No one with a pulse could miss the all news about the “Foreclosure Crisis” we are facing as a nation, and particularly here in S. Florida. I’m sure the gurus of late night tv who teach you “how to make millions in foreclosures”, or whatever the spin, will be really raking in the cash thanks to all the publicity.
One question I seem to get every now and then is the reason behind so many people are facing foreclosure right now. Who’s to blame? Is it the government? The banks? Those mean ‘ol real estate investors?I thought I’d take a minute to quickly address what I’m seeing in my daily life as a Realtor here in Broward County FL.
There are several factors that have caused the foreclosure rate to more than double in the last few years. As far as pointing the finger goes I’m not a huge fan. I’d rather just layout some of the issues that are to blame. A few are:
ARMS (Adjustable Rate Mortgages) adjusting Homeowner’s mortgage payments beyond their ability to pay:
As we all know the housing market of a 3-5 years ago seemed like anyone could buy a home anywhere no matter what. It was crazy. People making $35,000 each year bought homes for $450,000 and felt great about it. Everyone you knew just bought or sold something. Things were just wonderful….or were they?
I know ARMS can be very helpful tools in the right hands. The problem is a lot of people didn’t realize what they were buying into OR they didn’t care. Maybe they believed they would be making more money by the time the payments adjusted? Most thought, or were ill informed, that the value of the home would continue to rise until they could just sell for a profit and not ever have to pay the piper.
Then there were those poor souls who didn’t even understand the terms of the loan at all. Maybe the mortgage broker didn’t really educate them enough, or they didn’t do their own homework, either way they lost out and are now paying for it big time. For whatever reason when people who couldn’t afford these homes to begin with saw their already unaffordable payment rising it was only a matter of time.
In the same vein there is also the issue of skyrocketing taxes and insurance here in S. FL that did just as much damage if not more in some ways. People were buying these homes and looking at the seller’s taxes of $1,600 per year, but after closing when they received the next year’s tax bill it might look more like $4,000! Same with insurance. We had a few rough years here in FL namely 2005 which hiked many people’s insurance premiums WAY up double or sometime even triple the amount they were paying.
The “Investor” Epidemic:
Who can forget the days when, if you didn’t have a friend or family member who became a “Real Estate investor”, you would in a matter of weeks (or you were that friend). According to statistics (please forgive me, I forgot which source they are from) from the last quarter of 2003 to the first quarter of 2005, approx. 40% of all sales were investor bought properties.
These “investors” were under the same impression that homes prices will continue to rise and they can make a profit. Really who could blame them, everyone that bought around that time made out like bandits didn’t they? Either way a lot of these homes may still be on the market today or possibly heading to foreclosure if they haven’t already gotten there.
The Unemployment Crisis:
Lastly, the fact that so many Americans are without jobs has definitely had a MAJOR effect on the foreclosures hitting the market. As of this writing the current jobless rate is around 9.7% and the underemployment rate or part-time workers who WANT to be full time almost doubles that number!
This has caused people to lose not only their homes, but a lot of hope at the same time. Until the jobless rate improves it’s unlikely that many of the homeowners that are facing foreclosure because of job loss will have much hope.
I’ve put together a list of “Alternatives to Foreclosure” for anyone reading this that may want to get an idea of their options, or know someone else who might. In my opinion, from working with lenders to help homeowners do short sales, people rarely take the time to really understand their options and take action promptly. That is probably one of the reasons so many people lose their homes to foreclosure when it may not have been necessary.
The 2 best options for a lot of people are doing a Loan Modification or Short Sale. It’s not a cut and dry issue, but depending on people’s situation these are the 2 most popular and effective options.
If you have any questions about your options or just want some helpful advice feel free to contact me by filling in the form below or call me at 954-907-4773 and I’ll be glad to take out a few minutes to see if I can point you in the right direction.
[contact-form 4 “Short sale info form”]