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Friday, June 18, 2010
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25 comments:
MarketWatch: triple-digit Dow in 2016
contrarian...I agree, economy is nasty and getting uglier. Double dip is much more likely than what market gives it the credit for.
But, that sounds like an extreme prediction.
By the way...
I don't know about you all...but price cuts seem to be accelerating. Reductions have been quick and larger in %. Quite a few regular sales falling apart and coming back to market with much reduced list prices.
Of course, numbers won't confirm it for a while. But, I see a lot of blood on the street.
Price discovery continues after a fake recovery...
Spider - I've seen the same thing recently, lots of larger than usual price reductions. I think a lot of people who thought they would sell this spring at their wishing prices have finally started to realize that all this bubble news might have applied to their house too.
I always think it's funny to see people say things like, "I can't sell my house for what it's worth because the market is so bad right now." The market IS what determines how much your house is worth - not what you think it should sell for. Morons.
Jeremy & Spider-
I am seeing the same things in the Vienna/Dunn Loring areas (although I am pretty sure this is where both of you are also looking).
Jeremy-
I also find it hilarious when people say that. The only way it could be at all reasonable is if creditworthy borrowers can't get loans (in which case the market value doesn't mean much). This has not happened though, I don't know any credit worthy borrowers who have been turned for mortgages. All of the "lending is frozen" comments really just meant banks were only lending to people they should have been lending too all along.
HB/Jeremy,
One difference might be the fact that - given Fed now stopped buying MBS's...deals might fall through because of appraisal issues. Private investors will be very careful loaning money on an overpriced asset.
In fact, I am hearing lot of sellers are now requesting removal of appraisal contingency...which is of course a bad idea for buyers in this market.
Jeremy, this may also be one more a reason for sellers to price the home reasonably to begin with to ensure deal goes through.
Spider-
Does an appraisal contingency really matter? Seeing that most people are only putting 0-10% down, a bank just will not give a loan if the house does not appraise. Either way I continue to think us buyers will be rewarded for waiting a 2-3 years. I still unfortunately think everything will happen slowly, but we will still see prices fall.
housebuyer said...
Does an appraisal contingency really matter? Seeing that most people are only putting 0-10% down, a bank just will not give a loan if the house does not appraise.
I think that it would matter a lot. I think that without the contingency you risk losing your earnest money should the home not appraise. Buyers would have to be much more conservative with their offers.
HB, the problem with leaving it out is that sellers these days demand that buyers be pre-approved at the time the offer is made. In the past, buyers often included a "contingent on financing" clause, which would have included the appraisal, so a separate appraisal contingent wasn't needed. But now, with pre-approval, the financing clause is left out. So the appraisal clause needs to be in there.
"appraisal contingency", that is.
Ace,
I was pre-approved, but still had a financing contingency. (I had both a financing and an appraisal contingency). *
I agree with HB that technically these are redundant clauses.
The Fed may indeed no longer be buying MBS, but given that mortgage rates haven't gone up, I see no indication that private investors are demanding a higher standard from the GSE-backed loans than the Fed did.
Appraisals coming in below agreed upon prices has been a problem for a while now. Presumably since more comps have now happened at today's lower prices, both the agreed upon price and the appraisal price should be less volatile and more well defined lessening this problem going forward.
*In fact, the way our contract was written the financing contingency actually remained in effect all the way through closing because the seller's never demanded we remove it. Instead we just kept them updated with how smoothly our funding process was going, but nothing officially removing them was done. (unlike the inspection clause after that was settled).
Ace & Jeremy-
At least on my offers (a year ago) I had a pre-approval from my banks, but I still had a finance contingency, which would have allowed me to get out of the houses if they didn't appraise. The pre approval was just to say that I had a high credit score and could afford the mortgage. The bank still mandated an appraisal and would not give a loan unless it passed, because they need the asset to back the loan.
So if the house didn't appraise I could use that to get out of it. Also nearly every house you are looking at has a condo or hoa, and you can always use that to get out of the loan claiming you think something is too harsh.
Cara-
It looks like you beat me to the punchline on my points :)
hb,
Wouldn't a smart seller give you the HOA and/or condo docs ASAP so that your 3-days is up and done with long before you know for absolute certainty on your loan?
(not that our short sale EVER handed these over, why bother if the bank may not approve it?)
Cara-
I agree that would be smart, but that didn't happen for us either. I think people just don't worry about someone walking away because of the documents. So they consider it a technicality to handle at the end
Cara, HB, that's good that you were able to get it in your contract, but many sellers won't accept it, if they have other bidders.
HB, I understand your point about the banks needing the appraisal, but my point is a different one--where many sellers these days will not accept a financing contingency, they will accept an appraisal contingency (perhaps because they know about the bank's requiring it).
It may be that where you were looking, buyers have more power than in other places, or because both you and Cara were the strongest bidders on other terms, the seller agreed to it.
Ace-
That is a good point my bids were not on properties with a lot of competition. Although my guess is there isn't really much competition on most properties in the current environment.
There will always be competition for the nice properties that are priced under market prices, but those appear to be few and far between right now.
cara said - "The Fed may indeed no longer be buying MBS, but given that mortgage rates haven't gone up, I see no indication that private investors are demanding a higher standard from the GSE-backed loans than the Fed did."
Not quite...
Mortgage rates are tied to 10 yr treasuries which has gone down significantly because of euro-zone issues.
Loan to value is altogether another matter...lower appraised value will lower the chances of losses for investors in the event of asset liquidation...IMHO.
HB, Others...
Appraisal and financing contingencies are different. If you don't have appraisal contingency, you can not back out of contract based on lower appraisal....you have to come up with the higher DP to meet the difference or risk losing your earnest money. In this scenario, you aren't being denied financing - it is just a question of LTV that bank is willing to risk.
...this is the way I understand it anyways...
HB, I don't want to sound like a pumper, but in Arl., most houses priced well do get multiple bids and sell quickly. The reason you don't see more of them selling is that some sellers still don't "get" where the market is for their homes.
Here's an interesting house for $800K (includes 5 acres). I would definitely check it out if I had that kind of cash and any willingness to live as far out as Fairfax Station. It smacks a bit strongly of an Adirondack tourist lodge, but still, interesting...
ecohouse
Good luck finding a comp.
Ace-
I agree that most houses priced well (at or below the market) that are in good shape get multiple bids, but that fact that there is 4 months of inventory even in Arlington really shows how few houses must be priced well. In multiple bid scenarios you would expect to see the house sell much faster than that.
Spider-
After looking on the web a lot of sites say that you get your earnest money back if you have a financing contingency and the house doesn't appraise. They elude to not needing an appraisal contingency, because you can't get a loan from the bank otherwise. financing contingency
The better idea is just find a house that is a good deal and then you won't need to worry about the appraisal.
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