THE REAL ESTATE MARKET IS GOING CRAZY RIGHT NOW! BUT IT’S ARTIFICIAL AND HERE’S WHY…

Robert Smith-Adams
Robert Smith-Adams
Published on September 4, 2020

Real estate professionals around the country are really excited right now. Many Realtors are having record selling years. Many home sellers are seeing their homes end up in bidding wars….some houses are selling for thousands of dollars above asking price. But every market in the United States is different.

⚠️⚠️⚠️Our real estate marketplace, Southern California, is currently in an artificial bubble and here’s why:

❎ 5.5% of all CA homeowners are now in default on their home loans.

❎ Prior to COVID mortgage delinquencies were almost double that of a healthy real estate market, indicating that a market correction was forthcoming.

❎ Artificially low housing supply. Many people that want to sell have opted not to list their homes right now due to the health and safety concerns of Covid. This low inventory is creating bidding wars, most extremely noted in the first-time homebuyers’ price point.

❎ Higher Demand. First-time homebuyers are taking advantage of the record low interest rates which is allowing them to qualify for a higher purchase price in comparison to their borrowing power prior to Covid.

❎ Change in migration patterns. Because of Covid and political climates, many people are moving out of the urban areas of SoCal and into suburban or rural/desert areas where they can get more home for less money, move to an area with better crime and/or school stats, and more space to allow them to work from home. Many employers plan to allow their employees to continue working from home after Covid ends. This means these folks no longer have to worry about long commute times for work on congested freeways which would have prevented them from ever considering these outlining areas prior to Covid. Outer lining areas will continue to see an increase of buying demand, while some in-town areas will see a decline as more residents move out.

❎ CA as a whole is an outflow state. Many CA residents are moving out of CA to in-flow states such as Texas, Tennessee, Georgia, etc. Inflow states will see more stability in their marketplaces than outflow states after different real estate markets enter into a correction phase.

❎ “Zombie Foreclosures”. Some homeowners that are currently in forbearance are taking advantage of these record low interest rates and purchasing another home. After they close on their new home, they are not honoring their forbearance agreements and walking away from their current properties. This is the largest and fastest growing sector of the foreclosure market right now.

LET’S FAST FORWARD TO 2021👉👉👉⚠️

Most likely Covid-19 will be winding down by first or second quarter of next year, but the damage is already done.

⚠️ Foreclosure & eviction moratoriums will be lifted in 2021. Lenders and landlords will start taking legal action to recover their losses.

⚠️ Distressed sellers will start to list their homes on the market to avoid foreclosure.

⚠️ Downward pricing pressure. A distressed home seller is someone that HAS to sell. They will continue to reduce their list price until their home sells. This will put a negative pressure on the housing market and start to drive home values down.

SO IS NOW A GOOD TIME TO BUY OR SELL A HOME?

IT DEPENDS ON SEVERAL FACTORS INCLUDING WHERE YOUR HOME IS SPECIFICALLY LOCATED IN SOCAL. I’LL BREAK THIS DOWN FOR YOU STEP BY STEP NEXT WEEK.

✅ Stay tuned for next week’s episode! Robert breaks down all the reasons why it may be a great time to sell and/or buy a home in SoCal right now (for some people), and terrible idea for others. Find out which category you fall into and learn why!

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