How to Weather the Coming Housing Crisis
For millions of Americans, the pandemic and the ensuing economic crisis has been a challenge like nothing they’ve ever experienced. Although it won’t come close to the housing crisis of 2008, according to many experts, the coming housing crisis will still leave many Americans struggling or unable to pay their mortgages. Depending on the severity and length of the economic downturn, experts believe as many as 500,000 Americans may default on their loans in the coming year.
If you’re one of those Americans, the prospect of losing your home and everything you’ve put into it can be terrifying. Fortunately, there are several steps you can take to avoid foreclosure and all of the credit and housing challenges that follow.
At Bill Buys Houses, we work with Minnesota homeowners every day to help them make a plan and sell their house fast to avoid foreclosure. In this post, we’re breaking down some of the housing changes experts predict in the wake of the pandemic and sharing advice to help you weather the storm.
The Great Recession Crisis
The root causes of the Great Recession began years before the crisis itself. Experts believe the housing crisis resulted almost completely from predatory lending practices and poor oversight. At the turn of the 21st century, the private label mortgage market expanded dramatically while the government market started to decline.
Unfortunately, a good deal of that expansion was tied to subprime loans connected to predatory lending practices, and the majority of these loans were refinancing loans. Homeowners thought they were getting a great deal on low-interest rates. But in reality, many of these loans had built-in features that caused them to alter with shifting economic conditions, leaving millions of Americans struggling to pay their mortgages.
Sadly, most homeowners had a poor understanding of what they were getting into when they signed up for these loans, and with minimal government oversight, a crash was due. But to make matters worse, low housing prices meant it was easy for almost anyone to take out a mortgage that was beyond their means.
In the mid-2000s as interest rates reversed and began to rise, the housing market stalled. The whole system began to unravel rapidly, setting off the housing crisis and recession that followed.
One of the most significant differences between the housing crisis of 2008 is that we can see the post-pandemic crisis coming. In 2008, on the other hand, the housing crisis hit the world like a tsunami with few people predicting the meltdown. 1.65 million American homes went into foreclosure in the first half of 2010 in a short period that sent shockwaves throughout the world.
Thankfully, pandemic-related foreclosures are expected to remain well below anything during the Great Recession. Although unemployment has reached record highs, Americans have built up significant home equity reserves that simply didn’t exist at the beginning of the Great Recession.
Here are a few things that have changed:
● The housing market has better government oversight.
● Homeowners now have to prove they can repay a loan.
● Zero down payments are not handed out freely like they were during the aughts.
● Home values are remaining steady as working Americans seek bigger homes during the pandemic.
● Most home price markets are steadily rising.
Better Government Response
In addition to the factors listed above, another key difference is government response. During the 2008 housing crisis, everything happened quickly, leaving the federal government scrambling to keep Americans in their homes. However, we’ve been watching the pandemic unfold for a year, and economists have a fairly complete understanding of where we’re at and where we’re headed.
The federal government responded immediately to the COVID crisis, actively working to pass penalty-free federal forbearances through the height of the pandemic. Hoping to avoid a reboot of the Great Recession, private lenders adopted a similar approach, working with Americans instead of against them as they did in the aughts.
If You Can’t Pay Your Mortgage
Despite the positive big picture outlook, once the economy begins to recover, there will still be hundreds of thousands of Americans struggling to make their mortgage payments. If you’re one of those families, losing your home is just the beginning of the struggle. Foreclosure comes with a host of consequences including long-term credit problems, difficulty purchasing another home, and even trouble finding housing at all.
If you’re struggling to pay your mortgage, here are a few steps you can take:
● Find out if you can refinance at a fixed rate.
● Talk to your lender about establishing a repayment plan.
● Consider selling your home.
Sell My House As is Fast in Minnesota
If you’re ready to get out from under your mortgage but want to be able to purchase another home in the future, you need to sell your house fast. That’s where our team at Bill Buys Houses comes to the rescue. Get cash fast when you sell your house to our investors so you can pay off your loan and focus on the future.
Contact us to sell your house fast or call to request an offer. Give us a call today at 651-270-9191 and find out how we buy houses and can help you sell your house as is!