THE DAILY RAMBLE: Appraisal And AD&C Problems Hampering Housing Recovery, Builders Tell Congress
Yes, I admit it, I have a bug somewhere for the current problems with the appraisal industry and how it is hurting the recovery of the housing market (YES, I said RECOVERY). I really do not blame appraisers; having been one for two decades and having worked with some great MAI’s (John Cicero and Richard Marchitelli are you reading this!), they are being constrained on the residential side by the HVCC. it is strangling the market by encouraging the use of appraisal management firms, which take money from appraisers pockets by throwing up “quality control” as an excuse. Bull! it is pure greed and nothing else.
The following portion of an article issued today by the trade group National Association of Home Builders is just another example of the effect that HVCC is slowing the market recovery……
July 23, 2009 – The National Association of Home Builders (NAHB) told Congress today that inappropriate appraisal practices and the acquisition, development and construction (AD&C) lending crisis that has choked off credit for home builders threaten to prolong the current housing and economic downturn.
Testifying before the House Small Business Subcommittee on Finance and Tax, NAHB Chairman Joe Robson, a home builder from Tulsa, Okla., said these two issues “are placing enormous pressure on home builders’ bottom lines and, for many, endangering their ability to survive the economic downturn. Additional credit resources could be extremely helpful to them and other small businesses to bridge the divide and survive to the eventual economic recovery.”
While there are several signs that the housing market may now be at or near bottom – new and existing home sales have stabilized, the inventory of unsold homes continues to fall and single-family housing starts have posted four consecutive monthly gains – Robson said the appraisal and credit crunch problems are headwinds that continue to buffet any significant housing recovery.
“The inappropriate use of distressed and foreclosed sales as comparables in determining new home values is needlessly driving down home prices and forestalling an economic recovery,” he said, citing a recent NAHB survey that found 26 percent of builders are losing sales because appraisals on their homes are coming in below the contract sales price.
These appraisal practices are a major contributing factor to the current AD&C credit crisis. Falling appraised values for land and subdivisions under development have led some financial institutions to stop lending to developers and builders, to demand additional equity and even to call performing loans.
NAHB is calling on housing and federal financial regulators to adopt clear, concise regulatory guidelines that will allow appraisers to develop realistic valuations based on sales that are truly comparable.
