Today I want to talk to you about a foreclosure crisis that might be looming on the horizon, and what it could mean for you. I’m sure you know how the pandemic and lockdowns have hurt the economy. Many people have lost jobs or had their hours cut significantly. As a result, they are struggling to make regular mortgage payments.
You’ve probably also heard about various forbearance programs. These are temporary private and government programs that allow mortgage borrowers to postpone or even reduce their monthly mortgage payments. As it stands, 3.7 million borrowers are in mortgage forbearance programs. That’s about 7% of all active mortgages.
Many of these folks just hit the six-month mark of mortgage forbearance. The big question is what will happen in another six months when the maximum term for these forbearance programs comes to an end? That brings me to the possibility of a foreclosure crisis. Indeed, many people will still not be able to make their mortgage payments as forbearance programs run out. Unfortunately, some will be forced into foreclosure.
However, I’m not expecting a scenario like 2008. The difference comes down to current sky-high home prices and record-low mortgage rates. These unique circumstances mean that most homeowners have equity in their homes right now. In fact, home equity for homeowners with a mortgage rose 6.6% annually in the second quarter of this year.
This rise in equity means homeowners have options, even if they are struggling to make payments. In other words, they can put their homes on the market and sell them rather than lose them to foreclosure.
So what does this mean for you? Well, the current real estate market is severely short on its supply of homes. Homes are selling very quickly and at record prices simply because demand is so much higher than supply.
Even if we don’t see a foreclosure crisis in the coming months (and I do not believe we will), there is likely to be a flood of new homes for sale on the market. It’s likely to put a chill on home price growth or even reverse it. We will enter a more balanced market, where buyers have more of a say.
I bring this up in case you have been thinking about selling soon but are still on the fence. The current moment might be golden. The lack of supply right now means you could sell quickly and for top dollar.
If you have any questions, whether you’re buying or selling, give us a call or send a quick email today. We have our fingers on the pulse of the Central Florida real estate market, and we can help you make the right decision for your specific circumstances. We look forward to hearing from you.