As mortgage relief comes to an end, there’s going to be an onslaught of homeowners looking to sell their home, in order to pay for the mortgage and avoid foreclosure. Statistics show that there are more than 1.5 million homeowners who are 90 days late or more on their mortgage and aren’t in foreclosure.
So what does that mean for the housing market? What will the next few months look like? Read on for more details on what is going to happen and how the housing inventory is going to boost.
It’s predicted once those on mortgage forbearance programs leave in the next few months will increase the number of homes for sale by 15 percent. This increase is said to start showing in September and October when the federal forbearance programs end.
It’s also possible that the CARES act, which included the COVID mortgage forbearance, could be extended again. But, if that isn’t the case, there are a few things that homeowners who participated will have the option to do:
- Reinstatement: Here, you’ll pay a lump sum that covers the total amount your payments were reduced during forbearance along with interest and fees that accumulated during that time. Once reinstated, you’ll resume paying just as you did before forbearance.
- Repayment Plan: This method divides up the total amount you accrued during forbearance into a series of smaller payments. This is negotiable and payments are typically broken up into increments up to 12 months.
- Mortgage Modification: If you modify your mortgage, you completely change your whole loan to make monthly payments lower. Whatever you didn’t have to pay duing forbearance will just be added into your remaining balance.
In May 2020, there were approximately 4.7 million people in active forbearance during the shutdown. July of 2021 saw that number fall to around 1.9 million people. A Zillow report assumes that roughly 25% of those borrowers listed their homes in order to escape foreclosure. If that trend continues, the housing supply will increase by 31% with 26% of those houses being sold within the next three months.
This is going to be quite the change from the current supply as it’s currently at its lowest level in a long time. In fact, this is the lowest level the housing supply has been at since it was first tracked in the 1980s.
Although the end of mortgage relief may mean some are forced to downsize, it will bring newfound relief to those who have been on the hunt for a while. If a new mortgage relief program isn’t proposed or passed before the end of the CARES act, the market boom is expected to have the most buzz between October and January.
If you’re participating in the mortgage forbearance program, you may want to start preparing yourself now. For those of you who have been on the hunt for a new home for a while now, it’s time to start getting excited again.