confusion about mortgages & appraisal values

[scorpionis]

Hopefully one of you more knowledgeable people can clear up a bit of my confusion regarding the housing loan crisis and how it relates to how municipalities value their homes. Where I live, Austin TX, home prices have at least partially been driven up by increasing home appraisals on the part of the county and city. For example, the house I live

Comments

[chessdev]

This is the "simple version

[shmigs]

I personally believe the housing market is much worse than one would think. Banks are holding foreclosed homes on their books and not putting them up for auction, sale or into the MLS. Therefore, once a recovery does start and banks start putting these homes into the system, more supply will continue to come into the market as demand increases, holding values down. Bottom line is that home buyer incomes must match carrying (mortgage) costs.

[ebenizer]

I've also heard tell that a lot of banks are holding off on going into foreclosure on homes that have been abandoned by people that could no longer afford their mortgage payments so the banks can remain solvent which will just make it that much worse later on. It was being compared to hiding bodies under the carpet. lol

[chessdev]

Prices will continue to drop, but at a controlled rate versus a straight-out crash.

In the long run, this is a good thing.