Q: Is a Wave of Foreclosures Set to Crush Our Housing Market?

I don't foresee a wave of foreclosures crushing our market. Here’s why.

With the housing market strengthening every day and more Americans returning to work, our housing sector is recovering from the pandemic faster than what was expected. However, many people are still asking the question: Will we see a wave of foreclosures given the current crisis?

Thankfully, research shows that the number of foreclosures is expected to be much lower than what the country experienced during the last recession. According to Black Knight, Inc., the number of mortgages in active forbearance has been leveling off over the past month. Of the original 4,208,000 families granted forbearance, only 2,000,588 homeowners got an extension. This shows that people are paying their mortgages again. Either that, or they never tried lengthening their payments in the first place. They may have applied for forbearance out of caution, but they never acted on it. 

The housing market is in a better position than many think, and much of this is due to the fact that today’s homeowners have more equity than in years past. According to John Burns Real Estate Consulting, over 42% of all homes are owned free and clear. This means they’re not tied to a mortgage. The other 58% average roughly $177,000 in equity. This figure is keeping many homeowners afloat. 

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   A perfect storm for a wave of foreclosures is not in the housing market forecast.

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While ATTOM Data Solutions indicates that there’s a potential for foreclosures to increase throughout the county, it’s important to understand why they won’t rock the housing market this time around. As of right now, the active quarterly foreclosure number stands at 74,860. That’s over 7.5 times lower than the number of foreclosures we saw in 2009. Even if the number of quarterly foreclosures doubles, they’ll only reach a normalized range, historically speaking. 

Equity is growing, jobs are returning, and the economy is slowly recovering. A perfect storm for a wave of foreclosures is not in the housing market forecast. While our hearts are with anyone who ends up in a foreclosure situation as a result of this crisis, we do know the homeowners have more options than they did 10 years ago. For some, this may mean selling their house and downsizing without equity, which is a far better outcome than foreclosure. 

As always, if you have questions about this or any real estate topic or are thinking of buying or selling a home soon, don’t hesitate to reach out to me. I’m happy to help.

Q: What Do the Experts Say About Future Home Prices?

Here’s what you can expect from our real estate market moving forward. 

The worldwide pandemic and economic recession have had a tremendous effect on the nation. There’s a lot of uncertainty when it comes to predicting consumer behavior, which is nearly impossible anyway. By extension, forecasting home prices has become difficult as well. Normally, there’s a simple formula to determine future pieces: supply and demand. 

Right now, demand for homes exceeds supply. Mortgage applications are at an all-time high, and inventory is at an all-time low, which normally indicates strong appreciation, but we went into a three-month reset, so we’re catching up to what would’ve happened during that time. Some experts aren’t convinced the current rush of home purchases is sustainable. The pandemic and other challenges impacting the industry have created a wide range of thoughts regarding the future of home prices. 

Cited below for your convenience are timestamps that will direct you to various points in the video. Feel free to watch it in its entirety, or use these timestamps to browse specific points at your leisure: 

1:48—Expert analysts and their predictions for home prices

2:54—The outlook for this summer 

3:17—The impact of unemployment 

4:13—Why we’re not in for a full recession ala 2008 

5:10—The journey ahead 

5:41—Wrapping things up 

As always, if you have questions about this or any real estate topic or are thinking of buying or selling a home soon, don’t hesitate to reach out to me. I’m happy to help.

Q: What’s in Store for Our Phoenix Real Estate Market?

Here are the latest updates you need to know about Phoenix real estate. 

In Arizona at least, we’re continuing to sell real estate, though we’ve adapted to the new normal.

Inventory is starting to go up, and we’re undergoing a slight shift. Values took a dip but are starting to increase again. As one of the fastest-growing cities (and states) in the country, people are still coming into our market in droves.

The pandemic sort of reset everything and pulled the economy back a bit, but I’d say by the end of the year we’ll be back on track again. Things will likely be a tad skewed toward buyers, but overall it will be a balanced market. Since our inventory has started to increase, buyers will come out of the woodwork to look around and see what fresh options they have.

A few important things have changed, most notably concerning how people show and view homes. Buyers must honor the wishes of the folks whose homes they’re touring, and this means wearing masks and other protective gear and using sanitizing stations. It may be the case that the seller only wants one person in the home at a time; you have to be flexible.

Interest rates are still unbelievably low, and the Phoenix market is a very affordable one.

3D tours and other virtual tours have proven to be effective tools in the market, allowing buyers to get a pretty good idea of what a given house looks like before they venture out in person. Moving forward, our industry will continue to depend on technology a lot more.

I think that real estate will be one of the economic drivers to pull us out of the recession and into recovery mode. People forget that we’ve experienced year after year (11 total) of increases in values. It’s imbalanced; history shows us that after so many years, the market sort of resets—a period known as a recession. This one, unlike the one in 2007 and 2008, is not a financial collapse spurred by irresponsible lending amongst banks. Though initiated by a very abnormal event, this current recession is more like a temporary slowdown.

It will take a couple of years to fully pick up steam and once again see continuous increases in values—but it will happen. Around the bend, you’ll probably first see inventory increase and a 3% to 5% give in value over the next three to six months. Interest rates, however, are still unbelievably low, and the Phoenix market is a very affordable one. The median price is still hovering in the low $300,000 range.

Give us a call if you’re thinking about selling and we’ll be glad to help you prepare your home for the ‘new normal’ for showings. Of course, we’re always here to take care of your buying needs, too! We look forward to hearing from you.