If you prescribe to the saying that perception equals reality, then we may have trouble on the horizon. In the last month searches for a housing crash have skyrocketed 2,450%! “Why is the market so hot” searches have doubled in a single week. It seems Americans are more worried about a crash than they have been in the 14 years since the housing bubble popped. Corelogic reports that 75% of the 100 largest us housing markets are up 10% or more in the last year. This is the largest increase since the year 2006. Maybe that year rings a bell for you, the year before the housing bubble popped. Today, we have a shortage of supply on the market at the same time that rates are near record lows. This low supply is certainly affected by the foreclosure moratorium , over federally-backed mortgage loans which was instituted over a year ago; this moratorium has stopped all foreclosures due to non-payment in the last year. Foreclosures normally supply the housing market with fresh homes for sale, but with that supply being cutoff; it has decreased the available homes which puts upward pressure on home prices. This foreclosure moratorium was recently extended until the end of June 2021. Could that cause housing values to reverse course? In 2006, there were plenty of economic advisors making the rounds on talk shows assuring Americans that there was no crash coming, even weeks before it actually started. We typically don’t see a crash until it is in our rearview mirror and at that point it is too late. In 2007 nervous homeowners realized the overheated housing bubble was popping, as they rushed to sell, it caused further downward pressure on home values, causing the market to pop even faster.
No-one knows if we have a housing correction looming around the corner or not, but, if you were to fast forward ahead one year, and if your home value had dropped, what would you have wished you did now to protect that equity and your future?
Selling your home would be a difficult way to protect your equity, as you would have to move to a different location, and begin renting. Not many would make this sacrifice. If you have thought about a Reverse Mortgage (RM), now may be a great time to look into accessing some of your equity in a RM line of credit or tenure payment. You are not charged interest on the equity you have set aside in your RM line of credit, in fact it grows, compounded annually, regardless of your home value rising or falling. The growth is based on the current interest rate plus a .50% margin. This line of credit cannot be frozen or taken away due to a housing crash. If you were to choose the tenure payment (a monthly cash payout to you), this cannot be taken away because of a housing crash either. My grandmother took out a reverse mortgage with a tenure payment in 2006 and after the market crashed in 2007, she was upside down on her home, along with many of her neighbors. The difference for her was that she continued to get her tenure payment each month and she had no monthly mortgage payment to make. All she had to do was pay her property taxes and home insurance, live in her home as the primary residence, and maintain it. Years later, the market recovered and she had equity once again that she passed on to her kids and grandkids; they even used it to establish a family vacation fund. Securing her equity before the market crashed was a great financial decision on her part that gave her peace of mind through a difficult time for many other people.
If you would like to look into protecting your equity with a RM line of credit or tenure payment, you may contact Robert Krepps rkrepps@hightechlending.com or toll-free at 877-567-7476.
Robert Krepps, NMLS #255191, at HighTechLending Inc. HighTechLending Inc, NMLS # 7147, is an Equal Housing Lender. Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act.
