We’ve had some discussion in the last couple of weeks about lending requirements tightening and how that will effect our market. I’ve been more optimistic outlook on how it will impact the Portland real estate market than other commenters. Subprime lending is clearly in dire straits. A clip on the news yesterday said that 31 subprime lenders have closed their doors. If you had a loan lined up for a purchase at one of these institutions, tough luck.
Lending rules are dynamic. Just because you have a rate locked and everything looks good, the lender can change the rules before closing unless you have a “loan lock” not just a rate lock. If you are on the cusp, the lender might ask for reserves (a number of months worth of payments) in the bank where none were originally required.
Our market has shifted towards the buyer. There are more homes on the market and they are taking longer to sell. There is not enough data yet to show how prices are fairing. Sellers (and some Realtors) are being forced to make the mental shift that houses aren’t going up at double digit rates anymore. This has resulted on some aggressive opening listing prices which then force more rapid price reductions. We should see the percentage off original selling price drop.
The buyer mix will probably change too. Investors may increase as high loan to value buyers are forced out of the market. Cracking the market is the hard part but I think there is a big enough pool of qualified buyers, even under stricter requirements, that our market is not going to freeze or crash. Others may disagree.
Something else we may see is sellers asking buyers to be preapproved with a certain lender. If there are two offers and one is qualified with a subprime lender, the seller may want a second opinion of that buyer’s ability to perform.