Everyone’s wondering about what the 2023 (and beyond) real estate market will bring. Fewer people are buying their first houses and the market prices have been in the stratosphere making homes less affordable. Given this trend, it’s natural to wonder if we’re going to see a huge correction or even a rash of foreclosures in our future. The signs are actually very optimistic! In today’s post we’re going to explore what those positive signs are & why I don’t think there will be a huge bump in foreclosures in the near future. If you have any questions about this article or want to have an expert consultation with Michael, give us a call today! We can’t wait to hear from you. Now, on to the post!
The Past We Are Not Doomed To Repeat
One of the major contributors to the 2008 crash (and subsequent explosion of foreclosures) was that the banks had their lending criteria so low, it was almost comical. Just about everyone was able to waltz into a lending office and come away with way more home than they could afford or could even use. Homes were cheaper and the dollar was stronger, so the amount of money changing hands in today’s dollars was astronomical. Well, the banks learned a valuable lesson from that 2008 experience and have since tightened their criteria for lending and currently have a much more stable portfolio of mortgage loans on the books. Buyers who have purchased homes since can actually afford them. Barring a catastrophic change in income or employment, they should be just fine and are not just “squeaking by”.
Party Like It’s 1979!
Current foreclosures are as low as they have been in the marketplace since 1979! That means that we are in a veritable golden age of market stability. This should give you confidence in investing your hard earned dollars into today’s and tomorrow’s market. So, that makes all of those bell bottoms you saved in your closet that much cooler.
COVID Was Less Of A Market Impact Than Expected
Some thought we would see foreclosures because of COVID and the forbearance options for homeowners. For those who don’t know, forbearance allowed borrowers to skip mortgage payments for up to a year if they expressed a financial hardship due to COVID. The caveat was that after the forbearance period expired, they must resume making on time payments. At this point, going into 2023, we are well past the forbearance expiration period and most borrowers who were in forbearance are now making on time payments. Just like people thought the world was ending on December 31st, 1999, Y2K never came to pass, just like this COVID slump that never panned out. Many expected most of the borrowers in forbearance to go into default and this just hasn’t happened.
Don’t Count Out The Power Of Equity
Many homeowners in the current real estate market also have a substantial amount of equity. If a homeowner gets catastrophically behind on mortgage payments and it goes into foreclosure, they will most likely list their home and sell it before it forecloses. If we start to see people getting in trouble with their payments the first clue will be a large increase in the number of homes for sale/listed, that isn’t happening based on current market stats.
For The Road
As we move into the new year, keep in mind that the future is bright and the outlook is good in the real estate world. You just have to keep looking forward. Wondering how to accomplish that? Give us a call! We would love to talk to you and to help you along the buying process every step of the way.
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