REAL ESTATE NEWS
A Surge of Foreclosures and Short Sales? Unlikely.
With the turbulence in the country right now, many are nervous that we will experience a surge of foreclosures and short sales due to the COVID-19 recession. People have seen the huge number of mortgage delinquencies this year. They assume we are on the brink of a foreclosure crisis like back in 2008-2009 when people were losing their homes at an alarming rate. Based on the available data, things are very different this time around.
For starters, forbearances in 2020 factor heavily into mortgage delinquency counts. These are people who voluntarily put their payments on pause and plan to catch up in 90 days, 6 months or even 12 months down the road once shutdowns have ended and things became closer to normal at work. These forbearances look to be 90+ days delinquent in the data. However, they are different than true delinquencies because these homeowners plan to, or have already, modified their loans to catch up over the long term.
Of all the people that took a forbearance nationally, only 4% have had their payment holiday expire, could not re-start payments, and are now actively delinquent. Because of strong home appreciation in Colorado over the past decade, 95%+ of the locals among that 4% will have a lot of equity and should be able to sell their home without distress.
Low Entry-Level Inventory Expected to Persist at Least Through 1Q2021
Despite a “V-shaped” recovery in the national markets since the COVID-19 crisis began in March, many are calling the current pattern more of a “K-shaped” recovery. This is because of the divergence in the strength of the recovery between people of different socioeconomic backgrounds. People with less education and income have been disproportionately affected by the latest recession, which has set back the home buying goals of many people.
If you are on the hunt for an entry level home, condo or townhome and qualify for financing, now may be the best time to act. The 2021 spring season is expected to be red hot as many people who had originally postponed the sale of their homes are expected to bring them to market after the election and a harsh winter. This should also put more buyers on the prowl who were trying to wait out the COVID-19 crisis.
If you find a home you are interested in, act quickly. Make strong offers and do not expect sellers to negotiate many concessions. In this market, sellers are in the lead in terms of negotiations. You do not want to lose out in a bidding war because of petty details like paint colors or finishes. If you do get into a home, there should be plenty of time to make these adjustments as you go along. Focus more on big ticket health and safety concerns, as that’s most likely what other buyers will be doing too.
If you are looking for a trade-up or more expensive home, now may be a great time to pounce. Conforming mortgage interest rates (under $510K) are at record lows, and jumbo loan rates have also dropped a lot. Despite an expected 0.5% increase after the election (based on historical trends) the cards are still in your favor. The demand for your original home is probably sky-high. There is generally more to choose from on the higher end price points. This could be a golden opportunity!
Fewer and Fewer Sellers Are Willing to Drop Prices
As the demand for homes continues to skyrocket and inventory continues to shrink, few sellers are accepting negotiations on price. And why would they? Well, the main answer is still overpricing. Be sure to do your research. Rely on your agent to help you accurately price your home based on comparable homes in your neighborhood. The biggest reason people have to reduce the price of their home or accept lower-priced offers is because they get excited. They ignore all of their agent’s warnings and list their home at a higher price than the market value. As a result, the home sits on the market for too long.
This is when price reductions begin. Buyers may begin to wonder, “What’s wrong with that house?” and so on. With such a strong market, do not fall into this classic trap and potentially lose out on thousands of dollars just because of your hubris in this seller’s market. Based on the current market trends in the Denver metro, you are likely to receive strong offers on your home. As long as, it’s priced at a fair value from the start. Average home prices are up again this year. The bidding wars may jack the price of your home up to what you wanted it to be anyway.