I’m seeing a larger percentage of sales closing at prices that are below their listing ranges. I’m seeing almost nothing selling any higher than the middle of their ranges. The days of overbids are over. I’m seeing more and more markets where the tramsactions with the highest sales are becoming too dated to use in an appraisal, and where listings are lower than the previous sales. Come July 1, most appraisers will stop using 2005 transactions as comparables, leaving only the sales that have occurred so far this year.
Once the regional market is conclusively proven to be in decline, the lenders will be compelled to switch gears on their underwriting. They can no longer assume that prices will continue to increase, thereby compensating for any errors. Interest rates don’t have to go up much to affect a decision on a mortgage transaction – increased underwriting requirements will kill a lot of deals that would otherwise have been done in years past.
I don’t think it will take very many deals going south because of tightening credit requirements to have an outsized effect on the market psychology.
