In today’s uncertain times, it’s crucial to differentiate between speculation and reality when it comes to the housing market. Recently, one of my clients heard from a family member that they should wait for a flood of foreclosures to hit the market. However, let’s take a closer look at the current situation to get a clearer picture.
- Delinquency Levels and Media Spin
Contrary to what you might hear in the media, present mortgage delinquency levels are only about half of the historic average. While it’s true that some headlines may claim a 50% increase in delinquencies or foreclosures, these figures are based on small, isolated numbers. We must remember that just a few years ago, there was a moratorium on foreclosures due to the impact of COVID. It’s important not to overinflate the situation; this is not a repeat of the 2008 crisis.
- Homeowners’ Equity Position
Homeowners today find themselves in a unique and favorable position. Thanks to the recent surge in property values, homeowners’ equity in their properties has reached historic highs. With a relatively low level of active inventory, distressed owners have the option to put their properties on the market and capitalize on their equity. This serves as a safety net for many who might otherwise face foreclosure.
- Mortgage Underwriting Guidelines
In response to the lessons learned from the 2008 recession, mortgage underwriting guidelines have become much stricter. Most mortgages originated in recent years are fixed-rate mortgages with favorable low rates, with a staggering 83% of them falling below 3.99%. This emphasis on fixed-rate mortgages has created a more stable foundation for homeowners, reducing the risk of default.
- Adjustable Rate Mortgages and Property Appreciation
There are still some adjustable rate mortgages in circulation, many borrowers have experienced substantial rate increases over the past year. This might put some financial pressure on them, but the positive side is that with the recent appreciation in property values, homeowners now have more options to explore and avoid the dreaded foreclosure scenario.
- Loan Servicers and Workout Plans
The government is putting pressure on loan servicers to work proactively with borrowers to avoid foreclosures. For homeowners facing financial distress, engaging in dialogue with their lender is of utmost importance. Exploring workout plans or other feasible alternatives can help prevent unnecessary foreclosures.
In conclusion, while there will always be some level of foreclosures in any housing market, the current real estate landscape is far from resembling the dire conditions of 2008. The Federal Reserve has raised rates to slow inflation, but the population is entering this economic cycle with strong balance sheets. With low mortgage delinquency rates, robust homeowners’ equity, and improved mortgage underwriting practices, the outlook remains considerably more stable. Homeowners facing difficulties are encouraged to communicate with their loan servicers to explore viable solutions, ensuring a more secure housing market for everyone.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, SRES, SFR, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
Leave a Reply