Real estate markets in many parts of the country have been suffering for more than a year, but the Pacific Northwest has maintained one of the strongest markets around. But…cracks are beginning to show on the periphery of our market as well.
Real Estate appraisers are required to indicate on their appraisals whether the subject property is located in a declining market. And we have a few in the area, particularly in South King County and Tacoma.
Declining real estate markets are rated Categories 1-5, just like a hurricane. Categories 1-3 indicate a moderately declining market. A category 4 or 5 is sort of like Hurricane Katrina. We do not have any category 4 or 5 neighborhoods in our area so far, but we do have some 3’s.
If a property is declared to be in a declining category, the lender may reduce the maximum financing available by 5%. That means a borrower who was planning on a 5% down payment may find out at the last minute that he needs to make a 10% down payment instead!
As loan officers, we are usually the bearers of bad news, and must spend quite a bit of time educating buyers, sellers and refinancers that the market is not where it was a year ago, or even six months ago.
Will our real estate market recover? I think so. But it could get a bit worse before it gets better.
