Lenders hold the keys to housing recovery; Insider Q&A with Christian Redfearn
Orange County Register online
By Jeff Collins
...Us: Demand is very high for bargain homes at the low end of the price spectrum, while higher-priced homes continue to be hampered by low demand and tight financing. What factors are prolonging this housing slump?
Christian: The numbers are still hard to interpret at this point. That said, there are some trends that are worth discussing. First is the sharp distinction between activity at the low and high ends of the market. At the low end, financing is available. For example, I heard from a developer in Beaumont that he'd had a successful sale of new homes, but that all of the buyers were FHA borrowers. There are no parallel programs for jumbo mortgages on higher end homes.
Moreover, I'd argue that the pricing models used by banks to value higher end homes are based on aggregate indexes that are comprised heavily of low end homes. So, if median sales prices plummet because the low end is first to manifest the bursting bubble, what's the value of a higher end home? Hard to say: there aren't enough transactions to make a really good case.
Banks, using the aggregate price indexes may undervalue homes and provide too little credit for buyers to reach prices at which owners are willing to sell...