Re/Max Realty Team, who's president of the Realtor Association of Greater Fort Myers and the Beach. "I think there's a huge disconnect between what happens in the decision-making up in Washington and what's happening in the streets. We've seen several deals fall apart based on the appraisal."
Bad appraisals are a frequent occurrence, said agent Ron Smiley of VIP Realty Group on Sanibel. "At our Monday sales meeting you hear some of the horror stories."

In one case in his office, he said, "They sent an appraiser in Cape Coral who just got his license out to Sanibel and the appraisal came in really low" because the appraiser wasn't familiar with the market.

"You get into the subtleties of beachfront" and issues such as direct vs. indirect beach access, Smiley said
Sherer said her office had a similar experience with an appraiser from central Florida who used a freshwater canal house as a comparable value for a Gulf-access home in the Cape.
When the agent protested, she said, "The answer was that 'It's all waterfront.'"
Appraisers take a more nuanced view, however.
While the new rules are not ideal, appraisers are not to blame for a market where prices are falling rapidly, said Bill Garber, director of governmental relations at the Appraisal Institute. He defended the industry, saying, "The appraisers only report what's going on in the market."

Matt Simmons, who appraises residential property for Fort Myers-based Maxwell & Hendry Valuation Services, said not all management companies operate strictly on the bottom line.

"There's all kinds of different shades here," he said. "The big banks go with the big-box appraisal management companies and that's where the bulk of the work goes," often to the low bid.
But, Simmons said, for one job to appraise some local properties, "We signed up today with a bank in Illinois. They've taken the time to go slowly. They took the time to pick a management company that didn't operate in the same way as the big-box ones do."

The new rules are in the right spirit, but had to be implemented because for years the federal government failed to push state regulators to crack down on unethical appraisers and lenders, he said.
"The whole reason this is being done is we wouldn't hold people responsible who were abusing the system and pressuring appraisers," Simmons said, and there won't be true reform "until you really draw down on that and focus in each state on weeding out the bad apples on both the lending and appraisal sides."
He also noted that lenders don't actually have to hire management companies - if they want to, they can erect strong rules separating their appraisal departments from the bank employees green-lighting loans.
David Hall, president of Fort Myers-based First Community Bank of Southwest Florida, said the new rules occasionally scuttle a deal but aren't a serious problem. "Usually the values (of the asking price and the appraisal) are relatively close" and something can be worked out.

When the prices are far apart, he said, it's a problem, but may simply indicate the seller wants too much for a property.
"If they've got an agreement to buy for $150,000 and the appraisal comes in at a hundred, are we doing the customer a favor letting him buy it at that price?" Hall asked. "The answer is no."

Pending Home Sales Record Fourth Straight Monthly Gain

Washington, July 01, 2009
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of Realtors®.

The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.

Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

For more information, contact:Walt Molony 202/383-1177 wmolony@realtors.org
Pending Home Sales Record Fourth Straight Monthly Gain
Washington, July 01, 2009
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of Realtors®.
The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.
Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”
The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago. In the Midwest the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008. The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago. In the West the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he said. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”

McMillan said sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he said.

“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. A Realtor® could offer guidance and information to help you with this process.”

NAR’s Housing Affordability Index2 remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Yun said.
The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.

A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.

The first-time buyer tax credit also is benefiting the market. “Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun said.

Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun said. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.