Rumors of a Housing Market Rebound in 2012? How Does This Affect My Short Sale Decision?
Will there be a rebound in the housing market for 2012? Many are becoming more optimistic about this year’s housing situation as homes have reached unprecedented lows in interest rates and prices thus increasing demand. Concurrently, rent prices are rising and more people are apt to buy which will decrease the excess of supply in our market (many of which are short sales and REO properties) and ultimately, bring the prices back up. What does this mean for current homeowner’s who are struggling with their mortgage(s) and considering a short sale?
As evidenced from past experiences, the fluctuation in the housing market is so variable that even experts are unable to guarantee which direction it will go. There are expectations of stabilization or possibly a slight shift in the direction of prices in the latter half of 2012. Even then, the expected prices are definitely not 2004 prices but more at the 2008 price levels.
The rebound is largely contingent on various factors such as the strength of employment, builder activity, investor activity, and other changes in the general economy. Experts opposing the optimistic predictions of the housing market say, “Distressed properties have the lowest prices for any category of home sold. To a large extent, that’s why we’ve seen continuous home prices drop over the past three years and why those drops are likely to go on.” – Guy Cecala of Insider Mortgage Finance. An influx of short sales and foreclosures entering the market is not going to slow down soon. Even in the case that these great deals fly off the market and prices halt its decline with a slight rise, should a homeowner stay in their homes or short sell right away?
The important question is, are you able to amply afford your mortgage payments in the upcoming years? If you are struggling with payments, then this year would be the most opportune time for a short sale. Suppose the homeowner stays in the home while barely making it by with the mortgage payments. He/she doesn’t only stay at risk of defaulting and foreclosure but the home will likely build little to no equity, if not stay underwater. If the home falls into foreclosure or the homeowner decides to pursue a short sale later, the homeowner may be liable for income tax from the sale of the home which is currently forgiven via the Mortgage Forgiveness Debt Relief Act set to expire December 31, 2012.
A more reasonable option would be to short sell your current home, negotiate the deficiency owed to lender(s), stay within the mortgage forgiveness debt relief act timeline, and purchase another home that makes sense for your financial situation at the lowered interest rate the market offers. It is a good time to buy but for how long will it last? If the housing market slowly rebounds in the next few years, then promptly short selling would give the homeowner enough time to reestablish their financial situation, rebuild credit, and purchase another home within 2 years (typical after a short sale) that is within their means and at a superb price/rate. It may be delayed gratification but keeping up with the Joneses now will only precede an exacerbated financial situation on your hands.
If you would like more information on short sales or would like to speak to one of our Certified Distressed Property Experts, submit your information here and write a brief description of your home situation.
Hope this helps
Peter
