Don't Fear Foreclosures
The real estate market is acting as the very definition of a seller’s market. There is sky-high demand from home buyers because of low mortgage rates. At the same time, the inventory of available homes to purchase is at historic lows. In 2020 there were many homeowners who opted for a pause through mortgage forbearance plans. Luckily, this will not be a repeat of 2008. Homeowners should see the value of their homes go up in 2022 and engage the market with confidence.
Forbearance Extensions are Ending
Many were scared that the coronavirus pandemic would result in a real estate market crash similar to 2008. The fear was based on the idea that pandemic lockdowns would cause mass unemployment. In turn, this would cause millions to fall behind on their mortgages. This did happen. However, the government stepped in to prevent an eventual wave of foreclosures by putting in place a foreclosure moratorium and forbearance extensions.
A forbearance is when a lender agrees to hold back the process of payment for the person who has borrowed. This means that the payment on a mortgage is delayed to avoid a foreclosure. Due to the COVID-19 pandemic, the forbearance puts a pause or reduces payment for your mortgage. It is not an automatic process and you must request it from your mortgage servicer. If you are experiencing financial hardship from the virus, you most likely qualify. When the forbearance ends, you will pay through a payment plan and not a lump sum.
These measures were effective at preventing the bottom from falling out of the housing market. Unfortunately, the forbearance extensions are ending. These extensions will end in waves and the first batch is set to expire in June. At some point, we will see a bump in foreclosures, which is never a good thing. We understand the value of homeownership and hate to see anyone lose their home. Thankfully, many have been able to catch up on their mortgages. The fall out will not be as large as some feared at the beginning of the pandemic. What this does mean for home sellers is that there will be more inventory coming onto the market in the near future. Inevitably, this will take away home seller leverage and put a cap on the price you can sell your home for.
Foreclosures Will Not Happen In A Large Wave
It is very unlikely that we will see a wave of foreclosures happening. The Mortgage Bankers Association recently released data noting how different people exited their forbearance program. 38.6% of people who left the program will have their mortgage paid in full, which is already a large amount. 44% of the people also negotiated work out repayments through getting a different repayment loan, receiving a loan modification, or receiving a deferral. The statistics are overwhelmingly positive. People are handling their forbearance so that there will not be a wave of foreclosures. This is important because it means that there will be no large crashes.
If you or someone you know is still stuck in the forbearance plan, there is still cause for optimism. People who are still in forbearance are able to work out repayment plans. On top of this, homeowners always have the option to sell their homes. The housing market has steadily increased in prices, so homeowners have been accruing more equity as time goes on.
Home Seller Sentiment is Changing
A lot of market changes are based on psychology. One reason why homeowners have been reluctant to sell their homes is FOMO (fear of missing out). Homeowners have seen their home values rise dramatically since the beginning of the pandemic. While many homeowners could have sold their homes and locked in large increases in equity, many have been reluctant. This is because of FOMO. Homeowners did not want to miss out on even more increases in equity as their home value continued to increase. However, it looks like FOMO is receding and home seller sentiment is changing.
The April Home Purchase Sentiment Index released by Fannie Mae shows us a changing sentiment. The index noted that there is a higher percentage of people who think it is now a good time to buy a house. This number has increased from 61% to 67%. Similarly, it was revealed in a survey from realtor.com that the sellers market is starting to change.
George Ratiu, an economist from realtor, tells us that “one-in-ten homeowners plan to sell this year.” 63% of those people are looking to list in the next 6 months. The outlook of the market is changing, and it’s important to stay informed.
Final Thoughts
A large wave of foreclosures is extremely unlikely. Homeowners have several options when it comes to dealing with their forbearances, and many homeowners have already dealt with their loans. Any foreclosures will not be commonplace, and both buyers and sellers should be confident in their use of the market. Most people who have mortgages are in a good place and could lead to even more equity in the long run. If you have questions or concerns about your mortgage or forbearance, contact us! People’s Choice Mortgage is here to help you enter the market and get you the best possible experience.
