The idea of a foreclosure wave always gets attention. If you are looking for a deal the indicators of another foreclosure or short sale wave of the last mortgage meltdown years is not going to happen. We do have a few of commonalities of that time that could lead someone to this conclusion. There are climbing unemployment numbers, there are inflated house prices, and buying frenzies.

But what we do not have is unqualified loans being given out. The loans are based on income and triple verified, employment is double and triple verified, buyers are getting standard loans of 15 and 30 years with 20% down. AND while there are a lot of sales the sales volume is not at all what it was at that time. The loans are qualified with real buyers, with real incomes and real money. The current busy market is not fueled by bad loans but it is more of supply and demand problem there is more demand than supply. 

What does 20% down mean in terms of values, it means if a house sold in a neighborhood for $900,000 the bank has lent $780,000 on it. The bank has invested 80% and if the buyer needed to sell they would most likely get their money back OR sell at a bit of loss still avoiding a foreclosure or a short sale. A bit of equity is built in or as we like to call "skin in the game." The bank would much prefer the loan product to stay in place than try to grab the home from a few missed payments. Some banks have even offered forbearance during this time offering to put payments off for a few months or add the payments to the end of the loan. I had two sellers this year that took this option than sold the home and used the money to find a better housing situation.

For Santa Cruz County, investment groups buy the occasional foreclosure before the buying public is aware of it for cash at an online auction. And if one should hit the Multiple Listing Service it will be absorbed into the market at market price. It will be bid up and the discount will be dissipated. 

It would take a very deep unemployment wave to dig into property values, or an absolute glut of homes being put on the market none of which are foreseeable at this time or for the year of 2021. 

Posted by Michele Replogle on


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