Fires and the Real Estate Business
The effect of the fires have been devastating. I also realize that this week's events has caused our market to slow to a crawl. As a result, the next few weeks will be challenging. Here is a list of what we in the industry can expect:
- Sales will be slow as people reorganize. Over 500,000 people were evacuated this week; it will take a few weeks for households to get back to normal.
- The rental market should heat up with as many as 1,200 families may be seeking more permanent shelter after having lost their homes or suffered damage. If you have clients whose houses are vacant and are not seeing any activity, this may be a good time for them to enter the rental market and wait out the buyer's market. As a result, we may some prices stabilize as properties leave the sales market for the rental market particularly since the most affected properties (sub-prime mortgages) were the lesser expensive homes and would make the best rental properties.
- Finally, and perhaps most frustrating for those of you with escrows about ready to close, closings will come to a halt for the next week to 10 days. Lenders are not going to lend and insurance companies will not be issuing policies unless they have verification that the house is still standing. As long as the fires are burning, it will be tough to get funding. Please let your buyers and sellers know what is going on; even though a buyer may technically be in breach for not closing, this failure to close is the direct result of an "Act of God" and no court of law is going to find the buyer in breach of contract.
Todd,
Good post. I think if the banks decided to hang on to some of their portfolio and rented them out for a year or two to people who lost their homes it would decrease inventory on the market and could give the banks a higher return when they sell it. Just a thought - might work.
Mike Lewis
Hi Todd,
Good info. It sort of reminds me of the Whittier earthquake in 1987. Lenders would not fund until they did a re-inspect the day prior to funding. Like ecerything else, we will all get through this too.