Let’s bottom-line this thing: For the housing market to recover (i.e. get to a place where supply and demand are balanced or favoring demand) a lot of things are going to have to happen. To the people working on real estate street, there appear to be more hurdles than ever before to get there.
Here are just a few of the daily frustrations facing the residential homes industry in summer 2011:
- Repair complications in the FHA mortgage process. With these popular loans, appraisals are worse than ever, with appraisers CYAing it to avoid blowback from the underwriters. The word “defect” has taken on a whole new meaning, making the transaction more unsure and in the worse time — the last two weeks before settlement (a major side effect of this is that most foreclosure homes are ineligible for FHA loans, effectively killing the sale of that blighted house to a traditional buyer).
- Mortgage lenders are getting mixed up in the home inspection process. Some big lenders are starting to require review of the property inspections for all loans, including the whole home, water, septic, radon and termite reports, if performed. The obvious assumption is that they intend to use these data as a lever to approve or deny the loan based on property condition. More complications.
- Imploding neighborhood price assumptions. Seems like a list price doesn’t mean a whole lot in 2011. I’ve seen massive drops in price across many neighborhoods, throwing sellers into confusion as to how to proceed. Combined with the demands for up to 9 percent seller help from buyers, home prices are anything but stabilizing.
- Exploding numbers of distressed properties on the market. My wife is tired of me pointing out all the “abandoned” homes I see along the road. High grass, weeds and other signs of a foreclosure-to-be are seemingly on every street. Short sales are popping up all through the MLS, with all their complications to buy. On the other end, the agencies listing foreclosures and the banks reviewing the offers are driving buyer agents nuts with their automated systems, changing rules and poor customer service.
In reality, government intervention through extraordinary regulation and policy pressures on lenders (and by extension appraisers, agents, inspectors and insurance providers) is a large cause of the real estate market uncertainty.
Remember the homebuyer tax credits? Rather than empowering buyers, they’ve gone far in the other direction in my opinion — hamstringing the market forces that will get us back on track.
Combine this with the natural price hurdles of a bottoming market and the large subculture of distressed sales and we see that something needs to give for the growth to happen once again.
Jeff Geoghan is a residential real estate agent and founder of www.yourlancasterhome.com in Lancaster County. He also hosts “YourLancasterHomeTV (tv.yourlancasterhome.com).” He also holds a Green designation from the National Association of Realtors and blogs about homes and green issues.