“The housing market is on the brink of disaster”; “The housing market is going to crash”;
“Prices are crazy”; “A foreclosure is a deal”
With everything going on in the world, and the housing market taking off Nationally, we are coming across a lot of buyer hesitancy. They think it is 2008-2009. Though there are some stark differences in what is going on in our market. Back in the Housing Crash they were giving away mortgages to any one who had a pulse. Bad lending practices led to a large group of people being qualified and never having a shot of paying the mortgage. Thus 2008-2009.
Fast forward to Today. It is very difficult to get a mortgage. So many different factors and regulations have been put in place in order to protect the consumer. Prices have risen steadily over the past 5 years, and this past year rose 20%. 1-3 buyers are relocating to our area. 1-4 offers is cash. Why is that?
Co-Vid, Government, Realignment of what is important,
There are a variety of factors that contributed to our boom this past year. Co-vid being one of the major factors. People living in congested cities with skyrocketing infection rates decided maybe it isn’t for them anymore. Those with money fled urban areas for a much more rural feel and how could you blame them? Most companies allowed their employees to work from home, so many people took advantage of that and change where “Home” was.
Whether you love or hate Florida Government; it is hard to deny a couple of things. We “closed” for maybe a month during the pandemic, and then things quickly got back to normal. Most areas were not affected by the pandemic til later in the year so there was a more laid back reaction. Because we stayed open, we did not have nearly the amount of businesses closing, unemployment than competing metros. Our unemployment right now is around 3%.
People have changed. Maybe I am the only one who sees it; though work, school, play is all changing since Co-vid. Fast food companies cant find employees, there isnt a need for offices with Zoom, kids can school from home. These things have changed what people are looking for in a home. An office, a second living room for a “classroom”. The needs of housing have fundamentally changed; possibly forever.
What does this have to do with foreclosures?
As of right now we think there is a wave of foreclosures coming to the market because of Co-vid. People think that because so many people lost their jobs that foreclosures will follow in its footsteps. This is more than likely market specific. There was also a forbearance grace period allowed to most lien holders.
Under the Cares Act if you had a government backed loan, USDA, FHA, VA, you could apply for mortgage forbearance program. This allows you to either pause payments or lower payments for a certain amount of time. The money owed would then be restructured into the life of the loan
So if you purchase a home and it was going to take you 29 years to pay it off, you go into forbearance for 6 months, its now going to take you 29 years and 6months to pay it off. They added the debt to the end of your loan. There was also an eviction moratorium; so you couldn’t kick people out if you wanted to.
Foreclosures also take about 2 years to execute from first notice. So any foreclosures we see today are more than likely from 2019. First the buyer has to default. Typically if you miss one payment the bank will be lenient with you, some have a grace period. There are a couple steps to the foreclosure process.
Default – missed payment by 30 days. Judicial.
Notice of Default issued/Judgement – Opportunity to work it out with Lender
Pre-foreclosure – The time between default and the sale of property
Notice of Sale – In FL it is put up for Auction. Buyer can take possession right away.
Lets say you bought a house in St. Augustine and then the pandemic happened. In turn you lost your job and can’t make payments. You would go into forbearance. Like I said our unemployment in Florida is really low; so assuming you never found another job and the forbearance period ends, what happens? Will you get foreclosed on? At that point it is really a personal choice! Why? St. Augustine has appreciated 20% since last year. If you are under water in your payments you have the ability to sell in this market (FAST) and get out from under it.
As of right now there are 4 foreclosures in our market and 9 Short Sale Homes available. In Our ENTIRE Market. So if you are specifically looking for a foreclosure within a specific area with specific features, you could be waiting a long time for that to perfect foreclosure to meet your needs.
In summary, I do not believe this “wave of foreclosures” is coming anytime soon. As long as our market keeps being desirable, homeowners will have a quick out if they are under water. Like I said earlier this is market specific. So an area that has not appreciated like St. Augustine may experience more foreclosures.