The Fear vs The Math!
Sometimes people allow fear to prevent reality in their lives. Sometimes people allow fear to paralyze them into inaction. I have always found it that if you look into the actual fear and find out why you are afraid, you sometimes see there is nothing to be afraid of.
We have seen a number of people creating a new dialog of fear around the potential of 2.7 million homes entering foreclosure due to the expiration of forbearance. The fear has even grabbed the government because they have chosen to kick the reality of expiring forbearance down the road another six months because they don’t have a simple answer to the question, “what happens”.
Well, let’s do some math. NAR says we would have an even more robust purchase market if we had more homes in inventory. They say they would like about 5 or 6 months of homes to create an “average & comfortable” market. Last year we sold 6.8 million units, or about 560K units per month. We have a much greater demand than that, but we could certainly be happy to get more houses in the market, and 5 months @560K per month would be about 2,800,000 homes. However, despite the inventory challenges, 2020 was the biggest number of home sales since 2006!
The new fear is if all the homes in forbearance go into foreclosure, it would destroy the housing market and collapse prices. However, some simple math may shed some light on the reality.
- Of the 2.7 million homes, are all of them going to go into foreclosure? Given the rise in home values, why wouldn’t they just get sold?
- Again, many people will pay the balance, refinance, or extend and modify their current deals.
- If ALL the homes did become available, wouldn’t that supply of homes just supply the 5 or 6 months’ worth of “inventory the NAR says it takes to make the market more normal?
Yes, buyer demand makes the market a challenge, just like a few years ago the sellers were caught without buyers who wanted to buy.
Yes, given the failure of fully explaining and understanding forbearance, some people may have to sell their homes or may go into foreclosure. But given the current market, it is much more likely the resolve the issue or sell at a profit.
Not all 2.7 million homes in forbearance will end up on the market, but if they did, according to NAR, it would be welcome news for all the agents and people who are struggling with inventory!
Acknowledge the information and respect the fear; but do some math and find that fear may likely be very unfounded for many reasons once you look at everything and put it into perspective.
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