If you have been reading Michael Shedlock like you should be, you will not be surprised by an increasingly-common "problem" of homes being worth less than a buyer and seller agree they are worth - according to the appraisal they get back when the buyer tries to get a mortgage. This kills the deal for the financing.
Those who are wondering why the "problem" of lower home prices exists at all, should read the short note and comments here, at Naked Capitalism. In a comment that summarizes a lot of it nicely, DownSouth says:
"And what about housing prices? The NY Times story Frank links to above gives a case study as to what happens to housing prices when a market is flooded with foreclosures. I think TPTB want to avoid that sort of downward spiral on a national scale. Just imagine, from $267,000 to below $60,000 in just a couple of years! More foreclosures mean lower prices. Lower prices mean more foreclosures. More foreclosures mean lower prices. Lower prices mean more foreclosures. Can you imagine what is happening in Fort Meyers going viral?"
The only "problem" is, we don't have to imagine; we need only sit back and watch. Houses are back to their prices from six years ago. Six years ago, the price curve was pretty steep already.
There is still a long way to fall.
It is a rough patch for a lot of people who thought they were investors. For normal people, it is a benefit. Just think, in a couple of years, you might actually be able to afford a house! Note: this is different than being able to get a bank to underwrite your mortgage.
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