Elliot Eisenberg is an internationally acclaimed economist who is able to mix his wit with his wisdom and communicates each day to 20,000 recipients of his 70-word blog, available to all at Econ70.com.
Eisenberg, known as the bowtie economist, earned his master’s degree and his Ph.D. at Syracuse University and once served as the chief economist for the National Homebuilders Association. In a recent phone conversation, Eisenberg discussed the forbearance period on mortgages and the reasons why he does not feel that its expiration would lead to catastrophic market conditions in the residential real estate industry.
There are between 2.5 million and 2.7 million homes whose owners are participating in the forbearance program, Eisenberg says, meaning they have deferred their mortgage payments until the pandemic eases and they are on firmer financial footing.
The difference in the real estate economy during a recession and the current situation is that home values have climbed 8%-9% during the pandemic. Prices fall during a recession.
Consequently, those in forbearance could sell their house for more than the additional debt that they have added to their loan balance by deferring the payments and adding the principal and interest to the loan balance.
Eisenberg also says roughly half of those loans are FHA loans with a cap on the sale price of properties financed through the Federal Housing Administration. With the demand for housing as high as it is – and the inventory at historically low rates – these homes would be devoured within weeks of hitting the market if they, in fact, did hit the market.
The market being flooded by homes in forbearance is highly unlikely.
Locally, with the lack of buildable lots in Nashville, the teardown boom continues, and prices are exorbitant.
A buyer couple relocating to Nashville recently took a drive around Oak Hill looking for potential housing options in the realm of new construction. What they learned is that Oak Hill pricing now makes Belle Meade blush.
They identified 11 properties with houses in various stages of construction in hopes of finding something in the $2 million range. One house at 1024 Gateway Lane was framed and under roof.
Their dreams were dashed when they learned the builder had paid $1,104,000 for the house that they soon demolished, and the new home would fall into the $3.5 million-$4 million range.
Their search then took them to 4915 Sewanee Road, where the recently demolished home had sold for $1.3 million. And on 4618 Lealand, the former home was purchased for $1.29 million and then destroyed. Among the other homes, there were several $800,000-$900,000 range.
328 White Swans Crossing
Where will it end?
Sale of the Week
The following should fall into the category of a public service announcement:
One of the most oft-repeated mistakes made by buyers is assuming the number of days a house has been on the market should affect the price offered.
Year after year, there are houses that doze on the market with scant showings and limited interest.
Suddenly a buyer appears on the scene and the house checks all of his boxes. He wants it, but since it has been on the market for 192 days, he thinks he should be able to sleep on it and make a decision in the morning. Despite warnings from his Realtor, he chooses slumber over action.
With the days in the market dancing in his head, he decides to offer 80% of list price. In many cases, the offer is rejected as the listing agent discloses a better offer has been made. The scorned buyer cannot believe it.
There can be a slightly different outcome if the buyer receives multiple offers and tells the prospective buyers to return with their highest and best. This response sends buyers into a different stratosphere as they realize they could have bought the house at a lesser price had any of them written the offer the previous day. Timing. It’s everything.
Last week, a house on 328 White Swans Crossing enjoyed the same game.
Listed June 9 by veteran Realtor Beth Molteni for $2.49 million, the 8,073-square-foot house drew praise initially and the price was raised to an even $2.5 million. After a 159-day slumber with no real interest, Molteni reduced it to $2.295 million, a $205,000 reduction.
The price reduction excited some buyers, and at least two emerged. The battle began. When the dust settled, the seller had reclaimed his $205,000, and the house sold for $2.5 million.
The dynamic duo of Shea Ghertner and Whitney Musser won the skirmish for their buyers, who can relax on the front porch and enjoy a panoramic view of a lake and the rolling hills.
Molteni described the home as a “country estate with city convenience in a private, gated community located between Green Hills and Brentwood.” The house has elevator access to three levels, an apartment with studio space and a stunning six-car garage. There are five bedrooms, each with their own bathroom, of course, and two half-baths.
Richard Courtney is a licensed real estate broker with Fridrich and Clark Realty, LLC and can be reached at [email protected].