I have a couple of news items for you. On September 18th, the former head of Goldman Sachs’s housing research team, Joshua Pollard, sent a report to the White House indicting that home price appreciation is outpacing income and that the U.S. is on the brink of a 15% decline in home prices over the next three years.
If he’s correct, we’re looking at a $3.4 trillion hit to consumers’ net worth. His reasoning: rising interest rates, student debt and a 45% underemployment rate for recent college graduates. Is he correct? Time will tell – but unless we arrive at a solution to the student debt problem, logic dictates that the young adults will not be in a position to buy starter homes – and that means there will not be buyers for those who wish to exit their starter home and move up to the new house.
On a different note, Fannie Mae recently announced a change in its rules as to the required waiting period for distressed borrowers with derogatory credit information resulting from foreclosure, bankruptcy, short sale and deed in lieu of foreclosure. Often times, people ask me, “Which is better from the standpoint of being able to obtain a mortgage loan in the future?” Fannie Mae’s answer is “foreclosure” is the worst outcome.
The foreclosure waiting period is 7 years (possibly shortened to 3 with extenuating circumstances). In contrast, bankruptcy, short-sale and deeds in lieu are looking at 4 year waiting periods (possibly shortened to 2 with extenuating circumstances).
What does this mean? It means if you are facing an underwater home or simply cannot afford to pay, you should take the steps to accomplish the short sale and NOT let it go to foreclosure. The trigger date is the date of the foreclosure sale. After that – while we sometimes can get a foreclosure set aside post sale – it’s a difficult and expensive task. You need to take action prior to sale.
With Regulation X – which came into effect in January – we have a lot of ammunition to accomplish the task. The key – people need to take action and not bury their head in the sand. Everyone knows someone with a housing problem –so if you or a friend are having an issue – the important thing to know is you should not sit back and let it go. There are better options.
Have a great week,