In this episode of “Russell Realty Minute Podcast,” Evan Russell, owner of the Russell Realty Group, discusses the likelihood of a foreclosure crisis brought by the covid outbreak.
“Foreclosure means you just stop paying and walk away. Why would you stop paying and walk away if you had some equity in your house?” – Evan Russell [02:20]
What You Will Learn:
[00:18] Is there a chance for a foreclosure crisis?
Visit our website: https://www.therussellteam.com/
Ep. 96: Foreclosure
Intro: Welcome to another episode of Russell Realty Minute with your host, Evan Russell, where Evan shares his real-world real estate experience with you. If you like what you hear, please be sure to give him a quick review right here in iTunes. Thank you for listening.
So, there’s some talk based on COVID, and based on the finances, and based on the percentages of how many people went into a mortgage forbearance, or went into some mortgage forgiveness, or some loan modification of some type over the last six, eight months of, you know, the COVID outbreak that’s affected so many of us. Not necessarily from a health perspective, but from a financial perspective; how many people haven’t been able to pay their rent? How many people haven’t been able to pay their mortgage? How many businesses have gone out of business based on lack of customers and lack of income?
So, what comes across my desk is, is there another chance of a foreclosure crisis? So, with so many people being out of work without being able to pay their mortgage, they’re looking for some kind of help or relief on their mortgage. You know, the chances of a foreclosure crisis hitting us, I would say, is pretty close to zero. Now, why do I say that? I say that, because the home values are still higher, or have risen in most areas of the country. Especially here in Boston, they’ve risen so much, or they’ve gone up so much, that even if you were behind on your mortgage, a couple, three, four or five months, you’re still probably going to turn a profit on your house, provided that you’ve owned it for a couple of years.
Obviously, if you bought it last year, the year before, and then you’ve missed five or six payments, you know, maybe you’re in a different situation. But if you’ve been in your house for any length of time, and you’ve been making your regular mortgage payments, the odds are you’ve got a pretty decent amount of equity in your house, or at least enough to break free of your mortgage debt. So, if you were in a pickle, and you did need to sell and you did need to get out of your mortgage debt, and you did need to move somewhere else a little more affordable, a little cheaper based on the crisis that COVID has been to you, the chances are, you’re going to be able to do that. You know, the word on the street that the foreclosure crisis is coming, we’re having another bubble, another real estate bubble is going to explode, all that sort of stuff, I don’t really think that’s the case.
I really do think that there’s about a 0% chance of that happening, even with the robust forbearance program. Because again, I think that there’s a ton of equity in people’s homes. And when people go to sell their home, they’re going to realize a little bit of a profit. Therefore, it’s not going to go to foreclosure. Foreclosure means you just stop paying and walk away. Well, why would you stop paying and walk away, if you had some equity in your house? Right? You’re not going to do that.
I really don’t think there’s going to be a foreclosure crisis. I really don’t think there’s going to be a real estate bubble pop, simply because the statistics are there that support the value. Sellers aren’t going to automatically take less money. The only reason the market would go down is if a bunch of sellers decided they’re going to take less money on their house, they’re going to sell for less than what their neighbor did, which doesn’t make any sense. Why would you sell less than what your neighbor sold for? That doesn’t make any sense.
So, the only way the numbers would come down is if the mortgage rates were to go up, and therefore people spending power would not be as high, they wouldn’t be able to afford the prices on the street, that would force the prices down. But as long as the interest rates stay low, people spending ability as high as long as people you know sell for what their neighbor and the homes in the neighborhood are selling for, they’re going to turn a profit. So, there’s no reason it’s going to hit people walking away, that just doesn’t make logical sense, just based on the economics of what the real estate market is doing. Hope you guys enjoyed another edition of Russell Realty Minute.
Outro: This has been another Russell Realty Minute brought to you by Evan Russell.