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The signs of inflation have already presented. There are regular anecdotal reports in urban housing markets nationwide for homes selling for tens or hundreds of

The signs of inflation have already presented. There are regular anecdotal reports in urban housing markets nationwide for homes selling for tens or hundreds of thousands of dollars over appraisal (which is meaningfully different enough from 'over list', as some agents in extremely hot markets intentionally underlist to attract bidding wars). Some of this is due to interest rates, but those have already bottomed out. At this point, it's a near certainty Covid will continue impacting markets for quarters to come. As mentioned, a little inflation is a good thing. If we think of the financial system like a rube goldberg machine or some heavy enterprise SaaS application --things you can't just tear down and start over-- the most viably peaceful way out of our problems is inflating the debt.

zamfi 6y ago
> homes selling for tens or hundreds of thousands of dollars over appraisal Except appraisal is an estimate of what a house will sell for, not any intrinsic notion of value. Selling over appraisal implies that the appraisers expect the value of the house to drop in nominal terms, not inflate.
- DennisP 6y ago
  That makes sense, but when I took the real estate appraiser courses a couple decades ago, none of it was about market expectations. It was entirely about recent sale prices of comparable properties. Maybe experienced appraisers do more than that, but my state at least doesn't expect them to.
  - zamfi 6y ago
    Could also be that appraisers are being conservative (their "customers" are the banks, after all, not the buyers) in their estimates and haven't caught up with the higher bidding? But isn't "recent sale prices of comparable properties" about market expectations though? Like isn't the implication of an appraisal that if you were forced to sell the house you could get the appraised amount for it?
    - DennisP 6y ago
      You're right, and in a bull market it's inherently conservative since you're looking at past prices. What I mean is, if houses are selling more than appraisal it's mainly because prices are up compared to recent sales, not because appraisers are accounting for any particular view about how that will play out over the next few years. It was surprisingly subjective though. It wasn't like you were feeding lots of data into big statistical models. You'd only pick the few closest comp houses that sold recently. They'd still have different features, so you'd try to figure out the value of the features by comparing the comp houses. It was a simple mechanical procedure but you could work it out different ways and get different numbers. Our instructor admitted there was a lot of opportunity to make it come out however you wanted, and even said that experienced appraisers did so consciously. So I wouldn't be surprised if an appraiser who thought the market was in for decline actually did write lower appraisals, though they'd justify it entirely by recent comps.

zamfi 6y ago

> homes selling for tens or hundreds of thousands of dollars over appraisal Except appraisal is an estimate of what a house will sell for, not any intrinsic notion of value. Selling over appraisal implies that the appraisers expect the value of the house to drop in nominal terms, not inflate.

DennisP 6y ago
That makes sense, but when I took the real estate appraiser courses a couple decades ago, none of it was about market expectations. It was entirely about recent sale prices of comparable properties. Maybe experienced appraisers do more than that, but my state at least doesn't expect them to.
- zamfi 6y ago
  Could also be that appraisers are being conservative (their "customers" are the banks, after all, not the buyers) in their estimates and haven't caught up with the higher bidding? But isn't "recent sale prices of comparable properties" about market expectations though? Like isn't the implication of an appraisal that if you were forced to sell the house you could get the appraised amount for it?
  - DennisP 6y ago
    You're right, and in a bull market it's inherently conservative since you're looking at past prices. What I mean is, if houses are selling more than appraisal it's mainly because prices are up compared to recent sales, not because appraisers are accounting for any particular view about how that will play out over the next few years. It was surprisingly subjective though. It wasn't like you were feeding lots of data into big statistical models. You'd only pick the few closest comp houses that sold recently. They'd still have different features, so you'd try to figure out the value of the features by comparing the comp houses. It was a simple mechanical procedure but you could work it out different ways and get different numbers. Our instructor admitted there was a lot of opportunity to make it come out however you wanted, and even said that experienced appraisers did so consciously. So I wouldn't be surprised if an appraiser who thought the market was in for decline actually did write lower appraisals, though they'd justify it entirely by recent comps.