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The health crisis we face as a country has led businesses all over the nation to reduce or discontinue their services altogether. This pause in the economy has greatly impacted the workforce and as a result, many people have been laid off or furloughed. Naturally, that would lead many to believe we might see a rush of foreclosures like we saw in 2008. The market today, however, is very different from 2008.

The concern of more foreclosures based on those that are out of work is one that we need to understand fully. There are two reasons we won’t see a rush of foreclosures this fall: forbearance extension options and strong homeowner equity.

1. Forbearance Extension

Forbearance, according to the Consumer Financial Protection Bureau (CFPB), is “when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage.” Thisis an option for those who need immediate relief. In today’s economy, the CFPB has given homeowners a way to extend their forbearance, which will greatly assist those families who need it at this critical time.

Under the CARES Act, the CFPB notes:

“If you experience financial hardship due to the coronavirus pandemic, you have a right to request and obtain a forbearance for up to 180 days. You also have the right to request and obtain an extension for up to another 180 days (for a total of up to 360 days).”

2. Strong Homeowner Equity

Equity is also working in favor of today’s homeowners. This savings is another reason why we won’t see substantial foreclosures in the near future. Today’s homeowners who are in forbearance actually have more equity in their homes than what the market experienced in 2008.

The Mortgage Monitor report from Black Knight indicates that of all active forbearances which are past due on their mortgage payment, 77% have at least 20% equity in their homes (See graph below):Black Knight notes:

“The high level of equity provides options for homeowners, policymakers, mortgage investors and servicers in helping to avoid downstream foreclosure activity and default-related losses.”

Bottom Line

Many think we may see a rush of foreclosures this fall, but the facts just don’t add up in this case. Today’s real estate market is very different from 2008 when we saw many homeowners walk away when they owed more than their homes were worth. This time, equity is stronger and plans are in place to help those affected weather the storm.

For seniors who have modest incomes, paying for housing- whether a home they own, a rental, or a room in a facility that provides additional senior care assistance- can feel nearly impossible. According to the National Council on Aging, in 2019 over 25 million Americans 60 and older were living on $31,225 or less per year, a status recognized as “economically insecure.” For those who rent, have housing debt, or need some form of assisted living, such an income is often inadequate for their housing needs. 

Read the rest of the article at Senior Homes – Senior Living Near You:

Carolina Living Real Estate your Realtor’s For Life

With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008. The feeling is understandable. Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

“With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”

There are many reasons, however, indicating this real estate market is nothing like 2008. Here are five visuals to show the dramatic differences.

1. Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers’ Association releases a Mortgage Credit Availability Index which is “a summary measure which indicates the availability of mortgage credit at a point in time.” The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows how getting a mortgage is even more difficult than it was before the bubble.

2. Prices are not soaring out of control.

Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.There’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did in the early 2000s.

3. We don’t have a surplus of homes on the market. We have a shortage.

The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory which is causing an acceleration in home values.

4. Houses became too expensive to buy.

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here’s a graph showing that difference:

5. People are equity rich, not tapped out.

In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out over $500 billion dollars less than before:During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owned was greater than the value of their home). Some decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. That can’t happen today.

Bottom Line

If you’re concerned we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

The start of each year provides an opportunity for setting new goals and resolutions to accomplish. And what better resolution is there than boosting the safety and security of your home? That’s why we’ve put together this list of solutions to consider that can make 2020 the safest year yet for you and your family:

Getting a New Furnace

We’ll start with one factor that most families don’t think about until there’s an obvious problem: the furnace. This year, have a professional come out and look at your furnace to make sure it’s in good condition. If your home’s furnace is old or malfunctioning in some way, it can pose a number of dangers for your household.

The most significant threat is carbon monoxide poisoning, as this invisible, odorless gas can cause serious—potentially fatal—health issues. A bad furnace can also lead to an increase of pathogens, mold, and dust circulating in your home, which can cause breathing problems for people in your household. Furthermore, if a furnace is not working properly, it can become a fire hazard.

HomeAdvisor notes the average cost of installing or replacing a furnace is currently between $2,543 and $6,121. Whether you pay within this range or pay more or less will depend on what type of furnace is installed. For instance, an electric furnace can run you anywhere from $1,700 to $7,000, while a gas furnace typically costs $2,000 to $10,000.

When you’re shopping for different types of furnaces, remember that labor will usually cost $500 to $2,000, depending on the furnace you choose and the scope of the work involved.

Having Your Roof Inspected

The roof is your home’s first line of defense against the elements. As Medium explains, it’s also a critical structural component, and if it’s compromised in any way, it can lead to severe structural problems which can pose safety concerns for you and your family. Call a professional inspector to look your roof over for any issues. If your roof is getting old, has missing or damaged shingles, or displays any other problems, you should have it repaired or replaced appropriately.

Upgrading Your Security System

One of the most effective ways to protect your family and property is to invest in a quality home security system. There are many smart security systems on the market that can reduce the likelihood of your home falling victim to burglary or other property crimes.

Go for a security package that includes features like surveillance cameras, door and window sensors, and a doorbell camera. Many systems can be installed DIY-style, and monitoring runs from free to $59.99 per month, depending on the service and features selected.

Taking Additional Safety Precautions

A lot of maintaining a safe home comes down to the people living in it. To keep your family safe and secure, consider these precautions:

• Always keep exterior doors and windows locked.
• Make sure your entry doors are stable, and replace the door or add support if necessary.
• Trick burglars when no one is home by setting timers to turn your lights on and/or by using a fake TV simulator.
• Ask a neighbor to pick up your mail and park their car in your driveway when you’re on vacation.
• Keep your valuables well-hidden from outside observers.
• Add motion sensors and warning signs to your front yard and backyard.

Nothing is more important than ensuring the safety of your family and property. Get professionals out to look at your furnace and roof, and have them repaired or replaced accordingly. Also, research the many types of home security options on the market, and choose what will work best for your family’s needs. Finally, be sure to follow essential protocols that will help protect your home, both when you’re at home and away.

Image via Burst