With businesses remaining shut down and a high unemployment rate, we must be seeing a bunch of foreclosures hitting the market, right? This is a question we are getting from lots of our clients lately. Following are the numbers as of Sep 13 and our analysis.
How many bank owned homes are on the market today?
Of the 2329 homes for sale in Sacramento, Placer and El Dorado counties, 16 are bank owned. If we hustle, we could go take a look at all of these homes in one day!
Are bank owned homes sold at a discount?
While banks don't want to keep homes on their balance sheets, they aren't in the business of leaving money on the table. In this market, when a bank forecloses on a home, they hire a Realtor to sell the home at market value. Bank owned homes tend to be a bit rough around the edges, so expect the price to reflect this.
Why hasn't the pandemic caused more foreclosures?
Part of the pandemic relief legislation is a mandate for banks to allow homeowners to defer payments for up to a year without incurring penalties. This has taken the distress out of the market and nearly eliminated foreclosures.
But, what about all the homes in "pre-foreclosure" that I see online?
Some of the big portals show homes labeled as pre-foreclosure. These are homes where owners are behind on payments and include the 3+ million homes owned by people in forbearance. In a normal market, these pre-foreclosure numbers may offer a look at foreclosures to come. This market is not normal!
Will foreclosures flood the market when the forbearance period ends?
Probably not, for a few reasons:
- Homeowners that are back to work will start making payments again and be right back on track. These folks can even refinance at historically low rates, decreasing monthly payments.
- The vast majority of homeowners that remain unemployed following the forbearance period will have equity in their homes. This will allow them to sell and avoid the foreclosure process.
- The foreclosure process takes a long time. Even those homes that enter the foreclosure process at the end of the forbearance period will take months to become bank owned.
In summary, due to strong demand and government mandated programs, there is almost no distress in the Sacramento Valley real estate market. As a result, we don't see bank owned homes being a significant part of our market in the foreseeable future.
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