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LOS ANGELES-The growing disconnect between purchase-only and all-transactions home price indices as shown by FHFA research may be making obtaining a mortgage more difficult in some markets, reports CBRE. The firm studied the year-over-year percent change in the indices and discovered that purchase-only indices paint a much rosier picture of home price gains than all-transactions indices, which are heavily weighted by appraisals from refinancings—these make up nearly 70% of all mortgage transactions.

Purchase-only indices—like the Standard & Poor's Case Shiller Home Price Indices, for example—are based on sales of the same property over time, somewhat like a focus group in a scientific study, Gleb Nechayev, senior managing economist of CBRE Econometric Advisors explains to GlobeSt.com. Industry experts use them to study how a set group of properties changes in value, but they don't give as broad a picture as all-transactions indices do. The latter category uses pricing data from all types of transactions, including appraisals, which could be skewing the indices down if appraisers are taking a more conservative approach post-housing crisis.

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Lenders who rely on all-transactions indices may choose not to grant mortgages if appraisal prices are considerably lower than the asking price—particularly in markets hardest hit by the housing crisis, Nechayev tells GlobeSt.com. Therefore, it's worth asking the question of whether appraisals are actually making mortgages more difficult to get in these markets, thereby delaying housing recovery there.

Nechayev is quick to point out that neither the purchase-only nor the all-transactions indices are more accurate than the other. “The recovery in home prices is probably not quite as strong as has been reported in purchase-only indices, but not as bad as all-transactions indices. The truth lies somewhere in between.”

He also points out that this disconnect could be a headwind to the recovery in some markets, especially those markets that went through the foreclosure crisis. “Some markets in California, Florida, parts of the Midwest and Atlanta are showing very big increases in purchase-only indices, yet virtually no change in all-transactions indices. This is suggesting that appraisals are lagging behind what's happening in the market. In those cases, it's at least worth digging a little bit further, in our view, to understand if there really is this headwind in the form of appraisals lagging the recovery and could it have an effect on purchases. Appraisal valuations are lagging actual sales prices.”

In addition, Nechayev emphasizes that he doesn't want to send the message that CBRE is questioning appraisers' view of the market at all. “They're right to be cautious. But it's worth exploring the disconnect. A 20% to 25% increase year-over-year based on Case Shiller is a significant increase. But when you start looking deeper behind that at what is happening on the ground when people try to obtain financing, a somewhat different picture emerges.”

Richard Borges II, president of the Chicago-based Appraisal Institute, disagrees that appraisers may be delaying the US housing recovery by underestimating home values. “Appraisers, particularly designated members of the Appraisal Institute, are supposed to be reflecting what's happening in the market,” Borges tells GlobeSt.com. “They are neither making the market nor confirming sale prices for the sole purpose of confirming sale prices or confirming amounts for the sole purpose of granting a mortgage.”

Borges does allow for the possibility that appraisers doing appraisals for a refinance might not consider something that they are required to consider in a purchase transaction: the actual contract between a seller and a buyer that is required under appraisal standards to be provided to, reviewed by and analyzed by the appraiser. “So hopefully, the appraiser is using that contract as an indication of where the value or price is, but that may not always be the case. However, I can see in neighborhoods where there has not been much activity—how much is the lag on the data based on what you start seeing in the market these days?”

Borges adds that there's some indication of home price fallback in the market. In fact, as GlobeSt.com reported earlier today, even as the housing market recovery continues gathering steam, there are signs of the recovery faltering.  But, he maintains, this is not the fault of appraisers. “Appraisers reflect the market; they don't make the market.”

Instead, Borges suggests that it's the market itself causing the disconnect, particularly as all-cash buyers and institutional investors drive up prices by buying homes to rent and pricing competitors out. “That may not be the market value, but it's the value to them.”

He also allows that, post-housing crisis, some appraisers may be leery to go out on a limb and are being extra conservative in their appraisals. “But they should call it like they see it—it doesn't matter if it's a refinancing or a sale—if the market value is the same, the answer ought to be the same.”

GlobeSt.com contacted the Appraisal Foundation to get its perspective on the FHFA research and CBRE's findings, but calls were not immediately returned.