WILL FORBEARANCE PLANS CAUSE A TSUNAMI OF FORECLOSURES IN 2021?
Updated: Jun 17, 2021
Mary A & Alex P share economic predictions about forbearance effects on real estate prices in 2021.
Right now 3 million households in the United States are in forbearance, meaning they can’t pay their mortgages. A third of those, a total of one million households, are five months late. Another 750,000 are six months late on their mortgage payments. There is a lot of speculation that there will be a large number of foreclosures and short sales next year. Will that precipitate a drop in prices?
Experts are saying that this housing market is very different from the 2006 and 2008 markets. Because so many sellers have a lot of equity in their house, they can do things like sell, refinance, or pull out an equity line of credit to continue paying the mortgage.
Of course, some homes will go on the market, which leaves sellers wondering if a flood of homes for sale will have an impact on prices. Nationally, the number of homes for sale was down 40% this December as compared to the year before. We have, by far, the lowest recorded inventory in the history of the United States. The economists at the National Association of Realtors estimate that the market can easily absorb a half a million homes without causing home prices to depreciate. This is great news for sellers. For buyers, we’ll see.
Price growth is expected in 2021, but not at the record-setting pace of last year. NAR economists predict a 5% growth, as opposed to the 8% average growth we saw last year.
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