January 14, 2019
How a Housing Foreclosure Crisis Can Re-arrange the Housing Landscape
A housing foreclosure crisis is a seismic economic event. When many people are losing their homes to foreclosure, it means erasure from the economy of wealth owned by a great swath of the population—particularly because, in the case of such a scenario, the effects snowball, leaving fewer people with the capacity to buy a home, and causing lenders to sell homes for drastically lower prices, which in many cases means that the lenders, too, lose wealth.
We’re still learning a lot from the echoes of the so-called “Great Recession,” which was in large part characterized by the burst of a housing bubble that left a slew of foreclosures in its wake. But there are some outcomes that we can observe to gain a deeper understanding of how a housing landscape is re-arranged by such an event.
According to a report by Zillow—and as one might expect—the people most likely to lose their homes to foreclosure during the crisis were low-income homeowners. Indeed, a full 45.4% of the homes foreclosed as result of the subprime mortgage crisis were situated in the lowest third of the American housing market; often entry-level homes. (Only 16.9% of those foreclosed upon were in the top third.)
Those homes that were foreclosed on earliest in the course of the crisis also saw the swiftest gain in their value once the crisis began to ease. Homes sold during the nadir of the foreclosure crisis fetched around 42.6% less of their previous value on average, but have since regained that value—and then some.
Which means that those who were able to buy those foreclosed homes—especially among those who bought them as investments, as early in the crisis as they were able—have seen a resulting gain in wealth in the days since the crisis. This is reflected in the 7% rise in rental rates for single-family homes, measured from when the economic recovery began.
As with other elements of the market, the old adage seems to hold: buy low, sell high (or raise rent).
If you’re looking to buy a home—whether for investment or as a residence—we at Topouzis & Associates, P.C. are experts at ferreting-out problems with title and disposing with them in advance of closing. We take pride in the great amount and quality of experience we bring to the closing table in Rhode Island, Massachusetts, and Florida. Contact us if you want a partner in your property closing—one who makes everyone involved feel like family.