Think now's the time to buy? (Denver: foreclosure, credit score, loan)

[Mike from back east]

Putting 20% down also means you don't have to pay Private Mortgage Insurance (PMI) as part of your monthly payment. If an existing mortgage includes PMI and equity eventually reaches 20% then the mortgagor (borrower) may request the PMI be discontinued ... unless things have changed since my last foray into mortgage wonderland.

[Vision67]

Let's speculate on the impact of the Covid-19 virus upon the future value of houses and cars.

Houses: My guess is that quite a few mortgage and rent payments due May 1 and beyond will remain unpaid.
The impact?

It depends upon the ability of the financial system to tolerate forbearance. If this repeats 2008 and sets off a cycle of repos and evictions, prices will fall. The Government could step in. However, with our current toxic political environment, I wouldn't count on that. So I'll bet prices fall.

How about cars?

Think about the fact that we recently experienced record levels of sub-prime debt issued to finance cars on super extended terms, e.g. 84 months. That causes most of those loans to have negative equity. My guess is that many will go into default. Furthermore, suppose you are a car rental company and your fleet is sitting still, depreciating and you have zero bookings. What do you do? Dump them.

So, if you are a potential investor, wait.

I'll bet both houses and cars will find a new, lower price.

[2bindenver]

I can’t speak about cars.

With regards to housing, prices will not fall until we get to 6 months of inventory. The average right now is 1.3. Many Sellers took their homes off the market in March. A small percentage of those will not return to the market. My relo connection said 70% of their business relocating clients has been cancelled. All the oil and gas relocations into and out of Colorado are cancelled.

If you own a house worth over 2 million, you are approaching a balanced market.

I have heard from lots of people that they will be moving out of state when this is over. Life is too short and precious to not live where you love.

No one has a crystal ball. We will have to wait and see what happens.

[Willy702]

Originally Posted by Vision67

Let's speculate on the impact of the Covid-19 virus upon the future value of houses and cars.

Houses: My guess is that quite a few mortgage and rent payments due May 1 and beyond will remain unpaid.
The impact?

It depends upon the ability of the financial system to tolerate forbearance. If this repeats 2008 and sets off a cycle of repos and evictions, prices will fall. The Government could step in. However, with our current toxic political environment, I wouldn't count on that. So I'll bet prices fall.

How about cars?

Think about the fact that we recently experienced record levels of sub-prime debt issued to finance cars on super extended terms, e.g. 84 months. That causes most of those loans to have negative equity. My guess is that many will go into default. Furthermore, suppose you are a car rental company and your fleet is sitting still, depreciating and you have zero bookings. What do you do? Dump them.

So, if you are a potential investor, wait.

I'll bet both houses and cars will find a new, lower price.

If people owe money on their deferred payments later this year its a problem. However it seems like most banks realize this and will work it out with borrowers to extend the loans on the back end. If so then its virtually no issue for homeowners. For renters, who knows what happens in terms of making up those missed payments, but at most that will just keep some potential homebuyers off the market longer.

Cars are another weird issue because new car production has declined quite a bit so the supply of cars is down, but the demand for them is even lower. So for a short window of time you should definitely expect car prices to go down. Cars aren't a product you can just say I'll take it off the market for 6-18 months until things normalize and not face an economic cost. However, should the economy recover in a year or so, then you will have a shortage of cars compared to demand. This unknown about recovery is what will keep the rental companies from dumping too many cars. Should demand resurface and they want to buy up supply to serve it, they don't want to face an environment where new car supply is squeezed.

[DenverBrian]

Originally Posted by Therblig

And I never said anything to the contrary.

But having 20% down puts you in an elite, proven tier of financial responsibility, which is clearly what the skittish banks are starting to demand. "Here's 5%, I'm good for it" might not fly as well as in years past.

An elite, proven tier? What tier is this? Will it take an 820 credit score...and improve it?

[Vision67]

When coronavirus eases up in Colorado, 450,000 renters could face eviction, study says

https://coloradosun.com/2020/04/15/c...eid=63b8603e28

"A snapshot study by eviction defense lawyers warns that more than 450,000 Colorado renters are at risk of being evicted from their homes in coming months when guidance against removing tenants expires, putting depth to the economic crater caused by COVID-19 lockdowns and layoffs. "

"Pamela, an apartment renter, is fairly certain she’ll end up in those eviction statistics unless something in her life drastically changes. She was working at a bagel deli in Colorado Springs when coronavirus hit, and the layoffs soon after.

After four years of paying her $900 apartment rent three weeks ahead of time, April 1 came and she had to scrape to pay even half. That meant borrowing from friends and selling items from her apartment, still leaving her $450 short.

The landlord made her sign an agreement saying that on May 1, she needs to pay the full May rent and the leftover half from April, or get out .

“I have nowhere else to go,” said Pamela, who asked that her last name not be used to prevent exacerbating her landlord problems. “Do they not know how many homeless people are going to be out there? They’re going to have tons more.” "

[Therblig]

Originally Posted by DenverBrian

An elite, proven tier? What tier is this? Will it take an 820 credit score...and improve it?

An 820 will get you any credit card on earth. You might even keep it when you take a financial dust nap the next year.

Mortgage lenders look a little deeper and more long term and are signing on for a 30-year ride. It's hardly surprising that they are raising the bar to limit the potential damage of the next few years. They're investing in you, with any 'investment' in the property an entirely secondary and shaky thing.

Note that I'm not defending anyone here, but most commercial lenders have no more than a token requirement to be a community service agency. The attempt to force/coerce/allow/bait them into doing so is exactly what led to 2008.

[davebarnes]

I guess I am doomed. Only have an 811 FICO 5 score.

I do think that will be bargains on cars.

[jweb29]

There are still multiple offers on homes < 300k. Even with restrictions. But a home below 300k is a unicorn at this point... excluding westwood.

I'm really hoping for a gem of a 750sf ranch home in athmar/barnum/villa park. Fingers crossed they pop up soon.

I do not need 20% down as of now says my mortgage person.

[Vision67]

Originally Posted by jweb29

There are still multiple offers on homes < 300k. Even with restrictions. But a home below 300k is a unicorn at this point... excluding westwood.

I'm really hoping for a gem of a 750sf ranch home in athmar/barnum/villa park. Fingers crossed they pop up soon.

I do not need 20% down as of now says my mortgage person.

Yup.

It's way too early for price declines. Prices are sticky for awhile. But that will change.

Here is the agenda:

- Sellers withdraw from the market when they realize that the prices they expect to get are too high. They hope for a return to peak prices.

- Buyers wait. Will next month will offer lower prices?

- As the economy contracts and people miss rent payments landlords begin the eviction process. That takes time. Meanwhile, the landlord, who may own multiple properties which have no rents being paid must still make mortgage payments. That quickly consumes capital.

-Furthermore, mortgage servicers who do not receive payment must still make payments to the mortgage bond holders. That consumes their capital and incentivizes them to begin the forclosure process.

- As a result, properties begin to hit the market. Too much supply from liquidation finds buyers at a lower price.

- Sellers who must sell due to job loss or family deaths must accept the market price. Sellers who end up with no equity get foreclosed and the lien holder liquidates.

All of this takes time. So come back in about 9 months, say January, 2021.

My guess is you'll find quite a few properties available for much less than $300K.