Today homes are flying off the shelves and selling for records numbers, but this could all change soon. Nearly a year ago the steady real estate market underwent a drastic change as the interest rate plummeted and people began taking advantage of the low rates. This buying frenzy combined with low inventory created a seller’s market unlike anything seen before. While houses were selling for record numbers, there was a growing number of homeowners and renters behind on their mortgage. Unfortunately, this issue did not plague only one state, it was and still is a national issue. For months the moratoriums on mortgage forbearance and evictions have been postponed to limit the economic fallout, but the economy has reached a point where it can no longer afford a halt on the inevitable.
Weeks from now the first wave of evictions in the state of North Carolina will begin as the moratorium on evictions are lifted and landlords may evict tenants who can no longer afford to pay. The national moratorium on mortgage forbearance has been extended by the current administration until the end of June. This means that homeowners who are behind on their mortgage are safe for now, but will ultimately suffer the same fate as non-paying renters once the end of June arrives. According to the article “‘I can’t afford my home’ | Millions at risk of eviction as federal protections are set to expire” by Savannah Levins at WCNC Charlotte, renters in the United States owe an estimated 57 million in back rent and a prediction from housing advocates estimate 400,000 renters in the Carolinas will be evicted as a result of the ending moratorium. Many are predicting this inevitable wave of evictions and foreclosures will rival the 2009 market collapse many remember all too well.
Just as homeowners must pay their mortgages, in some cases landlords must as well. Many investors position themselves to “cash flow” properties by financing them as well as renting them so the rent acts as debt service and the landlords collects the extra money or “cash flows” the property. When Coronavirus hit the United States nearly a year ago and evictions were halted, renters who were out of work began owing back rent as they could not pay all while their land lord couldn’t evict; this created a situation where the inability to pay began to trickle up the economic ladder until it reached those who were generally unaffected. Today there are many investors as well as tenants who find themselves in a situation where the place they called home or the place they used as an investment opportunity is no longer working out the way they had hoped. All the while the price of real estate continues to rise, but this is not sustainable. At the end of March when the moratoriums on evictions end, the “luck” these tenants have had will finally run out and soon it will be landlords with mortgages and those who do not own their home free and clear whose luck will run out. The market cannot continue to appreciate while so many find themselves is a tight financial situation, and in March, the beginning of a shift in the real estate market will ensue with an uncontrollable outcome.
Inevitably the economy goes through recession and expansion about every decade so the coming correction to the market is nothing that hasn’t been dealt with before. During the Great Depression it was the New Deal that helped people get back to work and during the 2009 economic collapse the government bailed out many companies to save jobs. Today we don’t know what things we be set in place to reduce the affects this pending collapse will have on the economy, but there are some tried and true housing solutions already available. Banks understand that when the economy tanks and people are without work, homes are not worth as much as they once were and many are often upside down on their mortgages. In some situations where the borrower is facing foreclosure or a difficulty to pay their mortgage, they may apply for a short sale. During a short sale the bank will agree to take less than what is owed on the property and the borrower may avoid a foreclosure, which may linger on their credit for seven years. With a correction in the housing market underway and buyers paying record numbers for homes, it is likely many of these new homeowners will owe considerable more for their property than it is worth and if a market collapse takes its toll on many businesses, it is likely these homeowners will find themselves in a tough situation. At Helpful-Homes, we do our best to help those in tough situations and when people can no longer afford their homes or their home isn’t worth the mortgage they’re paying on it, we are here to help. We primarily cover the North Carolina and South Florida and have the connections to work with the bank and get as many of the houses that are short sale eligible approved. In many cases we are even able to get some relocation money for the person short selling their home.
Those in the real estate industry were under the impression that the real estate market had reached its peak, and then about a year ago a major disruption was thrown into the mix, altering the real estate and global markets drastically. Coronavirus has made parts of the economy suffer while others have flourished, but a single entity can’t go two ways at once, and soon the real estate market will undergo some large changes. In many cases the government has propped up the market through moratoriums on evictions and mortgage forbearance, but the flow of cash cannot be halted forever and at the end of the day borrowers and tenants must pay their debts. As the ending of moratoriums and loan forgiveness begin, many will find themselves with homes they can no longer afford or homes that are not worth their payments. As this large shift begins to unfold on the economy it is essential that homeowners, landlords, and tenants know their options and the benefits of working with banks and investors who are looking for the properties they no longer need or want.
Link to the State of North Carolina’s website regarding Evictions and Foreclosure during the Coronavirus Pandemic: https://www.nccourts.gov/covid-19/covid-19-information-for-landlords-and-tenants