Published November 4, 2020
Q: Why Do Forbearances Have Little Impact on Our Future Market?
Here’s why the forbearance situation in our market is nothing to worry about.
Several weeks ago, financial guru Suze Orman famously advised homebuyers to wait to purchase until after all the current homes in forbearance went into foreclosure. She reasoned that that’s when all the good deals would start popping up in our real estate market. Since then, though, home prices have continued to climb and the numbers don’t support her theory.
Back in May, it was projected that roughly 30% of all home loans could go into forbearance, but that statistic peaked at 8.6%, and roughly 71,000 homes per week are coming out of forbearance and returning to a normal mortgage cycle. In other words, the situation is recovering much faster than previously imagined.
I personally never believed that our housing market would be heavily impacted by this COVID recession, and there are three reasons why:
1. None of the systemic flaws that produced the last recession in 2008 exist anymore. Our housing market is much more robust now.
2. Homeowners have much more equity. How can they go under foreclosure when they’re already right-side up and could sell on the open market if needed? Furthermore, inventory in some markets is dropping down to just one month’s worth of supply. Typically, we like to see a four- to six-month supply, but we’re in an incredible seller’s market right now.
When you combine these reasons with the general condition of the market, I don’t foresee a decline in home prices.
3. Homeowners have plenty of options to prevent a foreclosure. Foreclosures aren’t healthy for anyone, and the mortgage industry simply has too many assistance options to extend to homeowners to keep foreclosures from happening on a large scale.
When you combine these reasons with the general condition of the market, I don’t foresee a decline in home prices. I think we’ll see a leveling off as inventory normalizes and we return to a more balanced market, but I don't anticipate that happening for a while either. We’re seeing a bit of a slowdown in some of the luxury and ultra-luxury markets, but the market is very strong below the $700,000 price point.
If you’d like to know more about our real estate market, feel free to call or email me anytime. If you’d like to browse the available homes in our local marketplace or get a free valuation of your home, don’t hesitate to visit my website. I look forward to hearing from you.
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