April 11, 2009
Retired experts who have driven the mortgage crisis into the ground at Fannie Mae are reporting housing prices in the battered real estate markets as being safe for homebuyers to enter the market again.The amazing fact is that anyone would listen to the likes of Thomas Lawler from Lawler Economic & Housing Consulting, LLC, or that he could generate any clients at all to pay for his data and analysis.
Lawler worked as a senior vice president of something for Fannie Mae until the bubble burst in 2006, which is when apparently he saw the writing on the proverbial wall, and founded his consultancy firm.He has apparently made a living reporting the situation rather than actively managing and solving problems.According to Lawler housing prices are very close to being at a bottom as long as we factor in all distressed sales.
Lawler maintains that investors scooping up short sales have caused sales to skyrocket even in markets that prices are still dropping.He also suggests lending institutions are experiencing complete havoc due to this anomaly that causes bankers consternation and confusion regarding the true market values of these fire sale prices.Lawler points out that experts agree about the obvious that foreclosure sales are priced below the market value, usually due to poor maintenance.
Lawlers so called experts seem to have agreed that the foreclosure prices should not be used in determining the fair market value by the traditional comp method, whereby prices are set by comparing sales of similar properties within the same or nearby neighborhoods.However, Lawler also admits that by omitting REO sales, some markets are left with dreadfully slim sales data insufficient for accurate comp figures.
Another point Lawler makes is the fact that old sales data does not accurately reflect fair market value because of the national housing price crash.Add to the previous claim one like this: many sales have fallen through due to appraisals coming in lower than the sale price, and you have Lawlers nervous investors demanding strict guidelines on appraisal techniques.
In Lawlers opinion the valuation issue is not limited to individual deals but also affects the home price indexes and empirically-based models.There is a noticeable difference to Lawler in indexes compiled by different brokers and lenders based on differences used in considering the data, such as sample size and omissions from the sample due to REO property sales.
In closing Lawler claims in his short blog that many house prices in many markets are no longer inflated relative to income and local rent levels, even if homeowners are upside down in their mortgages.
-- Edited by TW on Saturday 11th of April 2009 04:45:45 AM
