By: Shmuel Shayowitz

We have entered an unnerving real estate market. Over the past few weeks, I have been fielding many interviews with publications such as CNBC, Fox Business, Money, Yahoo, Forbes, Fortune, and the like about shifts in the housing and lending industries. My big concern with such editorials is that many of these reporters and the experts they are quoting haven’t been around long enough to know what a “down” market is really like.

Having experienced firsthand the “Great Recession” and “Housing Crash” of 2008-2009, I feel comfortable voicing my insights about the similarities and differences these markets present. However, more than predicting what might happen, I believe it’s critical to use past experiences and market perceptions to help guide people with decisions they need to make during the changing landscape.

Part of what a challenging market brings is the lack of clarity and transparency of actionable information. Home buyers and mortgage shoppers are so inundated with negative news that they are scrambling to make decisions without real guidance. Unscrupulous Realtors and Mortgage Brokers are more than willing to use this uncertainty to pressure decisions, and lock-up deals before people have time to do their necessary research.

Personally, my consultations have become more frequent and more comprehensive than ever before. I use more analysis and insights personalized to the individual and their unique circumstances, adding the backdrop of current markets. We are in constant communication with home buyers, helping advise those contemplating making offers in real time. Buyers are baffled that despite what they read online, in some areas, homes are still selling “above ask.”

For homeowners, most are folding their arms with great satisfaction, knowing their current interest rate is untouchable and nothing further could and should be done. However, many homeowners need to understand that they are sitting on tremendous home equity and opportunities. I believe most homeowners, but not all, should explore home equity line of credit options. From the myriad of conversations I have had over the past few months, many have pursued HELOCs from their current lender/servicer solicitations, thinking it’s their best option. More often than not, however, it’s not the best-case scenario for them.

Since the start of the pandemic, home prices jumped 45%, and homeowner equity peaked at $17.6 trillion. Starting in May, about $1.5 trillion of home equity vanished, according to Black Knight, a mortgage analytics and tech company. They estimate that the average borrower has lost $30,000 in equity. I suspect that in a few weeks, their next report will show that over $2 trillion of home equity has disappeared.

According to a recent analysis by CNBC, less than 500,000 borrowers are currently underwater on their mortgages, but that is still double what it was in May. Those who purchased their homes in the past year will be most at risk of going underwater since they bought at the peak of the market. I disagree with that assessment, as the average downpayment has increased over that period.

I spoke with someone last week who was in contract to buy a home in New Jersey, where home prices have been declining. He candidly told me that the payment was much higher than anticipated, and he could barely afford it. At the recommendation of the mortgage broker and real estate agent he was working with, he was willing to move forward as they suggested because he would refinance in the future.

While I agreed with the sentiment that rates will drop, I explained to him that he wouldn’t be able to refinance as advised. He was shocked, and admittedly realized I was right. He backed out of the deal. He’s not the only one who might have such issues. Reach out to me to find out why.

Shout out and happy birthday to Sharon Avram, Eliana Baum, Renee Becker, Miriam Blumstein, Zev Brenner, Brad Dock, Dr. Jon Feder, Dr. Yosef Fox, Elliot Fuld, Kimberly Fuld, Adam Geisler, Sam Goldstein, Tzipi Kaminer, Isaac Keschner, Yonatan Klayman, Daniel Krause, Shira Lipner, Jeff Mendelson, Ruth Miron, Dovid Schild, Alex Solomon, David Vegh, and David Weisberg

Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at Shmuel@approvedfunding.com.

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