FHA short sales in Springfield, Ozark, Nixa and the surrounding area have increased in recent years and should continue to run strong for years to come. Why? Because there have been so many purchases made with FHA loans during and after the bubble with low to no down payment and now prices have fallen well below the prices most of those homes were purchased at.
Prices for homes in the Springfield, MO metro area hit their peak in early 2007 and then fell by around 5% per year (plus or minus) through 2011. About 15% of all sales in Springfield from 2005 through today were completed with FHA financing, totaling somewhere around 4,000 loans. Generally speaking, prices are now around 2003 prices after hitting bottom in 2011. What that means is that the vast majority of homes purchased from 2005 through 2010 are now worth less than what the buyers paid for them. Most FHA buyers put no more than a 3.5% down payment and many put 3% or less down. If prices have fallen 10% to 25% from the time you bought your home and you put no more than 3.5% down, well, you can do the math. You're under water. And there are literally thousands of these loans in the Springfield/Ozark/Nixa area alone. And the number one predictor of whether a home will foreclose is.... drum roll please.... under water mortgage.
Historically, the average home owner stays in a home for around seven years. That would mean that we are starting to see a lot of folks who bought in 2005 and 2006 want to sell now. Since prices didn't even peak until 2007 it seems logical to believe that FHA short sales will remain strong for a long time to come. I'd guess the Great Recession and real estate bubble bust have increased the time frame people are staying in a particular home but, make no mistake, those folks who are under water are going to start wanting/needing to sell for a variety of reasons. Short sales are going to be the way out for a lot of those folks.
I have done a lot of FHA short sales. In fact, I'd say more than half of the short sales I've done are FHA. The good news is that FHA short sales can be the easiest short sale there is, in my opinion. You know up front that, if approved, you won't have to worry about a foreclosure on your credit report or a deficiency balance and, the process is very transparent. Best of all, FHA will usually pay you to do a short sale! In my next post I'll go through the mechanics of how an FHA short sale works. Until then, if you'd like more information on FHA short sales, please contact me!