The 2007 mortgage mess brought the ugly truth to the American public that no one was immune from the possibility of declining markets. For all the Chicken Little reporting of the Dallas Morning News, I believe the silver lining of this dark cloud is that finally North Texas homeowners have embraced the reality that their property values don't always increase every year. For years we have become comfortable in the fact that our property values would grow, if only slightly.
Declining markets have always been on appraisers' minds, however. Every appraiser that completes a FNMA 1004 URAR has to check the Market Area box as Increasing, Stable or Declining. Some appraisers just check Stable to make things easy. But then in July of 2007 Fannie Mae announced that it had compiled it's own list of declining markets, and appraisers now had to really pay attention to their own research. Since then, I have included in the report a statistical table which actually shows the trends and how I derived my conclusion (does your appraiser do that?). In the past, to check the box "Declining" was almost a killer for the mortgage and usually raised a ruckus with everybody involved. Now, I can check that Declining box without fear of reprisal because lenders, Realtors and homeowners realize that declining markets really do exist in North Texas. Readers of the appraisal generally accept this at face value thanks to all the hoopla created by the media. And I think the Lenders that still do business in declining markets (FNMA, FHA, etc) and getting the word out that this factor, if present, is a workable variable.
Overall, I've found this year that the declining markets exist exactly where you expect them to be. For the most part, North Texas is stable. In Carrollton, for example, the median home price has increased a mere 3% in the past 3 years, and increased 8% in the past 5 years. It's been interesting to see where the recent "hot" areas have now stabilized. And yes, some parts of town are still increasing (such as at Hillcrest & Forest in North Dallas).