Q: What Did Suze Orman Get Wrong?

Here’s why I disagree with Suze Orman’s recent advice to homebuyers.

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The current state of the economy has people wondering whether now is a good time to buy or sell real estate. In these confusing times even thought leaders in the world of personal finance are having trouble understanding the data coming out of the housing market and how it’s different now than in 2008. With the greatest respect to my hero Suze Orman, I have to disagree with her recent statement about the market:


Waiting until the Fall to purchase might well be the right decision for a Buyer or Seller to make and we will fully support you in that decision. The problem is her reasoning. She is worried a wave of foreclosures is coming now that the Covid payments are ending July 31st. That's factually incorrect and with the way foreclosures work, not even possible.

First, the federal government isn’t allowing foreclosures at this time. Your lender or loan servicer isn’t even permitted to begin foreclosure until August 31. Even if the homeowner doesn't take advantage of all the extensions, refinancing, or forbearance options that are in place right now the process is lengthy. If a bank initiated a foreclosure on September 1 the fastest it would show up as a bank owned sale is generally a year or more.

 

Second, if you experience financial hardship due to the coronavirus pandemic, you have the right to obtain a forbearance for up to 180 days. That’s a whole six months before your forbearance would expire (i.e., January 2021). -Consumer Financial Protection Bureau

 

 

 

 

Suze also mentions what a foreclosure would do to your home’s value, and it’s important to understand a major difference between today’s market and that of 2007 and 2008. Heading into the housing crisis, there was so much inventory on the market that demand was nowhere near supply. When the coronavirus hit, we were seeing record-low inventory. There simply weren’t enough houses on the market when the pandemic began. Since then, demand increased in many markets; it’s increasing in more markets than it’s decreasing.

 

Pricing is driven by Supply & Demand.

High demand means home values will stay high as well. Also, from a practical standpoint, if a bank receives a property back in foreclosure and decides to sell it, they won’t do so at a discount because there's no need. If a property goes into foreclosure in an area where market values are, say, $300,000, that’s what the bank will sell it for.

Contrary to what Suze Orman says, this is not the same scenario we faced in 2008. The market isn’t flooded with properties that are causing values to decrease. It may very well be in your best interest to wait to buy or sell a home, but not for the reasons Suze claims. A wave of foreclosures isn’t on the horizon, and property values won’t be dropping due to foreclosures.

As always, if you have questions about this or any real estate topic or are thinking of buying or selling a home soon, don’t hesitate to reach out to Warner Realty Group at 401-236-8685 and talk to one of our professional Realtors. Real Estate Experts. Guiding You Home.