The State of the Markets
As the infamous summer buying season heats up, hopeful housing mar-
ket participants are looking for a respite from nearly four years of woe.
Reality, however, is throwing a wrench in their plans.
Two trends have recently emerged that are derailing what many hoped
would be the strongest summer in real estate since the downturn
First, fears about government’s massive debt load and the specter of
looming inflation are pushing up interest rates. Despite
trillions of dollars dumped into the secondary market for mortgages,
rates have risen nearly a full percentage point in the past month. For
more on this topic, please read Higher Rates Strangle Mortgage Market.
Second, in response to a lawsuit filed in New York against Washington
Mutual, new appraisal guidelines went into effect May 1. The rules,
which try to limit collusion between banks and appraisers, are wreaking
havoc in the market for new loans. For more on this topic, please read
Keepin’ It Real Estate: Just How Bad Are the New Appraisal Guidelines?
Meanwhile, foreclosure moratoria which expired April 1st were expected
to unleash a flood of supply of bank owned homes onto the market. This
mountain of new inventory has yet to materialize, as ―soft moratoria‖ are
being employed by banks, at the behest of Washington, keeping homes
off the market.
In short, its crazy out there. But, amidst the chaos, normalcy is begin-
ning to emerge from the housing market’s charred remains. That is, of
course, if you know where to look.
In an environment where prices are careening over a cliff, selling is in-
discriminate, fundamentals are thrown out the window and prices move
seemingly without regard to logic and all in the same direction: down.
The stock market is a great example of this, as during the panics of last
fall and this spring, investors sold stocks with both hands; banks, oil
refiners, retailers and technology companies alike were thrown out with
the proverbial bathwater.
As the chaos rec