Is the current hot seller’s market about to turn into a buyer’s market? We are in uncharted territory, it is difficult to predict. But the author of the following article may well be correct.
https://www.biggerpockets.com/blog/covid-evictions-market-fallout
Unemployment numbers are still over 10% and the extra $600 a week for unemployment has expired.
The moratorium on evictions is about to end. That will mean more people will be out of a house. Landlords cannot sell their houses when they have nonpaying tenants in them. After the moratorium on evictions is over, some landlords may decide that they no longer like the business, after having been without income for many months. While there is also a moratorium on foreclosures, after that is lifted, landlords will have to pay back the amounts they missed, with interest. If tenants don’t pay their rents, they get evicted. If landlords don’t make their mortgage payments, they lose their properties.
After the moratoriums on evictions and foreclosures are lifted, there should be an increase of inventory.
Mom-and-pop landlords are not the rich land barons that the states think they are. These landlords are facing financial hardship due to the prohibitions of evictions. They rely on rents to pay their mortgage, taxes, and insurance. Even when tenants do not pay the rent, the landlords must still pay for maintenance.
After not receiving rents for many months, these landlords may default on their mortgages.
Politicians conveniently ignore the fact that mortgage forbearance is not forgiveness, which means that landlords will need to make up missed payments, with interest, regardless of whether rents were received. A lot of the non-paying tenants are noncollectable, having less than $1000 in their bank accounts. So when the moratoriums end, tenants will be evicted but landlords will likely not receive any back rent. The landlords not be made whole for being required by their states and by the federal government to provide housing to the tenants for all these months. The governments have required landlords to take over the government responsibility of providing social housing to indigent tenants. They should not be surprised when the landlords lose their properties and the stock of housing available to tenants is reduced.
For sellers who have been on the fence, now is a great time to sell, while many cities have seller’s markets due to lack of inventory. Builders were unable to build for several months due to shutdowns and potential sellers did not want to sell and move during a pandemic.
It is quite possible that these markets will soon become buyer’s markets as more owners default on their loans and the moratorium on foreclosures ends. Buyers should not do any panic buying. It is a good time to exercise caution.