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Interest Rate Increase: What to Expect in Short Sale World
The other day an agent contacted our office and asked the following question: “I heard on a news program where someone was saying that we should expect a Recession similar to what we saw in 2008-2012. What do you think?” First off, at Short Sale Expeditor, we do not own a crystal ball. However, we do have plenty of experience with all sorts of economic situations and the housing market. To that end, we have plenty to say.
At present, interest rates have increased which is slowing down homebuyers. This leaves more homes on the market; most homes are not selling in a day or even in a week. But, if we are being honest, interest rates increase to combat inflation. Inflation is caused by increased buying power which motivates people to spend more. If we do not want to spend $10 per gallon for gas, we should expect these sorts of interest rate increases. It is a balancing act, and that is important to keep in mind. If you are interested in learning more about the causes of the Great Recession, read The Big Short by Michael Lewis or check out the movie staring Steve Carell, Christian Bale, and Ryan Gosling.
If you need help managing these changing economic conditions and your home sale, please contact the team at Short Sale Expeditor.
Lending Practices
After the Great Recession (2008-2012), we saw all sorts of changes in the lending world. We saw stricter lending practices and many new laws and policies. From a law about unbiased appraisals to more care taken by underwriters when underwriting home loans, we definitely saw big changes that would protect lenders (and homebuyers as well). Because of this, while we will likely see an increase in short sales and a drop in home values, our best guess is that it will not be nearly as deep and wide as the previous one.At present, interest rates have increased which is slowing down homebuyers. This leaves more homes on the market; most homes are not selling in a day or even in a week. But, if we are being honest, interest rates increase to combat inflation. Inflation is caused by increased buying power which motivates people to spend more. If we do not want to spend $10 per gallon for gas, we should expect these sorts of interest rate increases. It is a balancing act, and that is important to keep in mind. If you are interested in learning more about the causes of the Great Recession, read The Big Short by Michael Lewis or check out the movie staring Steve Carell, Christian Bale, and Ryan Gosling.
Zero Down Mortgages
Our team at SSE fully expects to see more short sales. Those folks who took zero money down mortgages or mortgages with only a small down payment in the last year or so may be severely impacted if they need to sell. As an example, an LLC who purchases a home to flip in early 2022 and completes the flip in July or August, lists the home at values to cover their costs and make a few dollars. However, since the time of their purchase the home value has gone down. So they may have a list. A flipper would not need to sell short, since most use cash to purchase. However, a person who takes a VA loan with zero money down who gets transfer orders and needs to sell will definitely be impacted by this housing market slowdown. Say a person on active miliary duty buys a home for $600K, and then the market goes down and the home is worth $570K. Since the loan was for $600K, there would need to be negotiation with the lender for accept less than the amount owed. And the amount the lender would get would not be $570K; it would be less due to the costs associated with sale.If you need help managing these changing economic conditions and your home sale, please contact the team at Short Sale Expeditor.
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