Market Idled By Appraisal-Demand Gap

Buyers cannot obtain loans for homes that do not appraise for the sales price. Appraisal values have decreased significantly in this down market. This has created opportunities for some buyers, and the demand for homes has significantly increased from the lows of 2008-2009. In some communities within Southern California , buyer-demand has increased the sales price of homes. The problem is that the appraisal values are not rising accordingly. Appraisal values are staying low, partly due to the consistent number of foreclosures, short-sales and REOs, as well as the tightened industry regulations. The result is that sales prices are overstating appraisal values, and the seller is left with the decision whether to sell at a price less than buyers are willing to pay. Many sellers are choosing not sell, which is reflected in the decreased market inventory. Ultimately, the market is left in idle. Prices cannot go up, because the banks will not lend for the higher price. Prices cannot go down, because demand exceeds the appraisal value.