Foreclosures Archives

How To Invest in Real Estate During a Recession?

January 25, 2023 by Marco Santarelli

What is a Recession in Real Estate?

It can be scary to invest in anything during a recession. We all carry visions of the great depression and bread lines and people selling apples. The idea of putting your money into anything other than your mattress can be frightening for some. However, real estate should never be looked upon as an ordinary investment. Real estate is one of the few investments that we actually use and need. Everyone needs a place to live and call home. And real estate has systematically and quantifiably proven to have risen in value over the decades.

During an economic downturn, real estate markets typically see a slump in both value and volume of transactions, which is known as a recession. This may arise because of a general economic downturn or because of particular circumstances like an excess of available housing units, a shift in interest rate expectations, or a decrease in demand for real estate.

Many people may find it difficult to make their mortgage payments during a recession, which can result in an increase in foreclosures and a decrease in property prices. A decrease in construction activity and the associated loss of construction and real estate industry jobs may result from this. Recessions in the real estate market can also cause a decline in the value of commercial buildings because tenants may find it difficult to keep paying the rent.

Property values may plummet and commercial real estate may become less in demand as a result. It's also worth noting that a recession in the real estate market can be caused by a variety of factors such as an oversupply of housing, changes in interest rates, or a fall in demand for property. Because there are so many more properties on the market than there are buyers, in other words, supply outstrips demand, the price for property in most areas can fall considerably during a recession.

Do This When Investing in Real Estate During a Recession

Investing in real estate during a recession can be challenging, but there are also opportunities to be found. Here are some strategies for investing in real estate during a recession. Look for distressed properties to buy cheap. Foreclosures, short sales, and other distressed properties can be found at a significant discount during a recession. Look for these properties and consider renovating and reselling them or renting them out.

Do not feel intimidated by a real estate agent who tells you that you are going to “insult” someone if you offer a low price for their property. The real estate agent wants you to spend as much as possible because their fiduciary responsibility is with the seller, and they get a commission based on the sales price. Use your head and take a look at the market.

When you invest in real estate during a recession, consider the following:

Why Are They Selling?

If you're purchasing from a builder/developer then why they are selling becomes less important. But if purchasing directly from the owner in a private sale, you can find out by simply asking the seller or your agent. If the property is in a state of disrepair, chances are that there are financial problems. Don't be afraid to offer a significant amount less. If the owner is buying another home and needs to close on the first one soon, again don't be afraid to offer less than their asking price.

How Long Has The Property Been On The Market?

A few years ago, a home that was on the market for several months was either priced too high or there was something significantly wrong with the property. Today, properties stay on the market for 90 days or more in many parts of the country due to the prevailing market conditions. Avoid making a lowball offer on a property that is fresh on the market unless you know it is going into foreclosure or just about to become foreclosed upon. However, feel free to make low offers on properties that have been on the market for a month or more. Those that have been on the market for over a year are owned by people who are willing to ride out the storm and will most likely not be sold for a low price.

Is The Property In Foreclosure?

If the property is bank owned, you should be prepared to offer a lot less than the asking price. Don't allow a real estate agent to sway you when it comes to making an offer. If they say, “I do not want to present such a low offer,” tell them that you are prepared to find someone else who will. There are many real estate agents looking for a sale, especially in today's market. If the property is in foreclosure, offer at least 20 percent below the lender's asking price.

Invest in Multi-Family & Commercial Properties

Multi-family properties, such as apartment buildings, can be a good investment during a recession. They can provide a steady stream of rental income and are often more stable than single-family homes. Commercial properties, such as office buildings and retail spaces, may also be a good investment during a recession. These properties can provide a steady stream of rental income, and as businesses may struggle, it can also lead to lower rental rates and better negotiation terms.

Look for Undervalued Markets

Some markets may be more affected by a recession than others. Look for markets that have been hit hard by the recession and may be undervalued as a result. Real estate markets can take time to recover from a recession. Be patient and don't be discouraged if you don't see immediate returns on your investment. Consult with a real estate professional or a financial advisor before making any investment decisions. They can help you evaluate the risks and potential returns of different real estate investments.

Contrary to what you may have heard, the recession is the best time to buy a property. Always do your homework and don't be afraid to invest in real estate during a recession. It's important to remember that investing in real estate during a recession is not without its risks. It is important to do your research and understand the market you are investing in and have a long-term perspective. It's also important to have a good financial plan and a diversified portfolio.

Housing Foreclosure Rates and Statistics 2023

January 24, 2023 by Marco Santarelli

Here are some housing foreclosure stats in the United States

In 2010, foreclosure rates peaked amid what became known as the “foreclosure crisis.” The housing bubble, foreclosures, and mortgage-backed assets devalued due to subprime mortgage delinquencies. Since then, U.S. foreclosure rates have fallen. After the COVID-19 pandemic, thousands of individuals lost their jobs and couldn't pay their mortgages, threatening another foreclosure wave.

The government instituted a foreclosure moratorium, a mortgage forbearance program for federally backed loans, and new mortgage servicing legislation. 2020 and 2021 foreclosures were modest. In 2022, foreclosure rates increased and are predicted to rise further in 2023. High-interest rates could bring more foreclosures in 2023. As some homeowners default on their mortgages, housing inventory will rise in 2023. Homes will also spend more time on the market, resulting in an increase in overall housing inventory.

ATTOM, a leading curator of real estate data nationwide for land and property data, today released its Year-End 2022 U.S. Foreclosure Market Report, which shows foreclosure filings— default notices, scheduled auctions, and bank repossessions — were reported on 324,237 U.S. properties in 2022, up 115 percent from 2021 but down 34 percent from 2019, before the pandemic shook up the market. Foreclosure filings in 2022 were also down 89 percent from a peak of nearly 2.9 million in 2010.

Those 324,237 properties with foreclosure filings in 2022 represented 0.23 percent of all U.S. housing units, up slightly from 0.11 percent in 2021, but down from 0.36 percent in 2019 and down from a peak of 2.23 percent in 2010.

“Eighteen months after the end of the government’s foreclosure moratorium, and with less than five percent of the 8.4 million borrowers who entered the CARES Act forbearance program remaining, foreclosure activity remains significantly lower than it was prior to the COVID-19 pandemic,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “It seems clear that government and mortgage industry efforts during the pandemic, coupled with a strong economy, have helped prevent millions of unnecessary foreclosures.”

ATTOM’s year-end foreclosure report also includes new data for December 2022, showing there were 30,822 U.S. properties with foreclosure filings, up less than 1 percent from the previous month but up 72 percent from a year ago.

Lenders repossessed 42,854 properties through foreclosures (REO) in 2022, up 67 percent from 2021.
It was down 70 percent from 2019 (143,955) and down 96 percent from a peak of 1,050,500 in 2010.
States that saw the greatest number of REOs in 2022 included Illinois (5,518 REOs); Michigan (3,669 REOs); Pennsylvania (2,741 REOs); New York (2,405 REOs); and California (2,223 REOs).

Those metropolitan statistical areas with a population greater than 1 million that saw the greatest number of REOs in 2022 included Chicago, Illinois (3,545 REOs); Detroit, Illinois (2,135 REOs); New York, New York (1,656 REOs); St. Louis, Missouri (1,395 REOs); and Philadelphia, Pennsylvania (1,302 REOs).

Lenders began the foreclosure process on 248,170 properties in the United States in 2022, up 169 percent from 2021 but down 26 percent from 2019 and 88 percent from a peak of 2,139,005 in 2009. California (27,269 foreclosure starts), Texas (23,151 foreclosure starts), Florida (22,968 foreclosure starts), Illinois (16,941 foreclosure starts), and Ohio (13,469 foreclosure starts) had the highest number of foreclosure starts in 2022.

In contrast to the national trend, 5 states experienced an increase in foreclosure starts in 2019.

Indiana was up 81%
Michigan was up 10%
Idaho was up 8%
Colorado was up 2%
Minnesota was up (up less than 1 percent)

These metropolitan statistical areas saw the highest number of foreclosure starts in 2022.

New York, New York (15,821 foreclosure starts)
Chicago, Illinois (14,360 foreclosure starts)
Los Angeles, California (8,185 foreclosure starts)
Philadelphia, Pennsylvania (7,286 foreclosure starts)
Miami, Florida (7,090 foreclosure starts)

States with the highest foreclosure rates in 2022 were:

Illinois (0.49 percent of housing units with a foreclosure filing)
New Jersey (0.45 percent)
Delaware (0.40 percent)
Ohio (0.38 percent)
South Carolina (0.37 percent)

Rounding out the top 10 states with the highest foreclosure rates in 2022, were Nevada (0.34 percent); Florida (0.33 percent); Indiana (0.30 percent); Maryland (0.27 percent); and Michigan (0.26 percent).

Among 223 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in 2022 were:

Cleveland, Ohio (0.70 percent of housing units with a foreclosure filing)
Jacksonville, North Carolina (0.58 percent)
Atlantic City, New Jersey (0.58 percent)
Columbia, South Carolina (0.55 percent)
Chicago, Illinois (0.53 percent)

Metro areas with a population greater than 1 million, including Cleveland, Ohio and Chicago, Illinois, that had the highest foreclosure rates in 2022, were, Philadelphia, Pennsylvania (0.43 percent); Las Vegas, Nevada (0.42 percent); and Jacksonville, Florida (0.42 percent).

Foreclosed properties in the United States had been in the foreclosure process for an average of 852 days in the fourth quarter of 2022, a 4% decrease from the previous quarter and a 9% decrease from a year ago. States with the longest average time to foreclose in Q4 2022 were Hawaii (2,546 days); New Jersey (2,041 days); Louisiana (1,925 days); New York (1,828 days); and Pennsylvania (1,692 days).

December 2022 Foreclosure Activity High-Level Takeaways

Nationwide in December 2022, one in every 4,558 properties had a foreclosure filing. States with the highest foreclosure rates in December 2022 were South Carolina (one in every 2,301 housing units with a foreclosure filing); New Jersey (one in every 2,378 housing units); Illinois (one in every 2,399 housing units); Delaware (one in every 2,535 housing units); and Ohio (one in every 3,027 housing units).

21,023 U.S. properties started the foreclosure process in December 2022, up 2 percent from the previous month and up 129 percent from a year ago. Lenders completed the foreclosure process on 3,663 U.S. properties in December 2022, down 3 percent from the previous month but up 21 percent from a year ago.

Top 10 ZIPS with Highest Foreclosure Rates in the US

ATTOM’s 2022 year-end foreclosure report also uncovers the top 10 zip codes with the highest foreclosure rates in 2022. Among those zips with 10,000 or more housing units, those with the highest foreclosure rates included the following.

44108 in Cleveland, OH (2.54 percent of housing units with a foreclosure filing)
44112 in Cleveland, OH (2.38 percent); 44105 in Cleveland, OH (2.14 percent)
44110 in Cleveland, OH (2.00 percent)
44137 in Maple Heights, OH (1.93 percent)
8046 in Willingboro, NJ (1.91 percent)
60628 in Chicago, IL (1.86 percent)
44128 in Cleveland, OH (1.71 percent)
44103 in Cleveland, OH (1.58 percent)
44104 in Cleveland, OH (1.58 percent)

Top 10 ZIPS with Highest Foreclosure Rates — Source: ATTOM

Sources:

https://www.attomdata.com/news/market-trends/foreclosures/attom-year-end-2022-u-s-foreclosure-market-report/
https://www.attomdata.com/news/market-trends/figuresfriday/top-10-zips-with-highest-foreclosure-rates-in-2022/

Real Estate Housing Recession: How To Make it Work For You?

January 23, 2023 by Marco Santarelli

Real Estate Housing Recession

We are currently experiencing a looming real estate recession in this country. Property prices in some areas have started falling in some housing markets, especially those which experience a boom during two years of the pandemic. In late 2022, the Consumer Price Index showed that inflation had slowed for the second month in a row, which was certainly welcome news.

Nonetheless, we expect the Federal Reserve to continue to closely monitor wage growth metrics, which have historically been more difficult to predict, in order to determine how long it should maintain its restrictive stance. With a recession expected to begin in the first quarter of 2023, one plausible scenario is for the Federal Reserve to reduce the federal funds rate in mid-to-late 2023. However, given the Fed's recent statements, we believe there is a significant upside risk to the Fed keeping interest rates higher for longer.

“The wild ride known as the U.S. housing market slowed dramatically in the fall of 2022, as mortgage rates surged and home prices remained high,” said Molly Boesel, principal economist at CoreLogic. “Home sales started off strong in early 2022 but took a nosedive later in the year. On the plus side, generous amounts of home equity will protect many borrowers from experiencing the type of foreclosure activity seen during the Great Recession.”

Home Price Growth Declined Significantly Between Spring and Fall

According to data from CoreLogic’s monthly Home Price Index, U.S. year-over-year home price growth reached 20.1% in April 2022, the highest level recorded in more than two decades. However, appreciation has tapered off every month since, falling to 8.6% in November. Sun Belt states led the nation for annual home price gains for most of the year, most notably Florida, which posted the highest gain in the country from February to November.

This trend partially reflects Americans migrating from more expensive areas in the West to more affordable areas of the country, though price growth in southern states has followed the national trend and slowed in recent months. The year’s spike in interest rates is the primary factor in moderating home price growth, with Freddie Mac data putting 30-year fixed-rate mortgages at 3.22% in early January 2022 compared with a yearly high of 7.08% in mid-November.

Despite the slowdown, a major downturn is unlikely due to a shortage of available homes for sale, strong mortgage underwriting standards, and an unemployment rate that has returned to pre-pandemic levels. The strong home price growth in 2022 led to robust home equity gains across the country for nearly two-thirds of American homeowners with a mortgage.

CoreLogic’s quarterly Home Equity Report shows that in the first quarter of 2022, borrowers gained a collective $3.8 trillion in home equity since the first quarter of 2021, a 32.2% increase. During that period, US homeowners with a mortgage gained an average of $64,000. But since home price growth is the primary driver of equity growth, increases slowed as prices cooled. In the third quarter of 2022, homeowners gained a total of $2.2 trillion in equity than during the same quarter in 2021, an increase of 15.8% and averaging $34,300 per borrower.

What Does Real Estate Housing Recession This Mean for You?

There are several ways to make a real estate recession work in your favor:

Look for properties that are priced below market value due to the recession.
Look for motivated sellers who may be more willing to negotiate during a recession.
Invest in rental properties that can generate cash flow during the recession.
Look for properties in areas that are not as affected by the recession.
Consider flipping properties, as a recession can create opportunities for buying low and selling high.

Opportunity! With housing prices dropping and interest rates still near historical lows, this is the perfect time to find good real estate deals and buy cheap.

Your goal should be to find investment opportunities in markets that offer the greatest long-term growth and stability. These are markets that show growth in employment and population.

Target properties that you intend to hold for a short or long period of time. You will gain equity through appreciation as the markets correct and grow over time.

Be sure to only invest in properties that provide a positive cash flow in order to cover all of your operating expenses. This is very important in order to be able to hold the property long enough to benefit from the appreciation that comes over time with real estate.

On the flip side, this is not the perfect time to sell. If you own real estate, it probably makes the most sense to hold onto your investment until the market rebounds. As always, it will. In the meantime, take advantage of the market by either refinancing your own properties for better terms or buying more property that you can rent with a positive cash flow.

During a real estate recession, property values and sales may decline. However, there are ways to potentially make the most out of a recession. One strategy is to look for discounted properties that can be bought at a lower price and potentially sold for a profit later on. Another strategy is to invest in rental properties, as rental demand may remain steady or even increase during a recession.

Additionally, it is a good time to negotiate a better price with a seller as they may be more willing to accept a lower offer during a recession. It is also important to do your due diligence and thoroughly research any potential investments before making a decision.

California Counties Top The List In The US Foreclosure Statistics

May 13, 2013 by Marco Santarelli

California Foreclosure Statistics

With Inland Empire foreclosures at pre-recession lows, Riverside County's foreclosure rate dropped to No. 21 statewide in April. A total 1,403 mortgage default notices, auction sale notices and bank repossessions were recorded in April, meaning 1 in 566 households was in some stage of foreclosure, according to Irvine-based RealtyTrac.

Of those, 45 were from Palm Desert, according to data provided by the organization to Palm Desert Patch. In Palm Desert:

One out of every 538 households received a foreclosure filing in April
That number was down by about 25% from March 2013, and down 55% from last April.
In April 2012, 100 households had been in default.

[Read more…]

CoreLogic House Price Index Up 10.5%

May 8, 2013 by Marco Santarelli

CoreLogic today released its March CoreLogic HPI report. Home prices nationwide, including distressed sales, increased 10.5% on a year-over-year basis in March 2013 compared to March 2012. This change represents the biggest year-over-year increase since March 2006 and the 13th consecutive monthly increase in home prices nationally. On a month-over-month basis, including distressed sales, home prices increased by 1.9% in March 2013 compared to February 2013.