It’s the bank appraisers’ fault for the slow housing recovery. They’re wrongfully using foreclosed homes as comparable houses to assess values in home sales, driving down home prices and even causing people to walk away from sales.
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That’s what the National Association of Home Builders [NAHB] says, according to its recent nationwide survey.
One out of three builders now report to the NAHB that they have literally lost signed sales contracts during the prior six months because appraisals on their homes are less than the contract sales price, or even the cost of constructing the entire house. The NAHB says it got this information from a recent nationwide survey.
Sort of like how government property tax collectors across the country continue to use bubble-era home valuations to keep property tax collections high.
“The inappropriate use of distressed and foreclosed sales as comparables in determining new home values is needlessly driving down home prices, killing home sales, causing more workers to lose their jobs and delaying a housing and economic recovery,” said NAHB Chairman Bob Nielsen, a home builder from Reno, Nev., in a statement.
The NAHB blames in its release “faulty appraisal practices” where “brand new homes with sparkling appliances and interior upgrades get compared to a distressed property that has been sitting vacant and in disrepair.” It adds: “The result, in many cases, has been that the new house winds up getting appraised at less than the cost of construction.”
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That is precisely what is occurring in today’s marketplace, the NAHB says, according to its new survey, It adds that a “full 60% of respondents reported they were experiencing appraisals coming in below their contract sales price.”
Out of those, “53% said the appraisal amount was actually less than the cost of building the home,” says the NAHB.
“This is not only unfair and unreasonable, but it perpetuates the cycle of declining home values, drives more home owners underwater, harms local economic activity and acts as an obstacle to the recovery of the housing market,” said Nielsen in the statement.
New-home construction stands ready to serve as an engine for economic recovery. Building 100 single-family homes creates more than 300 full-time jobs and provides $8.9 million in federal, state and local tax revenues.
“Resolving inappropriate appraisal practices and restoring the flow of credit to home builders will not only help to put America back to work, it will provide badly needed tax revenues that is essential for local governments to support schools, police and firefighters in communities across the land,” said Nielsen.