Market Value

What's going on with appraisals in some parts of the country? Mortgage lenders -- and appraisers themselves -- say they're increasingly coming in with valuations higher than the contract prices agreed to by sellers and buyers. The differences can range into the thousands of dollars. Are some sellers giving in to lowball offers, fearful that they can do no better in the wake of the subprime mortgage implosion and home sale bust? Or are appraisers simply lagging behind downward market adjustments?

As a general rule, the Hatfields aren't looking to the McCoys to learn any lessons about successful feuding. But in mutual funds, there is little doubt that in the ever-raging debate between active and passive investors, the folks who believe in picking and choosing their issues can learn something from the people who build funds to emulate an index. The basic debate boils down to management acumen. Active investors believe a manager can add value - either by performing better on the upside or protecting them against declines, while the indexer believes that the best way to capture the profits of the market is to buy the market, rather than trying to beat it. While the supporters of each strategy sometimes seem diametrically opposed to the other, the truth is that they can learn from each other, particularly at this time of year when many indexes are going through their annual or semi-annual "reconstitution" process.

NEW YORK -- Express Scripts Inc. will nominate four directors to Caremark Rx Inc.'s board in an effort to push through a $26 billion hostile bid rejected by Caremark yesterday in favor of a lower offer from CVS Corp. Express Scripts said it would seek the seats after Caremark's board announced the rejection. Caremark said earlier yesterday that a deal with Express Scripts "would result in a highly leveraged and weakened business" and "insurmountable antitrust risks." Caremark, a manager of prescription benefits for employee health plans, accepted a $21 billion bid on Nov. 1 from CVS, the No. 2 U.S. drugstore chain.

Is real estate heating up, cooling down, headed for a deeper freeze, or just hanging in there despite the challenges? Pick your own theory, but the latest federal report on home real estate price appreciation offers support for each of those scenarios. The third-quarter "house price index" compiled by the Office of Federal Housing Enterprise Oversight examined changes under way in 275 of the largest metropolitan markets. Unlike other studies, the index survey tracks value shifts in millions of existing houses whose mortgages are owned or included in securities guaranteed by Fannie Mae or Freddie Mac. Now to the four scenarios: Yes, real estate is heating up. You have to be in the right markets, of course, but there are several dozen hot spots around the country.

Have you ever checked out the satellite photos and market value estimates of homes in your neighborhood on Zillow.com - the Internet real estate site that offers "free, instant valuations and data for 67 million-plus homes"? Zillow was launched with major media fanfare in February, backed with a reported $57 million in venture capital. It is one of the most popular real estate sites on the Web - visited millions of times a month by sellers, buyers, agents, lenders and homeowners. It also has begun distributing its free "Zestimates" through Yahoo.

Last week in Federal Hill, more than 300 homeowners attended a meeting with state assessors to learn how to appeal their property assessments. It didn't take long to get heated. How is it possible that land values doubled in three years, one man complained. Another asked if assessors don't see inside homes, how can they fairly compare houses with no renovations against those that have secretly undergone major overhauls without the necessary permits? With tempers and frustration flaring, the meeting was abruptly called to a halt.

ATLANTA -- For nearly a decade, Theodore L. Parrish, a 33-year-old investment portfolio manager, has championed PepsiCo stock from Atlanta, the hometown of Coca-Cola. "Oh, man," he said, "it's a difficult path to take." His belief in PepsiCo's diversification - soda makes up less than 20 percent of PepsiCo's sales, compared with 80 percent of Coca-Cola's - leads to awkward silences with Coke executives at golf tournaments and irate phone calls from Coke investors who hear him on the local radio.

When Under Armour Inc. logged the best stock-market debut for an American company since 2000 yesterday, comparisons to the dot-com craze seemed apropos. Much like the Internet companies that began in somebody's garage, the Baltimore athletic apparel company had its start in somebody's grandmother's basement. And much like the Internet IPOs that saw stocks skyrocket the first day, Under Armour jumped nearly 100 percent on the Nasdaq stock market. So has "irrational exuberance" made a comeback?

Mayor Martin O'Malley said yesterday that selling city-owned real estate for less than appraised market values is a common way to jump-start economic development, especially in a downtown Baltimore that was struggling for investment only a few years ago. "We do it all of the time," O'Malley said. O'Malley was responding to concerns raised this week by Baltimore City Councilman Robert W. Curran about two city-owned downtown properties that, together, sold for almost $2 million less than their appraised values.

A proxy fight could be the next battle in the war for long-distance carrier MCI Inc. Yesterday, MCI's board accepted - for the third time - a purchase offer from Verizon Communications Inc. That sent MCI shares higher as Wall Street figured that rival bidder Qwest Communications International Inc. would not go away quietly. The Verizon deal, which values MCI at $23.50 a share, is about 20 percent below the latest Qwest offer rejected by MCI's board. MCI's closing share price was $25.39, a rise of 38 cents for the day, suggesting that the market expects further developments.