Is there a foreclosure crisis coming to the housing market
and how is that going to affect home values? That is what we're talking about today, so let's dive in !
As we're nearing the end of 2020, with still millions of homes in mortgage forbearance,
it's easy to see why some people think that there is a foreclosure crisis looming
in the housing market in the coming year. Hi I'm Daphne Bousquet, a local realtor with Fayette and
Peachtree City Homes and Lifestyles for Berkshire Hathaway HomeServices Georgia Properties
Although I do not have a crystal ball, I do have access to a lot of resources,
housing experts and facts that Ii research on a daily basis, so that I can keep my clients informed.
After all, informed buyers and sellers make smarter decisions and that is what this YouTube
channel is all about. So be sure to subscribe and hit that bell so you can stay in the know.
Before we head back to mortgages in forbearance and how that translates into foreclosures, let's
go back to see what happened to the general housing market since the pandemic started
As you recall when the country was shut down the housing market and pretty much the entire
economy went into a free fall. However as soon as parts of the country were reopening, like we
did here in Georgia, the housing market started coming back and it has been rising ever since
So how is that possible? After all, the unemployment is higher than it was at the beginning of the year
Let's start by seeing what people did with their stimulus checks. As you can see
only 29% used the money to pay bills, 35% used it to pay down debt and 36 percent saved it. And that
is reflected in the average FICO credit scores, which actually went up by three points in July
Since people are spending more time at home, your home becomes more important. And
if you now use your home as your main office, your kids school, at least part of the time
and your staycation destination, you have a lot more requirements for your home.
So people start looking for a home that meets all those requirements.
Homes that have room for a home office, homes that have space for a school room, homes that
have a pool, homes that have a media room. Add that to all time low interest rates and the normal
spring market demand that moved to the summer and it is easy to see why the housing market took off
Home values increased quite a bit over the last year. In fact, I had clients sell a house
they bought only two years ago and the value of their home increased by 25%. That is a huge
gain in such a short amount of time. All major housing forecasters had to adjust their forecasts
and where they forecasted doom and gloom only six months ago, they are now forecasting increases in
home values. Zillow had forecasted a three percent drop in home values and are now forecasting a
seven percent increase. That is a swing of 10%! Of the major forecasters only Zellman
and Associates had to adjust their forecasts by less than 3%. However there are not enough homes
on the market to meet all this demand and as Mark Fleming the chief economist of First American says
"In the game of housing musical chairs it is clear the housing market needs more chairs."
Here in Fayette county we have had between 400 and 500 homes on the market in the past
few years and as you may know, the last few years have been a robust seller's market. So that means
there are more buyers than sellers. However in the last few months, we have had fewer than 250 homes
on the market. Homes are flying off the market and the average days on market for homes sold
over the last six months is only 38 days. How does this translate to the possible foreclosure crisis
and what happened to homes in forbearance when it ended in September? Of the 5.8 million
families in forbearance when the plan ran out, 41% either paid off their mortgage or were current on
their mortgage. For another 2.8 million, forbearance was extended. Many banks made it super easy to just
extend forbearance, so that does not mean that all of these people are in default or even behind
on their mortgage. A good many of them are still paying their mortgage. For
267,000 families forbearance expired and they are in loss mitigation. Which means they are either making
extra payments to catch up or are tacking those payments on at the end of their loan,
and 54,000 families are currently delinquent. Now of course it is terrible for the people who
are struggling to pay their mortgage, however they have options. Unlike the crisis in 2008,
where the majority of homeowners were upside down and owed more than their homes were worth, today's
home owners have an average of a $177,000 in equity. Home
prices are still going up and homes are selling fast. Banks are not looking to add a lot of houses
to their portfolios. If a homeowner is in trouble, they have plenty of time to sell their house, pay
off their mortgage and still have a good amount of money left over. Home owners have options and
as Ivy Zellman says, "The likelihood of us having a foreclosure crisis again is about zero percent."
So if you are waiting to buy a new house until the prices drop in a foreclosure crisis, it doesn't
look like that's going to happen anytime soon. Buy it now, while interest rates are at an all-time low
and home prices are projected to continue to rise. Click the link below to start your search.
Whether you want a home with a pool, a home on a lake, home with a basement, I got you covered
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