More Housing Market Problems - Home Sellers are Stuck

Welcome to this week's Real Estate Q&A, where I respond to recent comments from our YouTube channel. All eyes are on the housing market. Slow home sales continue nationwide, indicating consumers are feeling uncertain about the economy. And Fortune.com reported last week that Home Depot says that a deep funk in the housing market is responsible for its sales slump. Our customers are homeowners, says their CEO. Home Depot is grappling with a deep funk in the housing market, which is disproportionately impacting home improvement demand. Can you imagine that? As homeowners delay projects and wait out the economic uncertainty. Now, this is what CEO Ted Decker said during the company's third quarter earnings call, which was last Tuesday. Now, can you imagine being on that call and what do you do? And I see this guys everywhere. I mean, I drive around pretty much most of my time and I'm either looking at houses or showing houses or trying to figure out the market condition. And as I'm driving around, I see literally no one working on their homes. Usually when you're driving around neighborhoods, really ever since the 2008 housing crisis, I remember just driving around and seeing homes being worked on, dumpsters in front yards, contractors working everywhere. But even over the last several years, really from 2020, 21, 22, 23, that was a familiar scene, right? You would drive around, somebody's getting something done, a deck build, they're working on their house, whether it's siding, new shingles, whatever, landscaping. We're not seeing any of that now. I don't know. Maybe you are. Maybe you can let me know in the comments below. But I think talking to a lot of the contractors, they're seeing this slump that the Home Depot CEO is talking about. And I've recently been to Home Depot and there was nobody there like eight o'clock, 7.30, eight o'clock in the morning when most of the contractors are picking up their materials. But also on a recent CNBC article, it says that housing numbers point to an unusually strong buyer's market. And then in that title, it says there's a catch. It goes on to say that real estate firms are on the front lines of the industry and are seeing firsthand how housing affordability and local economic conditions are impacting their clients. Duh, says Jessica Lotz, NAR's Deputy Chief Economist. I've been saying this for years. It also says that home prices continue to weaken, but nationally, at least, we're still 1.2% higher in September from the year before. According to Kotality, prices are roughly 50% higher nationally than they were just five years ago. I'm trying to figure out what their catch is. I guess the catch is home prices are up 1.2% in September year over year. I wonder how they calculate that. If they're calculating it based on home sales, yes, it's true that wealthier people have been leading home sales for several years now. So I guess wealthier people tend to buy more expensive homes. So the less expensive homes aren't selling, the more expensive homes are. Maybe these are repeat homebuyers, not our first-time homebuyer cohort. Everywhere I look, guys, a large percentage of the inventory nationwide has had at least one price cut and is sitting on the market longer. By the way, that price cut that I've just mentioned, it's still not urging the first-time buyer or most people to move. It's not enough, I guess. Yeah, it may be true. I think that we're getting there that the buyers are now in the driver's seat, like it or not, home seller. So let's see what our audience has to say this week. So our first comment says, I can't even afford to buy out my sibling's share of my parents' house because the house must be praised at a reasonable market price, which is too high. But my parents don't want the house to go to strangers. This is a problem. Number one, we've been really building McMansions over the last several decades. I mean, where are people getting the money? Well, the economy was, I mean, you look at Gen Xers or Boomers, they've really had the most opportunity to make the most wealth over the last several decades. The problem, and I've seen this coming down the road, the problem is now that we have these McMansions, who wants them? I envision, they will probably have to change the zoning to allow, I mean, they're already doing it, ADUs, Accessory Dwelling Units, it's taking the country by storm. Started in the West Coast, it's now moved to the East Coast, where there are a lot of ways that you can get an apartment. It doesn't have to be a blood relative anymore in a lot of municipalities where you can have an apartment in your house. And there are different regulations. I can see where that will loosen and that big 3,600 or 4,000 square foot house will become a multi-unit dwelling because who's going to, what are you going to do with it? Bulldoze the house down? The children don't have the money to heat and cool the house, let alone pay for the expensive property taxes and the repairs because houses need work. I mean, things go bad, roofs go bad. So if you look at a big house, it's a big roof. So it's a big bill to replace the roof. So what's happening is these houses all across the country, who's going to take them over? And that's what this commenter saying that, you know what, we're going to have to sell this house. We're not going to be able to keep it as a family because we're not going to be able to afford it. Our next commenter says, I had absolutely no idea about loan mods taking on market interest rate. This info is so enlightening. And what they're referring to is recent podcasts that I did with a mortgage tech guy. And it's worth watching. I mean, it was probably over a lot of people's heads because he was talking about a lot of the technical data that goes into mortgage-backed securities, what happens to a loan when you buy a house, it gets sold on a secondary market. And then when you have delinquency or you're being foreclosed on or not paying your mortgage, after 90 days, it becomes in default and the mortgage foreclosure proceedings begin. A lot of questions that I had was based on the modifications. And FHA ended what's called the waterfall of loan mortgage modifications where now people have to pay their mortgage. They can only get a loan modification once every two years. And in order to be modified now to stay in the house or delay foreclosure, prevent foreclosure, if you can get caught back up, you're only allowed to do it once every two years and you have to pay three months in a row. So they have to show the last three months they've paid on time, which if they're going into a default or foreclosure or delinquency status, they're not paying their mortgage. So now everything has changed and we're already starting to see, not by the FHA waterfall ending so much because John, our guest was explaining that this is something that these types of foreclosures will pick up as a result of the change with FHA in months to come. We're already starting to see an uptick in mortgage foreclosures, which is showing that people aren't doing well, a lot of people. It hasn't become a major problem yet, but it's still not at 2008 levels, mortgage foreclosures I'm talking about. But what this commenter is saying that they had no idea that when someone goes through a loan modification, they're potentially giving up that good rate. So when they remodify the loan, it's going to market mortgage rate, whatever that average or that market rate is for that type of loan, that's what they're paying. So essentially a lot of the people, they're not only giving up the cheap rate, but they're going into a more expensive mortgage. So we'll be watching this closely as now we see that the modifications are slowing down and in many cases less possible for delinquent borrowers to do. Hey guys, I hope you're enjoying the show so far. I just wanted to take a brief minute and share some exciting news. I have just released my new Todd's Simple Home Buying Course. This course is designed for anyone wanting to know how to buy a home. It's designed to take you through the entire home buying process from start to finish. You'll learn how to represent yourself should you want to avoid paying real estate commissions, the best ways to shop for a home, how to avoid costly mistakes, what to look for when touring a home, negotiation tactics, and so much more. In this home buying course, I hold nothing back. In fact, I would go to say that no one has uncovered the home buying process like I have. I've even made a way for you to gift this course to your family and friends. Visit sacksrealty.education. The link is also pinned in the comments below. Now back to the show. Our next comment said, I did a search on Zillow recently, and this is kind of along the same spirit of what we just talked about. I did a search on Zillow recently in my area, and I was shocked when I only searched pre-foreclosure and foreclosures, and it looks like a normal amount of homes for sale, except they are foreclosures. We have to think about what is happening with these foreclosures because it's not like 2008. So there are a lot of changes that have taken place since that GFC period. Number one, we had somebody on our channel that is an expert in the foreclosure field, and they said that now the servicer or whoever's doing the foreclosure responsible for that asset that's in default and going to foreclosure, they now don't just have to be the highest bidder to take that house back in foreclosure. They have to actually give market value for it. So I guess it's in a way to protect the borrower so that they don't lose equity when they're foreclosed on or lose their house. It's not just a principal balance or their loan balance that they're looking to secure what is owed the lender, but they're actually wanting more than that at a foreclosure auction. And that's really doing a disservice, in my opinion, to the whole industry because what's the condition of the house? No one has gone inside the house to this point. In fact, as long as the owner's still there, it's unlawful to go in the house if they don't allow you to. So how do they know what the actual condition is? Most people, when they lose their house, they don't do anything. They haven't paid their mortgage. They're not fixing things anyway. A lot of them know, well, I'm going to be on my way out, so I'm going to save as much money as I can. I'm not going to fix the leaky roof. I'm not going to fix the broken HVAC system. I'm not going to take care of any mold that's growing in the house. And so they're sort of assuming that the house is good inside by an outside view, and that doesn't make a whole lot of sense to me. The other thing is that recently looking at a lot of foreclosed properties, in touring these houses, they're in bad shape, like I just mentioned. They want an astronomical amount of money for it. They almost want as much money for a house that needs to be completely gutted and rehabbed as the house down the street that's a comparable that's on the market, not selling, by the way, for just about the same price. And it's in great condition or even rehab status. So a lot of people are thinking because these foreclosures are hitting the market that they're going to be able to get a deal on it. I'm not seeing that yet. So unless we get a big flood of this inventory, if you're a buyer, whether you're an investor or whether you're a home buyer that wants to buy a house and do sweat equity work on the house and improve it, you may not be getting the deal, at least now, that you were hoping for. And then this next commenter says, imagine if you had no conscience, may not be hard for some people to imagine, how much money you could set aside over three or four years if you simply didn't pay your mortgage yet allowed to stay in the home and how in the heck are the property taxes getting paid on these? Well, in the same spirit, the last two comments, and this is coming from this most recent, we're looking at most recent comments and this is from the most recent video. Our guest talking about foreclosures said that basically the only way that you got foreclosed on is if you vacated your house or you stopped speaking with your servicer. You stopped taking their calls instead of just saying, hey, I still can't pay. I still don't have a job. I still can't make my payment. But keeping that communication, if you stay in the house and you communicate with your servicer, John had said, you weren't getting evicted. So it was easy. You weren't getting foreclosed on. It was easy to stay for several years, four, five, six. Heck, I know somebody who stayed in the house for a decade during the GFC, probably saved over a million dollars in payments. It was a very expensive house. Your property taxes are being paid by the servicer who's being guaranteed to be paid back by the government in a lot of ways. If it's FHA, VA, USDA, they're directly underwritten by the federal government. But since Fannie and Freddie are essentially in conservatorship, they're ran by the government too. So the servicers will prepay all these expenses, your taxes, your insurance, make sure the asset's covered, all of the foreclosure processes, all the costs, expenses for that. And then they're guaranteed to get all their money, but they just have to wait for it. So yeah, if you had no conscience and you stopped paying your mortgage, you get it. And then finally, this is on our home inspector video. The discussion in the video was talking about, I was specifically addressing buyers saying, look, make sure that when you're buying a house and you're getting a home inspection, that you leave enough time to have your due diligence period. So a lot of agents will push you to three or five days, and that's simply not enough time in most cases to get home inspector or inspectors or whatever it is you're trying to figure out within that period of time, because these are calendar days, not working days. So I recommend that you do at least seven days or 10 days, or even 14 days is best. And buyers now, when houses are sitting on the market, you can dictate that longer period. Your agent may try and push you to shorten those time periods, but I recommend at least seven, but up to 14 days of a due diligence period where you can get your deposit money back, should you decide not to move forward with the sale. This is an agent from what I can tell by this comment and their profile and other comments they've made on our channel. Regarding the timeframe, if a buyer cannot secure an inspection within the contingency timeframe with the inspector they want, they can request a contingency extension, which is usually granted. Preston does an excellent job of accommodating timeframes. However, it's usually not an issue. Now, remember something. Though this agent may be accurate in what they're saying, usually not an issue. A seller does not have to give you an extension period, period, the end. If you don't meet your deadlines, you bought a house or you better look for another way or another out or hope you have another out to get out, or you can risk losing your deposit at the very least and potentially be sued for default if you don't settle on that house. So though I respect what this agent is saying, I don't agree with it. Upfront, know what you're committing to. Try and make sure that you can get things done in your timeframe. Don't assume the seller will give you an extension because it would be completely up to them at that point if they do. Anyway, thanks for watching, guys. And hey, leave your comments and questions below. You never know, you may be in next week's Real Estate Q&A. Look out for great content we have coming. If you haven't subscribed to our channel, please consider doing so now. Hit that alert bell. You'll know when we upload content just like this. And one of the biggest compliments you can do for all of us here at Sacks Realty is to share this video on our channel with your family and friends. I truly believe we have the best real estate audience on the internet. See you next time. Sacks Realty, Maryland broker number 607720, office number 4433184514, equal housing opportunity.