Are We Going to See a Fallout from PPP Infused Cash?

Are We Going to See A Fallout from PPP infused cash?   

Following trends in finance and the housing industry, you might start to wonder if money paid by the government has been keeping people afloat that might otherwise be foreclosing on their homes.  You would be right in that assumption.  You’d also be right that bankruptcy’s have slowed for the same reason.

Since the infusion of cash from the government, foreclosure filings dropped in April, 2020 in the Phoenix metro area.  This scenario is playing out all over the country.   

But the key factor to remember is that foreclosures were a tiny percentage of Phoenix home sales in March, 2020.  To give you an idea, in March, 2020 there were 8868 home sales and of that number, 31 were foreclosures.  A year later in March of 2021, there were 10 foreclosures. 

Due to the high sales volume of homes and buyer demand, foreclosures might be a welcome addition to historic low inventory.  Even if the number of foreclosures rises, there are MANY more buyers than sellers to swallow up that extra inventory.   

Nationally there is a 1.5 million deficit of available homes.  Remember the recession? For the Phoenix area the official bottom of the housing market was April, 2011.  That’s also when builders stopped building.  Now that construction is kicking into high gear, we also have labor shortages, and prices have risen 4 x for the price of lumber and other materials, thereby raising new-build homes.  New home prices; however, aren’t rising as fast as re-sale homes though. 

What about interest rates?  Expect to see interest rates rise this year, but remember that a year ago interest rates were at 4%, so even at that rate, money is still cheap.  Principal payments are high enough to reduce loan balances a lot faster than they used to and millennials are coming out in droves as the largest segment of the population buying their first homes.

There IS A COST OF WAITING to buy a home.  If you think that prices will drop, think again.  The demand in the Phoenix area is so high, that prices are continuing to rise.  Even if there is a flattening in the number of sales, price reductions are not anticipated by finance experts as the number of buyers won’t diminish any time soon thanks to the influx of business, 2nd home buyers, and retirement relocations to the area. 

There are more programs surfacing to help with buyers getting stuck on the sidelines.  Recently, I’ve become certified to work with the Knock loan program.  This works sort of like a bridge loan for those with a home to sell, except that Knock will buy your home at 85% of market value so on paper you have sold your home, allowing you to buy your next home without waiting for it to sell.   Meantime, your home is still listed for sale to gain the premium sales price possible.

Knock will lend you money to buy at market rate charging a 1.25% fee on the new home loan balance.  However, before you think that’s a high cost of using the program, remember they don’t charge a 1% origination fee, so the cost is really .25%. 

And if that’s not enough, Knock will lend you money to fix up your old house at 0%, allowing you to maximize the sale of your old home.   So for those home buyers who sell and think they have to lease back their new home, this program to the rescue.

For more on Cost of Waiting for Scottsdale, AZ 85254.  If you're on the fence about selling during this sellers market, contact a professional who understands this market and can price your home to sell, earning you top dollar.