What Current Home Prices and Foreclosures Mean for Property Managers

by Marc Courtenay –

The median home in San Francisco sold for around $800,000 at the market top three years ago. Then prices collapsed, falling 45% according to the Case-Shiller home price index.

But an interesting thing has been happening lately. Home prices in San Francisco appeared to have bottomed in March. According to the same Index, they’ve been up every month since and were up nearly 4% in the latest month. (Speaking of San Francisco, we recently held an educational seminar for property managers with Landlord Attorney Daniel Bornstein.)

According to Dr. Steve Sjuggerud at DailyWealth.com:

On my side of the country in Florida, the same thing is happening… for 11 consecutive months home sales in Florida have INCREASED over the same period last year.

The median home price in Florida is now $147,600. That’s a mortgage payment of about $650 a month (at current mortgage rates with 20% down). The median household income in Florida is about $50,000, roughly $4,000 a month before tax. That’s about 16% of your household income.

From coast to coast, housing affordability is better than it’s ever been, getting a big boost from two things: the housing bust and super-low mortgage interest rates. The pile of government incentives has helped, too.

Yet mortgage defaults and homes heading for foreclosure appear to be rising. The number of Americans who have fallen at least 30 days behind on their home loan payments jumped 44% in the second quarter from a year ago, according to an industry report.

That puts delinquencies at a record 9.24% of mortgages, according to the National Delinquency Report from the Mortgage Bankers Association (MBA). That represents more than 4 million of the 45 million borrowers covered by the report.

The inventory of unsold homes is rising in most regions too. And first-time buyer incentives are about to expire.

So it’s too early to say home prices have bottomed. Investors may want to wait a few months before purchasing additional rental units.

Residents have a big incentive to keep renting. Millions can not qualify for mortgages.

Now is a great time to tell potential residents that it’s more affordable to rent than to buy, which happens to be the truth.

Factoring in property tax and maintenance makes the above statement a fact in most regions of the country. Stress the fact that they don’t have to “qualify for a loan” and pay closing costs. For most Americans, now is the time to rent or lease.