Appraisal woes
Interesting article here on the difficulties in appraising houses in a falling market.

Lenders are more cautious and, because house prices are falling so rapidly in some areas, won't accept a "comparable" sale that's six months old.

"In San Francisco, neighborhoods are small, which compresses the number of comparable homes, making appraisals particularly complicated. 'Any time you have a reduction in volume, especially because that is when the underwriting criteria of lenders tends to become more stringent, it's difficult,' said Charles Warren, who runs a San Francisco appraisal business called Warren and Warren. 'Lenders want to see comparables from the last 30 days, and all of a sudden you are left without any valid data. That exacerbates the problem.' "

And this bit of sound advice: "Buyers should make sure to leave their financing contingencies in place until the lender has signed off on the appraisal. The down market means that lenders are reducing appraisal values more often."

On a brighter note, I heard an interview with a tri-state lender this morning (Hudson something or other - they're opening an office in Greenwich but have been lending in Fairfield County for some time)and he was surprisingly optimistic about the housing market in this area. His bank has always held on to its loans, rather than repackage them and sell them on the national market, and, while the bank has insisted on a minimum 20% down, on average, its borrowers put 39% down. "Our customers are people buying homes," he said, "not speculators." So far this year, its Fairfield County loans are up 1,700 over 2007, which was their best year. So, there are buyers still out there.

The bank president also pointed out that the housing collapse has hit hardest in just seven states: Michigan, Illinois and Ohio, which he attributes to the collapse of auto sales and its effect on the income streams of people who work for auto parts suppliers; and Florida, Nevada, California and Arizona, which all suffer from a glut of speculative building. He still likes the Northeast as a place to make housing loans. I hope his enthusiasm is justified by later events.

Update

The bank is Hudson City Savings Bank.According to its website, it's doing very well. They specialize in jumbo prime mortgages, so no wonder they like Greenwich.