In fact, I submit to you that had SFR appraisals had a rental component during the “naughties,” the bubble would have been MUCH smaller, say 1/3 of what we ultimately witnessed (or less). Because once you tie the value to rents – which didn’t go crazy to the upside – you limit the insanity of the appraisal, by definition. Add in a “normal” down payment requirement and – voila – very little bubble.[/quote]
On this (and the fact that lenders should consider potential cash flow when valuing collateral) we agree 100%.
