Will Low Appraisals be a Problem?
Posted by Hank Miller on
The great Atlanta real estate market adjustment of 2022 is upon us. As everything shifts, the main players are whispering around the water cooler...will low appraisals be a problem now? Probably not a bad question as the changes in quarter 2 of 2022 were dramatic. As the Fed fights rampant inflation, buyers are faced with dramatic rate increases and sellers with a comparative lack of activity. Lenders and appraisers are also impacted; both industries are circling the wagons just a bit tighter as everyone waits for this market to settle.
No More Appraisal Gimmies
The real estate market coming out of Covid from about fall of 2020 through spring of 2022 was an anomaly. The Fed held rates artificially low by buying billions of dollars of mortgage backed…
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killer inflation is ending the run this time. The Fed has to get control of this rudderless economy and the withdrawals from handouts and the free spending are here. The insane advantage enjoyed by home sellers over the last few years is ending, time for sellers to remember how to list a home for sale. That said, let's not misconstrue what we're looking at (as of the end of June '22 anyway); the Atlanta real estate market is not crashing. What we are seeing, are signs of a return to normal. What we are hearing are cheers from the buyers - the one's left in the game anyway.
the signs were there, we felt it all through early spring and at the start of May we asked "Is the Atlanta Real Estate Market Shifting"? That was rhetorical, we just didn't have the data to support it because real estate lags. Well we do now. The charts below are the counties that most national organizations call the "Atlanta market". Astute and well educated readers of this blog (like you) know that all real estate is hyper local. However, we're not fighting that battle now. Here we'll look back to the beginning of the year in two week increments. For consistency…
from historic inventory shortages and home buyer frustration finally started? That argument can be made...and while the data lags by several weeks, the radar of many experienced agents is lit. The feeling in the field can't always be immediately confirmed but we're beginning to see the data evidence. It'll take a few more months as markets always tend to "feel" before the "proof"; that's just a challenge of the business. One thing that's not debated, the mortgage rate increases (with more promised) have been an ice bucket challenge to the market.
housing inventory in Atlanta increase during the first quarter of 2022? Well that answer is more than a yes/no binary option, context is needed and that’s best done by looking back a bit. The first quarter of any year around Atlanta tends to set up the second one. Traditionally, the months of May and June see the most new listings as the school cycle hits – graduating families sell and rising families buy. This year however, rocketing mortgage rates and other economic challenges may change that.
It’s hard to find a housing market not presently on fire, Atlanta is no different. Compared to a decade ago and the worst housing crisis ever, this market turn around improvement is among the tops in the country. The 2022 market could not be more different than the 2010-12 market...over 100K homes were on the market during the darkest days. The Atlanta real estate market explosion is due in large part to its broad appeal, size and vast selection of properties. The “Atlanta Real Estate market” is a misnomer; the area is akin to spilled glass of milk. With no natural boundaries, it sprawls over 8 to 16 counties depending on who sources the information. Each area is its own micro market but all contribute to the overall "Atlanta housing market".
estate market exploded and subtle fundamental changes began to appear. Zillow crashed in spectacular fashion, other iBuyers dabbled grew their presence a bit more and institutional investors decided they really love homes. Atlanta has always been an investor darling, but over the last couple of years, activity has exponentially increased. "They" know something...Wall Street is far ahead of the real estate curve and what they anticipate seems to be coming into focus. They're on a massive buying spree and tightening the chokehold; the impact on home buyers, especially in the Atlanta market, is brutal. Their…
buyers are tossing off all constraints to "win" the beauty contest of buying a home. Appraisals below contract price will continue to be a challenge in 2022. Consider, appraisals this year will be using data from the already insane market of 2021 and many will still fall below contract. Remember, the buyer’s loan is based upon the lower of the contract price or appraisal. The appraisal contingency protects the lender – and indirectly the buyer – to ensure the home can be sold for at least the loan value. Buyers that waive or modify the appraisal contingency need to have cash on hand to make up any…
worth” will never end, because there is no standard answer. Sure the reflex text book answer is “what a buyer is willing to pay” but that’s hardly the complete picture. A home has a number of “values” and most are not tied to the buyers in the market. There is a best answer of course, it also happens to be the simplest one. Spoiler alert...it’s not what it sells for. This short clip provides a common sense overview, below that we get more into the weeds.
record high inflation, planning at least three rate bumps for 2022. The prognosticators are out there already making bold claims; you can find the overt optimists and you can find the dark pessimists. So what's in store for home buyers and sellers that have to make a move this spring? Well given this environment, we’re not going to look much past the first quarter or so. Buyers will again be challenged and sellers will reap the reward…until they become buyers. As usual,…