Starting this video by stating that the havoc being caused by the coronavirus is deeply affecting everyone would be an understatement. What started in China is now affecting everyone in the whole world.
Hi I'm Mac with Albert Rogers Realty here in Castro Valley, CA.
Right now restaurants, airlines, hotels, and many other industries are getting affected. Almost everyone is at home with the shelter in place order. Many are concerned about a recession. Jobs are going to be lost which leads to many homeowners wondering how they’ll be able to afford their mortgage payments.
So will we see a spike in foreclosures like 10 years ago? Experts are saying that is not likely and here are just a few reasons why:
The good news is that the government learned its lesson the last time. Swift action was taken by the government and the federal reserve.
There's a moratorium on housing foreclosure that was announced by the Federal Housing Administration
The government wasn't the only one to learn from the pains of the last recession. Homeowners learned their lesson as well.
Back in the 2000s homeowners used their homes as piggy banks and began to tap into the equity of their homes. It was like a virtual ATM. Home owners started cashing out or opening lines of credit and purchasing luxury items like cars, jet-skis, and taking lavish vacations. When the market turned and values started dropping, many found themselves in a negative equity situation. These were your short sale properties. The debt was larger than the value of the home. Some just walked away and the banks had foreclose on the properties.
Here are the numbers.
Back in 2005-2007 homeowners cashed out
$824 billion worth of home equity by refinancing.
Today that number is only $232 billion. Just a fraction of what it was.
Here's some other great numbers
37% of homes in America have no mortgage.
63% have equity and 1 in 4 having over 50% equity in their homes.
If there was a dip in home prices, these homeowners will most likely not just walk away from these huge equity gains. And by the way most experts are not predicting that this will happen. Remember we have a shortage of inventory and that has not change. If anything it may continue to be the same as homeowners stay in their homes longer.
As I mentioned earlier the government acted swiftly and decisively this time around, with a $250 billion cash infusions to individuals and $300 billion for small businesses.These actions along with finding a solution to this virus will help soften the blow our economy will hit.
Look, it's not going to be easy, but we learned our lesson from the last crisis. We are better prepared to weather the financial storm and there is help for those who need it.
Let's all do our part. Be positive. Be the change you want to see. Have a great day.