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Market Updates

Is the Housing Recovery Real?

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 true falseFrom John Grant, Market Adviser...

By most accounts, the housing market is lurching toward a recovery. The evidence most often cited by experts and the media is the rise in home prices, especially in markets ravaged by the foreclosure crisis. Their facts are correct, home prices are ticking upward, but their conclusion that the uptick corresponds to a reality-based housing recovery may be optimistic.

The rise in home prices directly corresponds to new valuation methodology implemented several months ago by Fannie and Freddie to obtain a “fair” price for bank-owned or real estate owned (REO) properties. Previous methodology valued foreclosed homes as a percentage of broker-price opinion (BPO). In other words, a broker would submit an estimate of the value of a foreclosed property, and distressed buyers would usually pay between 80-85 percent to take the property off the hands of Fannie and Freddie.

New methodologies put in place by Fannie and Freddie have scrapped the…


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