Buyer’s Market? Seller’s Market? Lenders Market!

Buyer’s market: A market which has more sellers than buyers. Low prices result from this excess of supply over demand.

Seller’s Market: A market which has more buyers than sellers. High prices result from this excess of demand over supply.

Conventional wisdom would say we are in a Buyer’s market at this time.  The levels of inventory, meaning available properties as a percentage of total housing stock (under 3% in Western Nevada County), are generally indicative of a seller’s market.  Buyers are out there trying to buy property.  Often on what are considered good deals there are multiple offers.  However despite a willing buyer and seller, far too often a deal is unable to close,  because the lenders do not want to fund a loan.

Lender’s rules of engagement (yes, it is a deliberate analogy to combat) seem to change day by day (some of my lender affiliates say hour by hour).  Most real estate transactions involve some form of financing and lenders are an integral and necessary part of the process.  For their part, they have over the years enjoyed very steady and mostly secure returns on their loans.  Yes, many lenders are currently having to risk adjust the value of their loan portfolios, but I see strong evidence that their actions are in fact further eroding the value of their portfolios and the real estate markets in general.

For example, some lenders require an appraiser to automatically adjust an appraisal downwards from comparable sales of 3 to 6 months ago.  I would call this undue influence on the appraisal community.  There are new regulations out affecting appraisers and how they are to do business; the Home Valuation Code of Conduct. (HVCC does not allow mortgage brokers to call an appraiser; they must be assigned by a “neutral” third party, called Appraisal Management Companies, because of the fear of undue influence).  This has resulted in out of area appraisers doing local appraisals, which of course calls into question the validity of the appraisal itself. I believe that a requirement or pressure to make an appraisal conform to a principal’s or lenders desires (either up or down) is inherently wrong.

Either way, in the current marketplace, the lenders are in the position of significantly affecting market terms and prices between buyers and sellers rather than being an ancillary part of the traditional willing seller and willing buyer transaction.  It is a Lender’s Market.

Rolf Kleinhans is a Broker/Realtor™ with Recreation Realty Inc./Sierra Cascade Properties in Nevada City.  Actively involved with the Nevada County Association of Realtors (NCAOR), he has held all officer positions of NCAOR including President, and served at the state level as a Director of the California Association of Realtors.  He has held the appointed position for the Nevada County User Fee Committee (Past Chairman), is currently serving on the Nevada County Sewage Disposal Technical Advisory Group as Vice Chairman, and represents the Realtor’s organization as a member of the Economic Resource Council.  He can be reached at 530-559-5000 or www.SierraCascadeProperties.com