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Comment by mgkimsal | Hacker News Reader

The network effect of the prices going up seems to permit the appraisers to add their bumps up as well. I don't think it's as influenced by appraisers as some think, and it might vary by region a bit. If prices in a region are rising (for a number of factors) I don't think many appraisers are going to round down in their judgements.

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Sure. There’s no objective value of a house, so they have to go off of recent sales of similar properties. If prices go up, appraisals go up. But I don’t see how the reverse would be true, as suggested above.

Appraisals also act as a gate for prices due to lender requirements. A bit round about, but I can see how looser appraisals can enable inflated prices. Imagining the opposite extreme is interesting: What if appraisals never returned with higher prices than the last sale of that house? Some markets would see increases from people paying the difference out of pocket, but I’d guess the rate of price increase would be much lower. (plus other effects, of course).

I mean, granted, but there's models, right? Surely some combination of the assessments made by financial firms and government is objective, right?

The value of a property is whatever it can sell for. Models and assessments attempt to figure out that number without actually performing a transaction. An accurate model will account for the same factors a buyer will use to decide what to offer, but ultimately it’s down to what people will pay. If that number goes up 2x, there’s no model that can tell you that increase is somehow incorrect, or that the true value is lower.

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