Real estate in hurricane season, plus forbearance news
It’s hard for us to believe, but we have now lived here for 42 years, with the winter of 1978 being the primary driving force behind moving to Cape Coral from the northeast back in 1979. Having had a front row seat from which to watch the blossoming of Cape Coral and all of Southwest Florida has been a fascinating experience, to say the least. One aspect of living here for a long time is the first-hand experience we have gained with tropical weather and hurricanes, and the beneficial information and advice we can provide to our buyers.
Along these lines, buying and selling real estate during hurricane season can provide some challenges and unexpected delays prior to closing on the sale of a home. For example, there can be periods of time when the insurance market will be closed down to accepting new homeowners insurance policies once there is a named tropical storm or hurricane approaching Florida. Also, there is typically a 30-day waiting period on flood insurance from the time a policy is purchased on a home until it goes into effect. This is why buyers need to get their insurance in place, or “bound,” as soon as possible after going under contract for a home purchase. There can also be unexpected delays from mortgage lenders, who may require another home inspection or appraisal of the property if a storm impacts our area.
Most purchase agreements for real estate will have provisions in them to address various types of damage that could occur to a property and what contractual rights each party will have for dealing with delays. For example, back during Hurricane Irma, we were working with a buyer who was under contract to purchase a home in Lehigh Acres. Well before the storm came through our area, we sat down with them and reviewed the “Force Majeure” or “Acts of God” clause in the contract. This allowed them to legally delay the closing, which did not thrill the seller, and following the storm their VA lender required that an appraiser go out to check the property again before they would move forward with the loan. Fortunately, there was only minor damage to the home, which the seller fixed and the deal closed several weeks late.
In that particular case, the seller was waiting for this home sale to close so he could use the proceeds to buy another home on which he was already under contract contingent on this sale. So these types of things can set off a chain reaction of unexpected delays on other sales. This is why it is important for buyers and sellers to read the contract and have it explained to them by their Realtor, title company or real estate attorney.
Moving on to our next topic, as many buyers have been repeatedly beaten out by other buyers in multiple offer bidding wars this year, some of them have decided to hold off their purchase plans in anticipation of a price collapse in the housing market. Some of this is due to the thought that the real estate market is in a bubble and they saw what happened the last time people thought real estate prices could only go higher. Part of this is also based on the expected end to the federally mandated COVID-related moratorium on mortgage foreclosures, otherwise known as forbearance. A number of people have been expecting a wave of home foreclosures to hit the market and drive down prices once this forbearance program comes to an end. Although we tend to expect the possibility that some additional foreclosures will eventually hit our market when this program ends, there are several reasons why we do not think we will see a flood of foreclosures.
First, according to an Aug. 30, 2021, article by Richard Torne through the Mortgage Bankers Association, data released through their “Forbearance and Call Volume Survey” shows that as of Aug. 15, the total number of loans currently in forbearance was 3.25 percent. Based on the MBA’s estimates, this means that 1.6 million homeowners in the U.S. are currently in forbearance programs, which is down by 400,000 since early June. The MBA’s statistics show that these numbers have declined for more than 20 consecutive weeks and that the peak in the number of people in forbearance was hit in the week ending June 7, 2020, at 4.7 million or 8.55 percent of mortgages.
Marina Walsh, the MBA’s vice president of industry research, has indicated that the rate of decrease in the number of homeowners with exposure to forbearance seems to have flattened out. She also pointed out that the FHA delinquency rate on mortgages is down to about 12.77 percent, which is below the peak set in the Great Recession, “but it is right up there.” Barring another extension, the current federal mortgage forbearance program is set to expire on Sept. 30, but Walsh expects any looming foreclosures to happen gradually because of strict guidelines being set by the Consumer Financial Protection Bureau and their oversight on mortgage servicers. She points out that there are also more workout options and assistance programs in place to try to help people retain their homes, all lessons learned from the last financial crisis.
Another factor which should help ease the potential for a large wave of forbearance foreclosures here in Southwest Florida is the fact that many of these struggling homeowners will likely be able to benefit from the build-up in equity in their home value from the rapidly rising market prices. At this point, they can probably sell their homes at a nice profit, have their mortgages paid off at the closing and still walk away with some extra cash in their pockets. The key element for anyone in forbearance will be to communicate with their lenders now to see if there are any realistic, workable solutions to their predicament, and if not, they should strongly consider selling while the market is in their favor.
As of Tuesday, Sept. 7, there were 539 active Cape Coral single-family home listings in the Multiple Listing Service at prices ranging from $215,000 to $5.995 million. This compares to 520 active listings two weeks ago, on Aug. 24, at prices ranging from $180,000 to $5.995 million. Foreclosures remain almost nonexistent. There are currently 929 single-family homes under contract with buyers as pending sales in the Cape (935 with distressed homes included). This compares to 921 pending sales on Aug. 24, and 896 pending home sales in the pipeline three weeks ago, on Aug. 17.
Based on the preliminary sales results, the number of closed single-family home sales in August are on track to come in below both the 561 sales in August 2020, and the 569 sales in July of this year. However, as we have been discussing in this column, the number of closed home sales registered this August will still give us the second best August ever, only coming in behind August of last year.
The preliminary median sales price for this August appears poised to be the highest ever recorded, although this number could change due to late reporting and corrections. We will have the market updates available here in two weeks.
The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of Sept. 7, 2021. It was compiled by Bob and Geri Quinn and it includes information specifically for Cape Coral single-family homes, and does not include condominiums, short sales or foreclosures. The data and statistics are believed to be reliable, however, they could be updated and revised periodically, and are subject to change without notice. The Quinns are a husband and wife real estate team with the RE/MAX Realty Team office in Cape Coral. They have lived in Cape Coral for over 42 years. Geri has been a full-time Realtor since 2005, and Bob joined Geri as a full-time Realtor in 2014. Their real estate practice is mainly focused on Cape Coral residential property and vacant lots.