2020’s financial side effects could be creating a new windfall for real estate investors, and landlords in particular.
While things may look like business as usual on the surface and everyone says they are doing fine, there seems to be some financial ripples happening under the surface that tell a different story. This could be creating windfall gains and long-term upside potential for landlords.
The Real Estate Iceberg
The tip of the real estate iceberg seems to show that home prices are rocketing and demand is up substantially. The data in the headlines seems to be bucking the trends and expectations many analysts had when COVID-19 hit.
However, under the water level, a lot of factors may be sending trends in a different direction. For one, while there seems to be many house shoppers looking to move or downsize, far fewer deals may actually be closing.
Recent reports have put the number of mortgage borrowers struggling with payments at around 30%. Some banks have halted certain loan programs, or have made it dramatically harder to close loans. Deals are falling apart at the last minute and lenders change their minds or lower loan amounts.
Credit card companies have reportedly started cutting credit card limits. Users are finding those financial lifelines are gone, and any offers of COVID-19 relief are gone too. That will have a domino effect on other loans and debt.
Auto dealers are reporting that repos are up dramatically, too. Shoppers seeing 0% deals might find that when they get to the dealership, they end up with an offer that requires a down payment and 20% interest.
What It All Means
The above suggests that many homeowners are like the Titanic, headed straight for the iceberg, and without the ability to steer clear of the impact.
ATTOM Data reports that zombie foreclosures are already spiking to new highs in all US states. These are homes where the owner has just upped and abandoned it, but the lender hasn’t or can’t foreclose yet.
The fact that big banks like Wells Fargo are again trading pools of defaulting mortgage loans of as much as $19B, suggests there is a lot more distress in the shadows than being revealed in the front pages of the media.
New hits to their credit may block consumers from getting home loans for a long time. Some just bounced back from 2008, after having to wait 10 years for negative items to fall off their reports. That means a nation of captive renters who cannot refinance or get new home purchase loans for another 7 to 14 years or even longer.
Landlords and apartment investors are uniquely positioned to help during this new surge in demand. For them, it means being able to provide essential housing, while having their pick of tenants, enjoying higher occupancy rates, and more consistency in income.
It means that the time to acquire real estate assets is now, while others are doubting their moves, and enjoy the most upside potential.