It’s interesting to hear that “flipping” is less prevalent up there–no waterfront condo flipping? Anyhow, the definition of flipping here also includes scenarios like this: Buy old home in “hot” area for $1M, scrape off existing house, build new house for $750K, then sell for $2.7M (a real example). For some reason, we call that flipping too, because of the quick turnaround, and the high “value” in a neighborhood that’s otherwise in the $850- $1M range. This sort of speculative building tends to inflate value and crowd out homebuyers because once such a “flipped” home is sold, it attracts other flippers to bid in the area (bidding war), which drives up prices. Imo, anytime multiple people buy, intent on quick and fast profits, it really skews the valuations. Of course, the real trick can be selling a $2.7M home in such a neighborhood–essentially moving it out of the local market. If it’s sold while “hot,” perhaps it’s “worth” that. If the market flattens, and it sits for 6 months–oops! Of course, people who gradually improve their homes with the intent to eventually sell is part of normal upgrades seen in well-maintained neighborhoods.

Just one example here (SF Bay), and glad to hear it’s less prevalent around Puget Sound. I used to live there, and I hope this “bubble” doesn’t ruin things for everyone.

Sacramento houses stay red hot; West Sac’s turn white hot

http://tinyurl.com/8quoz

Ok, here’s one problem I see: In a booming market, where values are constantly changing, the average homebuyer doesn’t have a good sense of values. If an appraiser says a house “worth” $750K last month is now $800K, how does the average homebuyer question that? I’m talking about appraisers working with realtors and banks–any motive there to appraise high? Of course, another factor here locally are the multiple bid wars, driving prices even beyond the listed “value”. I’d attribute this largely to flippers and other speculators, which is the main cause of the RE overvaluation–not appraisers.

I guess I’m not seeing how appraisers are the problem… There job is to appraise the value of the property based on what someone else would be willing to pay for it. If they were wrong (on the high side), I would think that the market would correct itself unless others were willing to pay this higher price for a home, in which case they were right that the property should have been valued higher. I guess it could be argued that they are creating a self-fulfilling prophesy, but I’m going to assume that you aren’t the type to argue *against* the merrits of a market-system (capitalism).

Most of the homes that I see selling on the market are going for over the county’s appraised value. Granted, the appraisal I’m talking about is done by the local government, and I think you have a problem with the contract appraisers…

Maybe you’re expecting appraisers to add some type of “bubble factor” to their equations (as oppose to just looking at comparable houses). In other words, their reports could say, “Comparable homes in this neighborhood are selling for $400K, but I think the bubble is going to burst in a few months/years, so even though others have proved that they are willing to buy a similar house at $400K in today’s market, I think the house (and land) should only be valued at $370K.” I’d be quite surprised if you cannot see the ridiculousness in that statement.

You can bet one of the reforms after this mess is over will be to change the appraisal system. Right now they’re just short of being wh*res. Perhaps mortgage companies will have to use appraisers based on a mandatory rotating system with no second appraisals allowed.