Home Buying – Zac Folsom Group

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Mortgage Title Policy

When purchasing a home in Michigan, buyers will typically be required to pay for a mortgage title policy as part of the closing costs. This policy protects the lender in case there are any issues with the property’s title. It ensures that the lender has a valid lien on the property and that the buyer has the right to use and occupy the property. The cost of the mortgage title policy can vary depending on the size of the loan and the title insurance company.

In the Kalamazoo area, it’s common for sellers to pay for the owner’s title policy as part of the transaction. While the buyer will typically be responsible for the mortgage title policy, the owner’s policy is an additional expense that can provide added protection for the buyer. This policy protects the buyer against any title issues that may arise after the purchase, such as liens, encumbrances, or other claims against the property.

Overall, the mortgage title policy is a necessary expense when purchasing a home in Michigan. By working with a trusted real estate agent and lender, buyers can understand the costs associated with the mortgage title policy and plan accordingly.

Prepaid Taxes and Insurance

Prepaid taxes and insurance are a part of the closing costs when purchasing a home. These expenses are paid in advance and are typically placed in an escrow account by the lender. This ensures that the funds are available to pay the expenses when they come due.

Prepaid taxes are the property taxes that are due on the property for the year. The amount of prepaid taxes will vary depending on the time of year that the home is purchased. If the purchase is made in the middle of the year, the buyer will be responsible for paying the portion of the property taxes that have not yet been paid by the seller. This amount is then placed in the escrow account and is used to pay the property taxes when they come due.

Prepaid insurance is the homeowner’s insurance policy that is paid in advance for the first year. This policy provides protection for the buyer and the lender in case of any damage to the property. The cost of the insurance policy will vary depending on the size and location of the property, as well as the coverage limits.

Real Estate Administrative Fee

Real estate administration fees are fees that cover the costs of processing the paperwork and administrative tasks associated with buying or selling a property. These fees are typically charged by the real estate brokerage and can vary in amount depending on the company and the location. However, it’s important to note that you should never pay more than $500 for a real estate administration fee. This is a standard amount that is considered reasonable and covers the necessary administrative tasks.

It’s also worth noting that the majority of your buyer agent’s commission will be paid by the seller of the property. This means that you, as the buyer, will typically not have to pay your agent directly for their services. Instead, the seller will pay a commission to both the buyer and seller agents, which is usually a percentage of the sale price of the property. This is why it’s important to work with a trusted real estate agent who can provide guidance and support throughout the home buying process.

When it comes to real estate administration fees, it’s important to understand what you’re paying for and to negotiate with the real estate brokerage if necessary. While it’s a necessary expense, you want to ensure that you’re not paying more than necessary. By working with a trusted agent and real estate brokerage, you can understand the costs associated with buying or selling a property and make informed decisions.

Home Inspections

Home inspection fees are an important cost to consider when purchasing a home in Kalamazoo. These fees typically range from $350 to $500, depending on the size and condition of the property. Home inspection fees cover the cost of a professional inspection of the property, including the structural, mechanical, and electrical systems. This helps to identify any issues or potential problems with the property before closing, providing buyers with the information they need to make an informed decision.

It’s important to note that the home inspection fee is a fee that needs to be paid at the time of service, rather than at closing. This means that buyers will need to budget accordingly and ensure that they have the necessary funds to cover the inspection fee. It’s also important to work with a trusted and qualified home inspector who can provide a thorough and accurate assessment of the property.

Appraisals

Appraisal fees are another expense to consider when buying or refinancing a home. The appraisal fee is paid to a licensed appraiser who assesses the value of the property. The appraiser will look at the size, location, condition, and comparable sales in the area to determine the value of the property. The cost of the appraisal fee will depend on the location and size of the property.

Sometimes, appraisal fees will be due before the appraisal takes place. However, some lenders in Kalamazoo are able to pay the fee upfront and then have the borrower cover the cost at closing. This can help alleviate the financial burden for the buyer or borrower. It’s important to work with a trusted Kalamazoo lender and real estate agent who can provide guidance on the appraisal fee and other costs associated with the home buying or refinancing process.

The appraisal fee is a necessary expense to ensure that the property is valued accurately and that the lender has the information they need to determine the loan amount. By understanding the costs associated with the appraisal fee, buyers and borrowers can budget accordingly and ensure that they have the necessary funds to cover all the expenses associated with the home buying or refinancing process.

Miscellaneous Expenses

In addition to the standard closing costs and fees associated with purchasing a home near Kalamazoo, there may be additional miscellaneous expenses that buyers need to consider. These expenses can include survey fees, HOA dues, special assessments, and buy-in fees for certain neighborhoods.

Survey fees are paid to licensed surveyors who assess the property boundaries and identify any potential boundary disputes or encroachments. In Kalamazoo, survey fees typically range in cost depending on the size and complexity of the property. Buyers should budget accordingly for this expense.

HOA dues are fees paid to a homeowners association for the maintenance and upkeep of common areas and amenities. If the property is located in an HOA, buyers will need to budget for these ongoing expenses. HOA dues can vary in cost depending on the neighborhood and amenities provided.

Special assessments are one-time fees paid to an HOA or local government for unexpected expenses, such as road repairs or improvements to common areas. These assessments can be a surprise expense for buyers and should be considered when budgeting for the purchase.

Buy-in fees are fees paid to certain neighborhoods for membership or access to amenities, such as golf courses or private beaches. These fees can be significant and should be considered when evaluating the affordability of the property.

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What is Happening to the Kalamazoo Real Estate Market?

If you’re interested in Kalamazoo real estate in Michigan, you’re likely curious about the latest home price changes. As we head into spring, it can be challenging to understand all the conflicting headlines and data. However, it’s crucial to stay informed. So, here’s what you need to know about today’s home prices.

While local price trends in Kalamazoo may differ, analyzing national data can provide valuable insights. Nataliya Polkovnichenko, Ph.D., a Supervisory Economist at the Federal Housing Finance Agency (FHFA), emphasizes that understanding current home prices is critical.

U.S. house prices were largely unchanged in the last four months and remained near the peak levels reached over the summer of 2022. While higher mortgage rates have suppressed demand, low inventories of homes for sale have helped maintain relatively flat house prices.

Month-over-month home price changes can be seen in the chart below. The data also shows that price depreciation peaked around August. Since then, any depreciation has been even milder. And in our research the homes in Kalamazoo have even out performed the entire US market. In other words, today’s home prices in Kalamazoo, MI aren’t in a freefall.

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What does this mean for you?

If you currently own a home in Kalamazoo, MI, you may be concerned about any decline in home prices, even a small one. However, it’s essential to keep in mind that Kalamazoo home prices have risen over 30% since 2020 and have seen little to no fall, with some multiple offer situations returning. This remarkable growth in the Kalamazoo real estate market over the past few years far outweighs any potential declines.

So, if you’re looking to buy or sell a home in Kalamazoo, it’s crucial to work with experienced real estate professionals like the Zac Folsom Group, who have the knowledge and expertise to help you navigate the market successfully. Even the Chief Economist at CoreLogic, Selma Hepp talks about the decline lightly on a national scale:

. . . while prices continued to fall from November, the rate of decline was lower than that seen in the summer and still adds up to only a 3% cumulative drop in prices since last spring’s peak.

As we enter the spring season, the housing market is expected to see some familiar trends from last year, albeit to a lesser degree. While the housing market experienced a significant surge in activity during the spring of 2021, fueled by historically low mortgage rates, remote work, and a desire for more space, this year, the market is expected to see a more gradual increase in activity.

While mortgage rates remain historically low, they have increased slightly from their record lows, and inventory remains tight, leading to increased competition and higher home prices. It is expected that the spring housing market will bring back some remnants of last year’s market but to a lesser extent.

Fast AF Summary

The Kalamazoo housing market has stabilized, and experts are not expecting it to plummet, despite the impact of the pandemic. Low inventory levels are preventing this from turning into another housing crisis, and experts have analyzed that the majority of low prices occurred in November and December. As a result, there is an anticipation of rising prices. Currently, the spring housing market provides a unique opportunity for buyers and sellers to capitalize on market conditions.

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How to Find Your Dream Home in a Challenging Market

Prioritizing Your Wants and Needs as a Homebuyer in Today’s Market

There’s no denying mortgage rates are higher now than they were last year. And if you’re thinking about buying a home, this may be top of mind for you. That’s because those higher rates impact how much it costs to borrow money for your home loan. As you set out to make a purchase this winter, you’ll need to be strategic so you can find a home that meets your needs and budget.

Danielle Hale, Chief Economist at realtor.com, explains:

“The key to making a good decision in this challenging housing market is to be laser focused on what you need now and in the years ahead, . . . Another key point is to avoid stretching your budget, as tempting as it may be given the diminished purchasing power.”

In other words, it’s important to be mindful of what’s a necessity and what’s a nice-to-have when searching for a home. And the best way to understand this is to put together a list of desired features for your home search.

The first step? Get pre-approved for a mortgage. Pre-approval helps you better understand what you can borrow for your home loan, and that plays an important role in how you’ll craft your list. After all, you don’t want to fall in love with a home that’s out of reach. Once you have a good grasp of your budget, you can begin to list (and prioritize) all the features of a home you would like.

Here’s a great way to think about them before you begin:

Must-Haves – If a house doesn’t have these features, it won’t work for you and your lifestyle (examples: distance from work or loved ones, number of bedrooms/bathrooms, etc.).
Nice-To-Haves – These are features that you’d love to have but can live without. Nice-To-Haves aren’t dealbreakers, but if you find a home that hits all the must-haves and some of the these, it’s a contender (examples: a second home office, a garage, etc.).
Dream State – This is where you can really think big. Again, these aren’t features you’ll need, but if you find a home in your budget that has all the must-haves, most of the nice-to-haves, and any of these, it’s a clear winner (examples: farmhouse sink, multiple walk-in closets, etc.).

Finally, once you’ve created your list and categorized it in a way that works for you, discuss it with your real estate advisor. They’ll be able to help you refine the list further, coach you through the best way to stick to it, and find a home in your area that meets your needs.

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Kalamazoo's Buyer’s Home Inspection Checklist: What to Look For

This checklist is a comprehensive overview of what to look for in a home inspection.

Grounds And Exterior Structure

Foundation appears in good condition with no significant cracks
No evidence of leaks from septic tank
Drainage away from the house with no standing water
Easily accessible crawl spaces to get to plumbing
Exterior walls appear straight with no sagging
Windows and door frames appear square
Siding appears in good condition with no cracks or damage
Bricks appear undamaged with no cracks in joints
Paint is not flaking or stained
Roof shingles are not missing or damaged
Gutters show no decay and drain properly
Chimneys appear straight and undamaged
Detached garage, shed, fence and deck appear in good condition with no rotted wood or evidence of termites

Basement

No evidence of moisture
No evidence of water damage to above floor
Sump pump operates properly

Attic

No evidence of staining from roof
Structure shows no damage or decay
Adequate ventilation through soffit vents and end louvers
Insulation is sufficient and installed properly
Electrical splices are contained

Bathrooms

Visible plumbing under sink is in good condition and shows no signs of water damage
Adequate water pressure for hot and cold water at all fixtures
Tub, shower and sinks drain smoothly
Toilet flushes and fills properly
Toilet is stable, with no rocking or stains at base
No evidence of leaking around base of tub or shower

Kitchen

Visible plumbing under sink is in good condition and shows no signs of water damage
Working exhaust fan vents to outside
Garbage disposal is operational
Water flow to sink is adequate and drains properly
Built-in appliances operate properly

Interior Rooms

Floors, walls and ceilings appear straight and level without visible stains, cracking or damage
Doors open easily and latch properly when closed
Lights and switches operate properly
Adequate number of electrical outlets in each room
Heating and air conditioning vents in all rooms
Fireplace has no cracking and shows no staining
Fireplace flue has been cleaned and is lined
Smoke detectors and carbon monoxide detectors are working and located properly
Stairway treads and risers are solid

Electrical Systems

Wiring is in good condition
Service panel has normal capacity with cables attached correctly
Cables are secured and protected
No exposed electrical splices

Heating And Cooling Systems

No gas odor
Air conditioning and heating operate well
Air filters are clean
Flues have no open seams and slow up to chimney connection
Cooling unit has no visible rust

Plumbing

Visible pipes have no damage or evidence of leaks
Water heater shows no signs of rust
Water pressure falls within accepted range
Hot water temperature does not exceed 125-degrees Fahrenheit

Where to Go From Here

Putting together your list of necessary features for your next home might seem like a small task, but it’s a crucial first step on your homebuying journey today. If you’re ready to find a home that fits your needs, let’s connect.

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You may have heard of REALTORS® that simply put the house up on the MLS and wait for buyers to come. If you have heard of agents like this you probably have also run into the horror stories that come with them. Our team actively emails, texts, and follows up with thousands of buyers who have put information into our site before, or leads that sign up to learn more about your house from our digital marketing.

A Look at the Unexpected Advantages of Buying Now

Key Advantages of Buying a Home Today

There’s no doubt buying a home today is different than it was over the past couple of years, and the shift in the market has led to advantages for buyers today. Right now, there are specific reasons that make this housing market attractive for those who’ve thought about buying but have sidelined their search due to rising mortgage rates.

Buying a home in any market is a personal decision, and the best way to make that decision is to educate yourself on the facts, not following sensationalized headlines in the news today. The reality is, headlines do more to terrify people thinking about buying a home than they do to clarify what’s actually going on with real estate.

Here are three reasons potential homebuyers should consider buying a home today.

1. More Homes Are for Sale Right Now

According to data from the National Association of Realtors (NAR), this year, the supply of homes for sale has grown significantly compared to where we started the year (see graph below):

This growth has happened for two reasons: homeowners listing their homes for sale and homes staying on the market a bit longer as buyer demand has moderated in response to higher mortgage rates.

The good news for you is that more inventory means more homes to choose from. And when there are more homes on the market, you could also see less competition from other buyers because the peak frenzy of competing over the same home has eased too.

2. Home Prices Are Not Projected To Crash

Experts don’t believe home prices will crash like they did in 2008. Instead, home prices will moderate at various levels depending on the local market and the factors, like supply and demand, at play in that area. That’s why some experts are calling for slight appreciation and others are calling for slight depreciation (see graph below):

If you consider the big picture and average the expert forecasts for 2023 together, the expectation is for relatively flat or neutral price appreciation next year. So, if you’re worried about buying a home because you’re afraid home prices will crash like they did in 2008, rest assured that’s not what expert projections tell us.

3. Mortgage Rates Have Risen, but They Will Come Down

While mortgage rates have risen dramatically this year, the rapid increases we’ve seen have moderated in recent weeks as early signs hint that inflation may be easing slightly. Where they’ll go from here largely depends on what happens next with inflation. If inflation does truly begin to cool, mortgage rates may come down as a result.

When that happens, expect more buyers to jump back into the market. For you, that means you’ll once again face more competition. Buying your house now before more buyers reenter the market could help you get one step ahead. As Lawrence Yun, Chief Economist for NAR, says:

“The upcoming months should see a return of buyers, as mortgage rates appear to have already peaked and have been coming down since mid-November.”

When mortgage rates come down, those waiting on the sidelines will jump back in. Your advantage is getting in before they do.

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7 Benefits of Living in Kalamazoo, Michigan

1. Low Cost of Living/Housing

The cost of living in Kalamazoo is 20 percent below the national standard, with particularly low costs among all major categories. This is mostly a result of the affordability of housing, which costs 50 percent less than average ($189,000 in Kalamazoo, MI versus $291,000 across the country).

2. A Young Population

With 6 colleges in town, it’s easy to find out that 25 of Kalamazoo residents are actively attending college. The strong presence of students gives the town a younger population. The average age of Kalamazoo is 25 years old compared to a national average of 37 years old. The young and quirky nature of the town has earned it the ranking of the 1 coolest city with the lowest cost of living.

3. Central Location

Kalamazoo is handily situated with a two-hours drive to the metropolises of Detroit and Chicago. It’s also about an hour from the medium-sized cities of Grand Rapids, Lansing, and South Bend. This locality provides residents with plenty of options should they want to go somewhere else for business or entertainment.

Lake Michigan and the city of Kalamazoo are popular places to take pleasure in recreation. A visit to the area can be made in just an hour by driving from the beaches, boating, and water sports of Lake Michigan to the site.

4. Thriving Downtown

The Downtown area of Kana stands on Burdick Street and Michigan Avenue. This is where the Kalamazoo Mall is located, not a store, but a pedestrian shopping road. Established in 1959, the mall was the first pedestrian shopping avenue in the world.

Kalamazoo Downtown has a lot to offer its residents including:

76 restaurants, most locally-owned and operated featuring products from nearby Michigan farms
23 bars, taverns, and a growing number of craft beer breweries
34 arts and culture locations including ballet, orchestra, theatre, library, museum, and live music venues
101 locally-owned shops, boutiques, and galleries.

Where to Go From Here

If you’re thinking about buying a home, you should seriously consider the advantages today’s market offers. Let’s connect so you can make the dream of homeownership a reality.

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Price Right & Get Moving: Learn How to List Your Kalamazoo Home

Your House Could Be the #1 Item on a Homebuyer’s Wish List During the Holidays

Each year, homeowners planning to make a move are faced with a decision: sell their house during the holidays or wait. And others who have already listed their homes may think about removing their listings and waiting until the new year to go back on the market.

The truth is many buyers want to purchase a home for the holidays, and your house might be just what they’re looking for. Here are five great reasons you shouldn’t wait to sell your house.

1. While the supply of homes for sale has increased this year, there still aren’t enough homes on the market to keep up with buyer demand. As Nadia Evangelou, Senior Economist & Director of Forecasting at the National Association of Realtors (NAR), explains:

“There’s still this gap between demand and supply because we were underbuilding for many years. . . . So now we see demand is slowing, but it still outpaces supply.”

2. Serious homebuyers are out looking right now. Millennials are driving homebuying demand today, and many are eager to make a purchase. Mark Fleming, Chief Economist at First American, explains:

“While not the frenzy of 2021, the largest living generation, the Millennials, will continue to age into their prime home-buying years, creating a demographic tailwind for the housing market.”

3. The desire to own a home doesn’t stop during the holidays. In fact, homes decorated for the holidays appeal to many buyers. Plus, purchasers who look for homes during the holidays are ready to buy.

4. You can restrict the showings in your house to days and times that are most convenient for you. That can help you minimize disruptions, which is especially important this time of year.

5. Rents have skyrocketed in recent years. And, many buyers are looking to escape rising rents and avoid falling into the rental trap for another year. As an article from Zillow says:

“Over the next 12 months, rents are expected to grow more than inflation, the stock market and home values.”

Your home could be their ticket to leaving renting behind for good.

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How to list your Kalamazoo Home for Sale

Once you’ve settled on a price, you should compose a description that advertises your property for sale to prospective buyers in the local marketplace. Understanding their priorities will enable you to determine what features of your property to highlight in your listing and attract more interest.

Top buyer priorities in Michigan

If you contract with a flat-fee multilist service, you may have to pay a buyer’s agent commission to incentivize your services. The MLS is the way typically realtors find properties for their customers, and many flat-fee services calculate a commission for heads of houses to encourage them to showcase the house to their client base.

How realtor commissions work in Kalamazoo

Most of the time, the commission agreement between the buyer’s agent and the listing agent is negotiable. When sellers work with a realtor, they negotiate a commission as part of the listing agreement.

In Michigan, the typical commission rate is between two and 3 percent of the selling price. Typically, a buyer agrees to a seller’s rate of commission for a real estate agent who brings them to an offer, which runs between 2.52 and 3.23 percent.

In real estate, agents may be paid a higher fee for showing a buyer’s agent’s home, which may cause your property to be shown more often. If you negotiate a commission that is not as large as comparable homes in your area, your property may be shown less often. Agents are more inclined to go house hunting with sellers who pay commissions in proportion to that of comparable residences.

Where to Go From Here

There are still many reasons it makes sense to list your house during the holiday season. Let’s connect to determine if selling now is your best move.

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Whether it’s your first purchase or your 5th, learning more about purchasing a home can never hurt right? We offer tons of online and offline resources that can help accelerate your journey to purchasing your next home.

Uncovering the Secrets of Successful Homeownership

What You Want To Know If You’re Pursuing Your Dream of Homeownership

If you’re a young adult, you may be thinking about your goals and priorities for the months and years ahead. And if homeownership ranks high on your goal sheet, you’re in good company. Many of your peers are also pursuing their dream of owning a home. The 2022 Millennial & Gen Z Borrower Sentiment Report from Maxwell says:

“Many young adults have demonstrated their resolve to embark on the journey toward homeownership soon. More than half of millennials and Gen Zs plan to apply for a mortgage sometime within the next year.”

Let’s take a look at why homeownership makes the top of so many young buyers’ to-do list and what you need to consider to achieve your goals if you’re one of them.

Top Motivators To Buy a Home

Before you start the homebuying process, it’s helpful to know why homeownership is so important to you. The survey mentioned above sheds light on some of the top reasons why younger generations are looking to buy a home. It finds:

95% believe the cost of renting is too high
35% think owing a home is an important wealth building tool
16% seek the sense of security owning a home provides
37% plan to use it as an investment property

No matter which of these resonates the most with you, know there are many financial and non-financial reasons why you may want to buy a home. While your top motivator may be different than that of your friends, they’re all equally valid and worthwhile.

Key Obstacles and How To Overcome Them

Whether your homeownership goals come from the heart or are driven by financial aspirations (or both), it can still be hard to know where to start when you’re looking to buy a home. From understanding the homebuying process, to getting pre-approved, and exploring down payment options, it’s a lot to wrap your head around.

The same Maxwell survey also reveals key challenges for potential buyers. Thankfully, the knowledge and guidance of a trusted real estate professional can help you overcome both. Here’s a look at two of the hurdles potential homebuyers say they face:

1. The Mortgage Process Can Be Intimidating

In the Maxwell study, 33.37% said one of their obstacles was that the mortgage process is confusing or difficult to understand.

An article by OwnUp helps explain why the mortgage process is so challenging for buyers:

“There is a general lack of knowledge about home financing. Mortgages are a complicated topic with no one-size-fits-all answer. It’s difficult to understand the space, let alone determine what the right course of action is based on your unique financial picture.”

While you may be tempted to do a quick search online to find instant answers to your questions, it may not get you the information you need to understand the full picture. Especially when it comes to financial advice, you want to lean on a true expert. Having trusted professionals on your side can help you to learn what it takes to achieve your dream of homeownership. Not to mention, an expert can give you advice specific to your situation, not generic advice like you’ll find online.

2. It’s Hard To Know How Much You Need To Save

In the Maxwell study, 45.75% believe they don’t have enough saved to cover their down payment or closing cost expenses.

What you may not realize is that, today, there’s a growing number of down payment assistance programs available nationwide to help relieve this pressure. A report from Down Payment Resource says:

“Our Q3 2022 HPI report revealed a 1.6% uptick in the number of homebuyer assistance programs available to help people finance homes, raising the number of programs to 2,309, a net increase of 36 over the previous quarter.”

Additionally, as the housing market cools, buyers are regaining some negotiation power and more sellers are willing to work with buyers to help with closing costs. Understanding what’s out there and the options available may help you achieve your dream of homeownership faster than you thought possible.

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Tips For First-Time Home Buyers in Kalamazoo

1. Be Sure You’re Ready To Commit To A Loan

Should you get a mortgage, keep in mind one essential tip: ensure you have everything ready. The average term of a mortgage is 15 30 years. It is not really necessary to stay in your home long enough, but buying a house is a big commitment. Be sure you’re completely ready for home ownership before pursuing a mortgage.

First, consider if you’re prepared to be a resident of this city and home for a minimum of 5 years. If you have $3,000 saved for a rainy day, it will help to meet your basic expenses for three months. Do you have a stable income?

2. Don’t Skip The Preapproval

It may be tempting to rush right into a search for the ideal home, especially if this is your first time relocating and particularly if are under considerable pressure to leave your parents’ home. Nevertheless, it s highly recommended that you secure financing beforehand, since it can assist you to examine all the obtainable alternatives on the market and determine the most suitable home. Gaining a retention about prequalification from preapproval is also critical.

3. Save for a Downpayment

The Federal Housing Administration’s most important goal is assisting home buyers get their first home, which is why it assists borrowers with their down payment. If you qualify as a first-time home buyer, you may be able to avail of state government programs, tax breaks, and an FHA loan.

Where to Go From Here

If you’re serious about becoming a homeowner, know it may be more in reach than you think. Lean on trusted professionals to help you overcome challenges and prioritize your next steps.

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When we decide to help with a listing we make sure that we’re able to make sure that it sells quickly and for top dollar. Our process involves heavy marketing, actively persuing buyers, and most importantly making sure that we get your home SOLD at the peak of the comparable sales.

Good News for Homebuyers: Slowdown in Foreclosures Expected

Why There Won’t Be a Flood of Foreclosures Coming to the Housing Market

With the rapid shift that’s happened in the housing market this year, some people are raising concerns that we’re destined for a repeat of the crash we saw in 2008. But in truth, there are many key differences between what’s happening today and the bubble in the early 2000s.

One of the reasons this isn’t like the last time is the number of foreclosures in the market is much lower now. Here’s a look at why there won’t be a wave of foreclosures flooding the market.

Not as Many Homeowners Are in Trouble This Time

After the last housing crash, over nine million households lost their homes due to a foreclosure, short sale, or because they gave it back to the bank. This was, in large part, because of more relaxed lending standards where people could take out mortgages they ultimately couldn’t afford. Those lending practices led to a wave of distressed properties which made their way into the market and caused home values to plummet.

But today, revised lending standards have led to more qualified buyers. As a result, there are fewer homeowners who are behind on their mortgages. As Marina Walsh, Vice President of Industry Analysis at the Mortgage Bankers Association (MBA), says:

“For the second quarter in a row, the mortgage delinquency rate fell to its lowest level since MBA’s survey began in 1979 – declining to 3.45%. Foreclosure starts and loans in the process of foreclosure also dropped in the third quarter to levels further below their historical averages.”

It shows supply this year has surpassed 2021 levels by over 30%. But the further back you look, the more you’ll understand the big picture. Compared to 2020, we’re just barely above the level of inventory we saw then. And if you go all the way back to 2019, the last normal year in real estate, we’re roughly 40% below the housing supply we had at that time.

Why does this matter to you? When inventory is low, there is still demand for your house because there just aren’t enough homes available for sale.

There Have Been Fewer Foreclosures over the Last Two Years

While you may have seen recent stories about the number of foreclosures rising today, context is important. During the pandemic, many homeowners were able to pause their mortgage payments using the forbearance program. The program gave homeowners facing difficulties extra time to get their finances in order and, in many cases, work out a plan with their lender.

With that program, many were concerned it would result in a wave of foreclosures coming to the market. That fear didn’t materialize. Data from the New York Fed shows there are still fewer foreclosures happening today than before the pandemic (see graph below):

That means, while there are more foreclosures now compared to last year (when foreclosures were paused), the number is still well below what the housing market has seen in a more typical year, like 2017-2019.

And most importantly, the number we’re seeing now is still far below the number we saw during the market crash (shown in the red bars in the graph). The big takeaway? Don’t let a headline in the news mislead you. While foreclosures are up year-over-year, historical context is essential to understanding the full picture.

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Most Homeowners Have More Than Enough Equity To Sell Their Homes

Many homeowners today have enough equity to sell their homes instead of facing foreclosure. Due to rapidly rising home prices over the last two years, the average homeowner has gained record amounts of equity in their home. And if they’ve stayed in their homes even longer, they may have even more equity than they realize. As Ksenia Potapov, Economist at First American, says:

“Homeowners have very high levels of tappable home equity today, providing a cushion to withstand potential price declines, but also preventing housing distress from turning into a foreclosure. . . the result will likely be more of a foreclosure ‘trickle’ than a ‘tsunami.’”

A recent report from ATTOM Data explains it by going even deeper into the numbers:

“Only about 214,800 homeowners were facing possible foreclosure in the second quarter of 2022, or just four-tenths of one percent of the 58.2 million outstanding mortgages in the U.S. Of those facing foreclosure, about 195,400, or 91 percent, had at least some equity built up in their homes.”

Best Ways to Prevent Foreclosure in Kalamazoo

1. Mortgage repayment plan

If you’re faced with an unexpected short-term financial crisis (such as expensive vehicle repairs or a big medical expense), your financial institution may allow you some breathing space by making a deal with you to pay off your overdue balance over the next two months.

2. Loan modification

A number of mortgage servicers can frequently increase the terms of your loan by lengthening the amortization schedule, lowering the interest rate, or rolling the delinquent amount into the loan, after which the new balance is re-amortized to help you make your loan current. Depending on the loan’s original balance, you may not have a reduction of your original principal.

3. Short Sale

A short sale happens when the lender allows you to sell your house for less than the amount of the outstanding loan, takes the proceeds, and forgives any remaining debt. A short sale enables you to salvage some of your equity and a real estate agent with experience in short sales might be able to help you find a buyer and guide you through the process.

Where to Go From Here

If you see headlines about the increasing number of foreclosures today, remember context is important. While it’s true the number of foreclosures is higher now than it was last year, foreclosures are still well below pre-pandemic years. If you have questions, let’s connect.

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