“. . . don’t expect a housing bust like the mid-2000s, as lending standards in this housing cycle have been much tighter and homeowners have historically high levels of home equity, so there likely won’t be a surge in foreclosures.”
Data from the Mortgage Bankers Association (MBA) helps tell this story. It shows the overall percentage of homeowners at risk is decreasing significantly with time (see graph below):
But even though the volume of homeowners at risk is very low, there is still a small percentage of homeowners who may be coming face to face with foreclosure as a possibility today. If you’re facing difficulties yourself, it can help to understand your options. It starts with knowing what foreclosure is. Investopedia defines it like this:
“Typically, default is triggered when a borrower misses a specific number of monthly payments . . . Foreclosure is the legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of and selling the mortgaged property.”
The good news is there are alternatives available to help you avoid going through the foreclosure process, including:
- Loan modification
- Deed-in-lieu of foreclosure
- Short sale
But before you go down any of those paths, it’s worth seeing if you have enough equity in your home to sell it and protect your investment.
You May Be Able To Use Your Equity To Sell Your House
Equity is the difference between what you owe on the home and its market value based on factors like price appreciation.
In today’s real estate market, many homeowners have far more equity in their homes than they realize due to the home price appreciation we’ve seen over the past few years. According to CoreLogic:
“The total average equity per borrower has now reached almost $300,000, the highest in the data series.”
So, what does that mean for you? If you’ve lived in your house for at least a few years or more, chances are your home’s value, and your equity, has risen dramatically. In addition, the mortgage payments you’ve made during that time chipped away at the balance of your loan. If your home’s current value is higher than what you still owe on your loan, you may be able to use that increase to your advantage.
Rick Sharga, Executive VP of Market Intelligence at ATTOM Data, explains how equity can help:
“Very few of the properties entering the foreclosure process have reverted to the lender at the end of the foreclosure. . . We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction.”
Lean on Experts To Explore Your Options
To find out how much equity you have, work with a local real estate professional. They can give you an estimate of what your house could sell for based on recent sales of similar homes in your area. You may be able to sell your house to avoid foreclosure.
If you find out you have to pursue other options, your agent can help with that too. They’ll be able to connect you with other professionals in the industry, like housing counselors, who can look into your unique situation and offer advice on next steps if selling isn’t your best alternative.
If you’re a homeowner facing hardship, let’s connect so you have an expert on your side to explore your options and see if you can sell your house to avoid foreclosure.
It turns out, millennials aren’t the renter generation after all. The 2022 Consumer Insights Report from Mynd says there’s a portion of millennial and Gen Z buyers who are pursuing homeownership as a way to build their wealth, but it may not be exactly the way previous generations have done it. The study explains how they’re breaking into the market:
“. . . younger generations of Americans are not buying into that dream in the same way that older generations have. A growing number of Americans are choosing to make their first real estate purchase as an investment property.”
Instead of buying a home and moving into it themselves, some young buyers are purchasing a home so they can use it as a rental. This tactic may be gaining popularity, at least in part, because of the affordability challenges brought about by today’s higher mortgage rates. The report above mentions how many people in this group are considering this approach. It says:
“Almost half of Millennials and Gen Z (43%) are considering buying an investment property compared to only 9% of Baby Boomers and 27% of Gen X.”
Why Younger Buyers Are Buying a Home To Use as a Rental
This strategy allows buyers to continue living in their current location, like the bustle of a city apartment or a neighborhood that they know and love, where they couldn’t afford to buy. But instead of giving up on the idea of owning a home, they buy a home in a more affordable area with the intention of renting it out.
In a way, they’re getting the best of both worlds. They live where they want, and they still own a home where they can afford it.
Their goal is to generate passive income and diversify their assets. It works like this: in addition to having a rental stream of income, the equity they build in their house will also help grow their net worth over time.
If you’re thinking about buying a home as an investment strategy to build your wealth, let’s connect to explore your options and nearby areas that may have homes that fit what you’re looking for.