All Things Real Estate: Impact of foreclosures on community roots

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 All Things Real Estate: Impact of foreclosures on community roots
Philip Raices

It’s obvious that our real estate market is still very strong.  My last open house in Seaford had 17 participants on a Sunday and the very next day I had seven qualified offers.

In the 42 years that I have been involved in real estate, I had never experienced that many offers simultaneously in a 24-hour period.  What is still quite amazing is that the final offer way above our asking price.

Demand has not cooled off and as long as inventory is as low as it is, I do not see things changing.  This market will continue until either demand cools off or an unfortunate catastrophe occurs (I hope not).

Anything is possible the way events are occurring in our world, and even international incidents or major local issues could have an effect, causing the housing market to slow or moderate.

According to Bankrate.com, it appears that some economists and experts believe there may be one or two more interest rate hikes before the end of 2023.  But predictions are generally never 100% accurate.

Our economy is still chugging along and appearing very resilient, growing at 1% per year. We do have the best economy compared to all other global economies. What is quite surprising is that job openings have declined and that should have caused unemployment to increase, but it hasn’t.

This economic environment is different from past scenarios and that is why it has been extremely hard to accurately predict what will happen in the future.

What I have noticed, however, is that there are still many cash and large down payment purchasers in the real estate market.

There are those who have earned substantial sums of money in the stock market or in their businesses over the last four years and have decided to move a portion of their profits into either a first-time primary residence or move-up residence and or an investment property.

According to FinMasters, foreclosures are slowly increasing and were 0.23% in 2022, which appeared low, but were higher than in 2021 (0.11%) and 2020 (0.16%).

In 2020 government intervention was one of the factors that kept the rate lower than it probably would have been.  A total of 31,557 properties in the U.S. had foreclosure filings in January 2023, which was a 36% increase year over year. New Jersey had the highest foreclosure rate, with one foreclosure for every 2,271 homes.

Cleveland metro area has the highest foreclosure rate of 0.40%, more than 316% above the national average.  But Detroit saw the highest increase (807%) in foreclosure filings compared to the previous year.

The highest foreclosure rate in the last 20 years was in 2010, at 2.23%.  As ARMs come due on residential and especially commercial properties, there will be many more foreclosures and short sales, due to the higher costs of borrowing.

I suggest one should sell now to at least walk away with the tremendous equity that has been built up over the last few years.  Call me for a free value analysis without any obligation.

The competition between first-time buyers and investors is fierce.  However, currently end users should be able to outbid investors/fix and flippers because the profit potential has narrowed locally as the cost of materials and labor have skyrocketed.

I always say, “If it doesn’t make sense in the brain, then it doesn’t make any cents in the pocketbook.”  But one of the critical and crucial issues is that if a first-time buyer qualifies for a grant, a full inspection needs to be performed in order for a mortgage commitment to be approved.

However, due to all foreclosures being winterized, then an inspection becomes impossible and the buyer cannot move forward.  I propose a simple change in the regulation that would allow a purchaser to pay $550 or whatever reasonable amount is agreed upon.

All winterized foreclosed properties could have their utilities temporarily turned back on so a full and thorough inspection could be completed. In this fashion, a mortgage commitment and grant can be approved.

The $550 can either be credited back to the purchaser by the bank upon closing.  However, if the buyer doesn’t move forward for any reason(s), the money can still be used to winterize the home again.

Most important, there should be more time allowed for individuals and families to purchase and restrict investors during a waiting period before they can purchase. This will allow more buyers to secure the American Dream and build roots within the community, develop relationships with neighbors, and gain new potential long-term friends and connections.

I believe it is a healthier environment than being in a rental situation, worrying about higher rents over the long run and concerns that the landlord might sell or not renew your lease, leaving you in a situation of having to move once again.

Homeownership enables a family to hopefully be in a stable position for 15-30 years while gaining appreciation and a buildup of equity over that time period as their mortgage is paid down and the benefits of tax deductions contribute to long-term wealth.

Currently, foreclosures are still more favorable to the investor, because they can purchase without an inspection and, more important, pay outright for the purchase without financing.

Their only purpose is to earn income and build their bank accounts, whereas an end user grows their family and involvement in the community.  I believe this is far more important and impactful for the betterment and growth of the local community than the reason why an investor buys.

Making it easier for an end user to purchase by allowing a full inspection and for those who receive first-time homeowner grant money will always be a better path to pursue as long as the government changes its position and the regulations in allowing it to happen.

Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck.  He has 42 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S) as well as the new “Green Industry” Certification for eco-friendly construction and upgrades.  For a “FREE” 15-minute consultation, value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] or via https://WWW.Li-RealEstate.Com

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