Having been in real estate for over 15 years and having survived the last real estate crash, I thought I would jot some thoughts down on why we probably will not see a repeat of that crash.
The first bit of data that I wanted to share is a report by Black Knight. They show that the number of people asking for forbearances is actually much lower than what was predicted would happen. Original predictions were that we would hit up to 30% of loans going into forbearance. According to the report recently release, less than 10% of mortgages have asked applied for them. You can see the report here.
Those individuals that have had the need for a these delays in payments
have numerous advantages over those individuals that lost so much back in the last housing crash.
First and foremost, homes are at an all time high in value. This means that people have equity in their homes and can sell their homes and pay off mortgage loans. Due to the lack of inventory, home prices keep rising and with the low rates available, we have a high demand from buyers still hitting the market.
Secondly, banks learned their lessons. Believe it or not, banks lose thousands when a home goes into foreclosure. They are not in the market to foreclose and attempt to sell homes. A majority of the banks are offering options for the repayment of these missed payments. Such as:
Deferment - This is when the bank extends the term of the loan and moves the missed payments to the end of loan term.
Refinance - With interest rates at an all time low, people that bought a home several years ago may be able to lower their current payments with a refinance. Even a 1% drop in interest can make a huge impact on monthly payments.
Repayment plans - Some banks are offering a repayment period where home owners that have gotten their jobs back can make slightly higher payments each month to pay back the missed payments over a longer period of time.
There will still be some foreclosures and still some need for short sales but the big flood of these properties is more than likely not going to happen in my opinion. There are safeguards in place and options for people needing assistance and help.
If you are facing issues with your payments and are struggling, it is important to explore your options before the payments get out of control. Contact your bank to see what options they have to offer and you can also contact us for a free no obligation market analysis on your home to see if there is equity in your property.
