An analysis of market trends for at least the past 12 to 24 months preceding the effective date of the appraisal is necessary in order to establish a benchmark for reporting present market conditions. Although there is no standard industry definition, for purposes of performing appraisals of properties that are to be collateral for FHA-insured mortgages, a declining market refers to any neighborhood, market area or region that demonstrates a decline in prices or deterioration in other market conditions as evidenced by an oversupply of existing inventory and extended marketing times.
Generally, a trend in the housing market is identifiable when it extends for a period of at least six months or two quarters prior to the effective date of the appraisal. In a declining market, negative market condition adjustments should be applied if there is sufficient proof of the trend from a credible source based on a thorough analysis of specific market trends and as evidenced by a sale and resale comparison.
For additional information see Handbook 4000.1 II.D.4.c.iii(F) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh