You thought I was going to say “seller,” didn’t you?
That’s the obvious answer, after all. It’s fairly easy to connect the dots these days: abundant inventory + credit crunch + record foreclosure rates + slowing economy = a long, painful, oftentimes unsuccessful selling process. It’s been no secret that sellers have really been taking it on the chin, and it could be a long haul down the road to stabilization.
The market since March of 2006 has generally been considered to be favorable for buyers. Prices have been dropping slowly (although recently, reductions have happened more quickly and in a more dramatic fashion), seller concessions have become the norm, and buyers now have the time to actually weigh the pros and cons of a particular home before they put in an offer.
But the truth is that the past year hasn’t been easy for buyers, either. Loudoun County, while less expensive than areas closer to DC, is still a relatively expensive place to live. (I feel tremendously sorry for first-time homebuyers looking in Northern Virginia; my husband and I would not be able to afford today the townhouse we bought as our first home back in 2000.) The credit crunch has made it difficult for all but those with tiptop credit scores to qualify for enough loan to buy a place they’d actually want to live in, or that would be worth the investment. And single family prices are still so high that most on the market would require a jumbo mortgage, which is even harder to qualify for than a conforming mortgage.
The Washington Post recently reported on a new insult to add to the injury: the labeling of the DC area market (including Loudoun County) as a “declining market” by loan underwriters. (As a Loudoun homeowner, I’m trying not to take that personally.) To lenders, a “declining market” label is a risk factor (one that is heavily weighed), and it’s going to mean that buyers are going to have to pony up a bigger down payment. The Post article includes a story about a couple whose attempts to purchase a Cape Cod in downtown Leesburg were torpedoed by their lender after already having been approved and having had their offer accepted by the sellers. They were literally days from closing when their lender contacted them and said that the “declining market” flag on Loudoun County meant they were going to need a down payment, even after they’d been approved to finance 100% of the purchase. The couple passed on buying the house, which went under contract again a few days later to another buyer.
You can read the entire article here:
The ramifications are pretty obvious. By making it difficult to purchase homes in a higher-priced area through use of a “declining market” flag, lenders are virtually guaranteeing that the market here will continue to decline.
The truth is that it’s hard out here right now for anyone who owns, buys, or sells real estate. It’s not all bad news, though; interest rates are now the lowest they’ve been since 2005 (with another rate cut coming soon), and prices are continuing to drop. I truly believe that there is a good chance we’ll see an overlap of those 2 factors this spring, and it could provide the type of break we’ll need to get things moving again.
Questions? Comments? I’m pretty chit-chatty and I’d love to hear from you! Feel free to add your input below.