[quote=eavesdropper]Interesting topic, scaredycat. I hadn’t heard this before. Only problem is I don’t have a clue. But I’m looking forward to the responses you get.
Actually the issue I’m having with this “underwater mortgage” stuff is why it’s happening. Obviously, there are a multitude of reasons depending on where you own property, but one major contributing factor in my area (Washington DC) is that the lending institutions are using short sales and REOs as comparables when approving mortgages. A couple short sales or foreclosures can reduce your housing values by 20% or 25% within a few months. We’ve had lenders refuse to use valid sale figures as comps, and replace them with SS/REO prices that predate them by several months.
I realize that this is not the only cause of falling housing prices. But reduced demand is not solely responsible for collapsing values in all areas. Can someone explain to me what makes the selling prices of SSs and REOs qualify as comparables?[/quote]
Because they are comps…just the same as the fraudulent sales (zero-down, no-doc, neg-am garbage…including “flips”) were being used as comps on the way up. Now, those fraudulent sales that made prices shoot up in the 2001-2007 era are being foreclosed on, and they are impacting the comps on the way down.
If we determine that short sales and REOs aren’t comps, then can we determine that all the sales made with loans that could never be paid back shouldn’t be used as comps, either?
It’s one or the other. We can’t have it both ways.
