As a fledgling surfer who aspires to ride a wave with control and not straight into the beach, I generally get excited when I think about waves. However, there is a big wave coming that I am none too excited about . . . it is the upcoming foreclosure wave. In the industry, many of us have been hanging out waiting for this eventual second wave to come crashing to the shore of a sensitive market, and I suspect that wave is coming soon.
Late in 2008 around the holidays, lenders were encouraged on a National level to hold off on foreclosure filings to allow time for the government to develop a housing stabilization plan (one which missed the mark, I hate to say) in order to help people stay in their homes. Locally in SC, as recently as May of 2009, the State Supreme Court ordered banks with loans backed by Fannie and Freddie Mae to stop filing foreclosures. By holding the tide back, we have been building up a tsunami of sorts.
There are several factors that are bringing on the “second wave” form government interference with the foreclosure process to more individual reasons. Sadly, with the economy still floundering and jobless rates increasing, many of the homeowners who were struggling to pay their mortgages before are still struggling now; eventually, the banks will have to move forward with foreclosures and these homeowners will be the ones who are going to be pounded by the wave. I read an interesting discussion on a real estate website this morning about homeowners who are choosing to bank their mortgage payments and go into default because they live in a market where the values have declined by 60% (Florida) and they would prefer to go into foreclosure than to pay on a loan that does not represent the true value of their home. And we are still seeing those nasty ARMS reset from as late as 2006, so that brings on a whole new batch of homeowners who are about to get a nasty wake up call . . . so yes, there is another wave on the horizon.
So is it a good time to be a seller? Heck no. If you are a seller who just wants to test the market – hold off for a couple of years and test again later. But if you are a seller who understands that you will get an awesome return when you are in the buying position – then yes, go for it. Just don’t be too shocked that your value is off a bit, because you will get your reward as the buyer when you can upgrade your home at a great price.
Which brings me to a point and a good place to end this ramble - now really is the right time to buy. Even with that looming wave that may push home values lower, this is the better time to buy because the interest rates are still nice and low. If you had a budget of 1100 a month for your mortgage payment, about two months ago you would be looking at a home around 200,000. With the interest rates starting to creep up, this month, you can only afford a home at 180,000, and even though home values have been coming down, they certainly haven’t dropped that much in our market to mean that the 200K home form 2 months ago is only worth 180K now. My advice? . . . go paddle out to the wave and get shopping!