The Alternative to Mortgage Forbearance

Currently, approximately 4 million homeowners in the US are in forbearance, which means that the lender has agreed to delay foreclosure on a property. Many others are delinquent in their payments and will be suffering the consequences when the foreclosure moratorium ends in February 2021. It may be too late for some of these people, but if you act quickly enough, you may be able to avoid the most serious of complications by utilizing a strategic default, also known as voluntary foreclosure or, more colloquially, the “jingle mail” strategy.

In a strategic default, the homeowner voluntarily initiates a foreclosure on their home in exchange for avoiding responsibility for some of the debt owed. When this happens, the homeowner is not responsible for what is called nonrecourse debt, which includes a mortgage funding the purchase or construction of an owner-occupied residence with no more than four units, as well as credit sales in which debt is secured solely by the sale of real estate. Even if the debt is recourse debt, the mortgage holder may or may not be able to pursue the homeowner for the loss. Be aware, however, that there are some drawbacks to a strategic default. It comes with a significant drop to one’s credit score, which can make securing new loans and finding a new home more difficult.

Photo by Felix Mittermeier on Unsplash

More: https://journal.firsttuesday.us/the-jingle-mail-strategy/75030/

August 2020 Sales Analysis

It’s September already! That means it’s time to look at a summary of real estate activity for LA’s South Bay neighborhoods over the past month. Our data is ultra-local which means you get to see the market conditions almost immediately after the month ends.

This summer we’ve been enjoying a relatively busy real estate market with a big jump in sales and mixed results in prices. August 2020 weighed in with the median price nearly 6.8% higher than August of 2019. However, it wasn’t enough to beat the median for this July. August median prices were down by 1.8% from last month. In the first eight months of the year, we’ve seen two months where the median increased, versus six months when it decreased.

Median PricesAugustJuly
2020$1.10M$1.12M
2019$1.03M—-

We saw 450 homes sold in August, up by 10% from July of this year. Compared to August of 2019, sales this year were up 13%. July and August were exceptional sales months compared to January through June. Both months had sales in excess of 400 units, while the first six months of the year were less than 300. March of 2020 made it all the way to 291 sales despite pandemic activity kicking into high gear that month.

Closed SalesAugustJuly
2020450408
2019398—-

July & August sales were up nearly double the sales numbers from the first half of the year. Why the jump in summer? Anecdotally, we’re hearing interest rates being at or below 3% brought those buyers not financially impacted by Covid-19 to the table. That huge savings in interest helped drive prices, as well. To buy now and take advantage of the interest rates, many buyers have been willing to offer slightly above asking price, to lock the deal in.

August brought a significant increase in the number of homes available for sale. At the end of August total available counts stood at 3.68 months of inventory, compared to 2.17 months at the end of July. In raw numbers, that’s an 18% increase in homes available for sale. More sellers put their homes on the market, and there weren’t enough buyers to absorb the increase. As Covid-19 moves to a back burner, we expect the inventory to return to higher numbers comparable to the beginning of the year.

A rising inventory indicates downward pressure on prices.

With subsidies and protective government programs closing, we anticipate fewer buyers will be able to purchase. At the same time, we expect the continuing stress will create more defaults and short sales. Forced sales, also known as ‘distress sales’ tend to push prices down.

Combined, a growing inventory and economic stress are precursors of a shift to a buyers’ market. Several noted commentators are predicting a recessionary market lasting through 2021 and possibly into 2022. Like so many things in today’s world, no one is sure of where we’ll end up. But it’s pretty much guaranteed to be different than we had planned.

Photo by Gustavo Zambelli on Unsplash

44% of Major Metros See Higher Foreclosure Rates

The July data for ATTOM Data Solutions’ US Foreclosure Market Report was released in August. 219 metropolitan areas were analyzed, among which 96 had an increase in foreclosure processes started. It’s only up 1% from June, but had been going up for three consecutive months. The small year-over-year increase of less than a percent is after a 36-month year-over-year decrease.

Despite the small numbers, Senior Vice President of ATTOM Daren Blomquist doesn’t think this is a fluke. Many local markets are continuing to see increases. The biggest jumps at the state and local level are Florida with a 35% increase statewide and the Houston, Texas metro area up a whopping 76%.

More: https://www.attomdata.com/news/market-trends/foreclosures/july-2018-u-s-foreclosure-market-report/

Curious About Foreclosure Properties?

No matter how hot the market is, there are always people looking for foreclosures. If you’re interested, here’s the latest set of FNMA foreclosure listings. As FYI, at 10 properties, this list is the longest I’ve seen in quite some time, which means the economy has shifted a bit. My daily charting has been telling me a change is on the way since the first of 2017. Finally the economic changes are showing up in more meaningful ways.

This list has minimal details, simply as a space consideration. If you have additional questions, don’t hesitate to ask.
Los Angeles-Watts; 3 bed / 1 bath; $320,000
Los Angeles-SouthWest; 2 bed / 2 bath; $323,000
San Fernando; 3 bed / 2 bath; $349,900
Carson; 3 bed / 3 bath; $359,900
Pomona; 4 bed / 2 bath; $374,900
Lancaster; 5 bed / 3 bath; $375,500
Whittier; 3 bed / 1 bath; $464,900
Palmdale; 4 bed / 3 bath; $490,000
Los Angeles-SouthCentral; 5 bed / 3 bath; $529,900
Granada Hills; 3 bed / 2 bath; $629,900