Appraiser under valuing property?
Yves has a post on property values and appraisers. He critiques an article blaming"low appraisals" really and truly for not supporting bubbled housing prices. As he goes into it, the article is supporting over priced housing.
Truthfully, all data to date on housing appraisals is biased by world population growth. This post has a graph of world population growth. It isn't so easy to see, but there has been enormous exponential growth of human population for about 500 years now. 500 years is probably the framework where all modern beliefs about business have developed. We have practically no data on how business looks with flat population, or declining population. We have very good data on what happens in individual communities when people leave, with say Detroit.
Well, beliefs about housing being an appreciating asset, and this leads to an old, garbage, breaking-down home being valued for a price that will cripple a young family for life into actually buying. But truly, a proper accounting practice should devalue that home over its life. There could be a premium for location, but the world population growth has built far too much confidence in pricing beliefs. A slowing world population growth would also have the effect of changing beliefs as the ratio of people starting their adult lives to people established will decline.
Personally, I tend to think population dynamics will play out in investments very differently in the future then they have in the past and beliefs that homes devalue with age, much like a car, will develop. Indeed, a tear down home will also have negative value for the building which will reflect the cost of tearing down and hauling it to the dump. The time frame for this kind of change is probably the next 100 years.