Why September might be a good time to buy a home
Ask someone who has tried buying a home this year what the experience is like, and you’ll likely hear similar reactions.
“There are no houses to buy.”
“The houses are overpriced.”
“There is just too much competition.
Low inventories, bidding wars and inflated asking prices have defined the residential real estate market since the start of the year. And although the number of available homes has increased slightly in recent months, it is still far from normal. As such, many buyers have struggled to find a place to call their own.
But things could change later this month. Here’s why.
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Abstention exits could fuel more announcements
Many homeowners have faced their share of financial hardship during the pandemic. Those who could not keep up with their housing payments were able to suspend their home loans under the CARES Act, the massive coronavirus relief bill that was enacted in March 2020.
Under the CARES Act, forborne homeowners were allowed to withhold their mortgage payments for up to 18 months (initially it was only 12 months, but was later extended). This means that those who forborne their mortgages as soon as it becomes an option under the CARES Act will run out of that 18-month clock by the end of September. And at that point, many people might choose to sell their homes rather than start paying their mortgages again.
Why? On the one hand, some homeowners may not have recovered from the pandemic, and those who cannot meet their mortgage payments may prefer to sell their home and downsize rather than struggle. (To be clear, loan officers are told to work with borrowers to help them stay at home, but some people may find themselves in such a dire situation that even flexibility on the part of loan officers is not sufficient.)
Additionally, right now, home values are on the rise nationwide. This means that homeowners whose loans come out of forbearance are in a better position to sell now than they perhaps were in the past.
In fact, due to the increase in home values, many people coming out of forbearance may be able to sell their homes for enough money to pay off their existing mortgages and start fresh elsewhere. And it is an option that some might choose to exercise, even if they are not in financial difficulty.
It is for this reason that the end of September could be a good time to buy a house. If more inventory hits the market, buyers will have more properties to choose from.
Additionally, homeowners who have to offload their properties due to financial issues may be willing to accept less money for their home if it leads to a quick sale. And while this is an unfortunate thing for those who are having difficulty, it does give buyers the opportunity to acquire a home at a more reasonable price than what is available on the market today.
And later this year?
Not everyone who forborne a mortgage did so at the end of March 2020. Those who waited until April or May of last year to forborne will not see this protection expire until October or November of this year. At this point, we might see more homes going up for sale if homeowners chose to offload their properties rather than continue paying for them.
Either way, it could be that the housing stock will increase in the latter part of 2021. So buyers who have struggled to buy homes may have better luck soon – if not in September, then in the following months.