6 Million Homeowners Are Struggling

In this exclusive interview, housing market expert Randy Patrick discusses the growing crisis facing over 6 million homeowners who are behind on their mortgage payments. We explore key indicators of a potential housing market crash, increasing mortgage delinquencies, the risk of FHA loans becoming the next subprime, and the likelihood of a wave of foreclosures and short sales in 2025. Randy also shares effective real estate investing strategies for identifying off-market distressed properties, pre-foreclosures, and reverse mortgage deals. If you're a real estate investor, a first-time homebuyer, or a homeowner experiencing financial hardship, this conversation provides actionable insights on what’s next for the U.S. housing market. 

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Transcript

0:00: Hello, my name is Tim Jones with Foreclosure.com. 

 0:02: I want to introduce our guest today, real estate broker, investor, foreclosure and short sales specialist Randy Patrick. 

 0:09: Randy, thank you for joining us today. 

 0:11: Hey, Tim, thank you for having me. 

 0:12: Always a pleasure. 

 0:14: Definitely, definitely, friend. 

 0:16: so let's jump in.

 0:17: You've been in real estate industry for years. 

 0:20: What indicators are you seeing that suggest we may be headed for another housing crash? 

 0:25: Well, the, the cool thing about what's happening nowadays is that, you know, if you, if any, if you were around or doing business back from the last housing crisis, and you sort of look where we are today, a lot of the stuff is mirroring what happened back in 2007 and 208. 

 0:40: So, you know, if you listen to the news, we are having a significant amount of inventory increase. 

 0:47: So now, a lot of it is, you know, when we say housing crash, I mean, a lot of times we refer to that as a national thing. 

 0:53: I think what we're gonna have is maybe more metro specific locations having issues first before it becomes much broader based, but a lot of locations are having a significant increase in housing inventory, all right, so more properties are coming on the marketplace and you know, it's funny, you would think that, well, you know, is it a buyer's market? 

 1:12: Well, it's becoming a buyer's market right now. 

 1:15: Sellers still haven't really reduced their price. 

 1:18: Significantly, but even though we're looking at that increase in inventory, we can still see a lot of price points. 

 1:24: So if you're a real estate agent or have access to the MLS, you can take a look at, you know, price decreases. 

 1:29: So we're seeing price decreases all the time, things that are going under contract. 

 1:32: I was, I forget what I was listening to the other day, but basically seller concessions. 

 1:37: It's like every deal now, buyers are, you know, are getting smarter, or at least their agents are that are representing them. 

 1:43: And they're asking for seller concessions, whether it's FHA mortgage buyers or anything else, like, hey, you know, let, let's get what we can and and see if we can take anything off the table, which is kind of cool. 

 1:54: from the real estate investor perspective, one of the telltale signs is wholesalers. 

 2:00: So in wholesalers, you know, they, they always try to make as as you know, as big a bank. 

 2:04: As possible when they're moving properties, right? 

 2:06: Well, now we're starting to see the whole, that wholesale margin is getting smaller. 

 2:11: And personally, you know, I'm on a lot of email distribution lists. 

 2:13: I'm seeing, you know, last week's, you know, property is now price reduced. 

 2:18: OK. 

 2:19: So you can see that they're dropping their price now, which is, you know, which is kind of interesting, And Flipper market too, same thing. 

 2:27: Like other words, if you're buying a property that you're going to put money into and rehab and resell, well, you know, there's some pullback in that, but already like at least a lot of the better fiction flippers that I know or the ones that are more concerned, they're adjusting their price point. 

 2:42: So today's ARV they're after repair value. 

 2:46: They're, they're saying, OK, if it's if it's X today, well, if it's roughly 4 to 6 months, you know, from start to finish from project to sale to closing, you know, they're reducing their internal ARV by 10 or 15%, saying, OK, you know, you know, maybe it's worth $500,000 today, but let's bring it to $450 realistic price point, you know, for 6 months from now because we're, they're seeing a reduction as well. 

 3:11: You see. 

 3:11: So everyone's making adjustments. 

 3:14: And I think, you know, last but not least, we're seeing the foreclosure filings. 

 3:18: So as much as, you know, it's sort of been sort of pattering along, you know what I mean, I think we're starting to see a little bit more indication of, of, I mean, clearly your, your group would know, be the one that would know that for sure, with all the data you have. 

 3:32: But, you know, like from, if you're talking to the layperson, the the casual. 

 3:36: or if you start reviewing the the data, certain counties, certain locations are starting to see a pickup for various reasons. 

 3:43: But again, you know, you only can kick the can down so far. 

 3:47: And a lot of the people that weren't say not paying or maybe we're caught up with some forbearance and still are are kind of in that limbo area, the lenders are now going, OK, guys, it's time that we start to to recoup our interest now, you know. 

 4:02: No, that's very interesting and definitely has changed a lot since the last time we spoke in the beginning of 2023, especially in our markets and, and, you know, Southeast Florida and Southwest Florida, you're starting to see those inventories increasing, you know, that's for sure. 

 4:18: well, you kind of mentioned this, but with the home values remaining high and mortgage delinquencies on the rise, do you think we're facing a gradual correction or a sudden wave of foreclosures and short sales in the next 6 to 12 months? 

 4:35: Well, the next 6 to 12 months, I, I'd say it's, it's still gonna be gradual, you know what I mean? 

 4:39: Like, like we have, you know, overall economic issues. 

 4:43: Regarding whether it's unemployment increasing now, just the normal inflation, you know, it's up and down, we don't know what's going on. 

 4:52: The Fed still hasn't really, well, they've been more, they haven't decided on lowering rates that they've decided they're not going to lower rates for a while. 

 4:59: So, you know, as long as you have that, that's putting downward pressure on prices, and people will start to graduate to either paying less offering. 

 5:07: Less and looking at the distressed market. 

 5:09: But when you still have things, you know, the, the economy being still very expensive for people, you're just going to see more and more defaults coming. 

 5:16: So I, I think the next 6 to 12 months will be the start, you know, we'll start to see the slide and, you know, more, and again, people will gravitate towards it as we know, like everybody's, you know, resale, fix and flip, wholesale, whatever that is, But then eventually they'll realize going, I can't pay this or, you know, the market's changing. 

 5:35: I don't want to get caught, like, you know, the expression, you never want to catch a falling knife. 

 5:39: So people start to become aware of that. 

 5:42: I think also, you know, so look for the next 6 to 12 to be gradual. 

 5:46: And then I think we've got a good 3 to 4 years of this happening, which, if you take a, take a look at the last, you know, crisis, you kind of, you go from like 2000. 

 5:55: You know, it was like 2008 to, you know, 2011, 2012 being the trough, like from the peak to the trough. 

 6:03: And then, you know, you had a couple of years coming up. 

 6:05: So you had like, you know, 4, 5, 6 years of this volatile period. 

 6:09: So I would say we're probably not gonna have as long, maybe 3 to 4 years, because we had better data and more information. 

 6:16: And we've already been through a cycle before, right? 

 6:19: That's I think the key part if if you've been around or you've, like, I always say to people that come to my events or or listen to my, my information, it's like, you know, we don't have a crystal ball, but we have a time machine because we can go back and we can look at what went on and use that information to kind of help us plan going forward. 

 6:35: No, that's, that's great information and that goes perfectly into my next question. 

 6:39: So in 2008, subprime loans played a significant role in the crash. 

 6:45: What factors do you see today that could be causing instability in the housing market? 

 6:52: Well, first of all, I, I think we go back to say well actually even pre-COVID. 

 6:57: I mean, you guys probably saw it on your end too. 

 6:59: Like I was looking at all the foreclosure data and it was spiking up like 2019, just before COVID, it was really going up. 

 7:07: It's like, OK, here we go. 

 7:09: COVID came and then we were faced with that eviction and foreclosure moratorium, which essentially shut the distress market off for a couple of years, right? 

 7:18: Everybody, you know, right? 

 7:20: Everybody, everybody jumped into forbearance plans, literally. 

 7:24: Millions of people and the, the, the issue or the problem that I have is that, you know, there was very, it was difficult to get data and information at that point in time. 

 7:34: Like you, you heard, oh, we have X number of people in in these forbearance plans. 

 7:38: And then, oh, well, these are people that are exiting forbearance. 

 7:43: Well, when you exited forbearance, it wasn't always clear whether, OK, did you fix your problem? 

 7:48: Are you paying your mortgage now? 

 7:50: or did did The time frame of forbearance just stop, OK? 

 7:55: And then now you had to move to loan modification slash loss mitigation. 

 7:59: And a lot of those people can't get loan mods. 

 8:02: So, you know, they're doing, they're actually in that what I call shadow inventory. 

 8:05: They're kind of they're not being foreclosed on, but they're not paying a mortgage. 

 8:08: There's a big number that's not there. 

 8:11: Then afterwards, well, you know, sort of during the last part of COVID and going forward, you know, we had exponential increase. 

 8:19: And property values, right? 

 8:20: So, so that's problematic. 

 8:23: And you know, when you look at, you mentioned subprime, well, we don't have subprime lending per se, but we have FHA lending, OK? 

 8:32: And FHA is, you know, lower down payment, lower credit score, higher debt-to-income ratio. 

 8:39: So to me, that's our new subprime, and if you start researching FHA loans and FHA loan delinquencies. 

 8:47: You know, recent vintage FHA loan originations, like we're talking from 22 and 23, you know, they have an exorbitantly high default rate. 

 8:57: So it's kind of like, hey, I jumped in, I paid a high price for my property, I was able to get an FHA loan, and then, you know, market changes 5%, you're underwater, you're gonna need to sell this closing cost commissions. 

 9:09: Now you're 10% underwater. 

 9:11: What are you gonna do? 

 9:12: You see? 

 9:13: So that's, so those are the things that I think replace subprime, just that perspective. 

 9:17: But here's the thing, lenders want to lend. 

 9:20: Over the weekend, I heard a radio ad and I actually just looked it up before our call, cause I want to make sure I understood this. 

 9:26: So I actually heard Rocket Mortgage is offering 1% down loans. 

 9:32: Believe it or not, yeah. 

 9:33: So I literally pulled it and it you know there's a bit of qualifying, but essentially what they're doing is that, you know, need a qualifying FICO score 620 or better. 

 9:41: It's kind of like subprime, right? 

 9:43: Single, single unit primary residences only. 

 9:47: I guess what they're doing is they're taking a 2% grant they're giving you, and then you've got 1% down. 

 9:53: And there's some DTI limitations, of course, I think ratios you gotta work with, but you gotta. 

 9:57: Be a certain, you know, median, close to certain median income for your area. 

 10:01: But the point being that, you know, as we're, what I always find is that lenders who aren't lending just before we see a crash, because it happened last housing crisis, start offering weird and wonderful programs to actually attract money and attract buyers, but at the wrong time. 

 10:19: Because if you're buying at the peak of the market, or, or the market has just sort of gone over the peak, but it's not quite apparent yet, and you're putting little down. 

 10:27: OK, and you're getting into a big mortgage. 

 10:29: Well, guess what? 

 10:30: That's, that's almost predatory as far as I'm concerned, because your prime, you know, prime, you know, housing loss, how, you know, foreclosure opportunity as a year or two goes on, you see. 

 10:42: That's very, that's a very good point, and As far as what you were saying earlier, I, I know exactly what you're talking about because so many people I know, I call it FOMO, bought, right? 

 10:56: They were so, there's so many people going to these properties and listings where if they didn't put in a bid, they were gonna lose it. 

 11:02: So people were doing it without even really Understanding the potential increase in the taxes when they bought at that price, but even more so specifically down here in Florida, well around the country, but as the insurance, you know, people were not anticipating those hike increases, and I know a lot of people that purchased in 2021, 2022 and thought they were getting a great deal, but then just didn't anticipate some of the additional costs that were coming in. 

 11:27: So, you know, that, that makes sense and it's interesting what we're seeing now. 

 11:32: So, you know, What opportunities do you see for real estate investors in the shifting market? 

 11:37: I, I know you mentioned FHA is now the time to start looking for distressed properties? 

 11:43: Oh, definitely, definitely. 

 11:44: I mean, they're out there, I guess you could say. 

 11:47: Optically, they're not there, so you're not gonna see distressed properties listed on the MLS, etc. 

 11:53: right? 

 11:53: However, if you get a data service like yours and you start pulling back the onion, peeling back the onion, seeing what's out there, you're gonna see a lot of pre-foreclosures, a lot of like pre-probates, things like that. 

 12:05: So, so, you know, that's the situation is that there's so much happening, but it's not quite coming to the surface yet. 

 12:13: So that's why I say kind of mirrors last housing crisis, like it was quiet. 

 12:17: If you knew what was going on, you're gonna be the first ones to venture out into the, you know, into the field to start looking at these things and getting your hands on deals, and then eventually, you know, real estate agents will start to figure this out, etc. 

 12:29: etc. 

 12:29: and the market will start to shift. 

 12:31: But I think there's a huge amount, and, and again, this is the, the difficulty with data is that, you know, it's a moving target, right? 

 12:38: So people are losing their homes, people are getting foreclosure filings, people are in loan mods, like it's really hard to quantify that data. 

 12:44: But, you know, you guys like you guys got enough that and good data that, you know, you can just look like you can pick a zip code, you can niche down to, you know, maybe mortgage type, like a big thing we're looking at now is reverse mortgages is a great opportunity. 

 12:58: People are passing away, and a lot of them aren't even in probate yet, so there's some good stuff going on there. 

 13:03: So yeah, I mean, the distress. 

 13:05: The market is, and again, untouched and, and let's go back a few years. 

 13:11: Everybody wants to, you know, get it on the way up, right? 

 13:14: Well, if I buy it today, I might make 10% next year, or I'll just break even if it doesn't work, right? 

 13:20: So people like to, to play the upward game on appreciation. 

 13:24: And a lot of times they They forget that if you actually look behind the scenes and start actually detailing what's going on, you make your money when you buy and if if you buy distress because you're getting the best price points or best discounts when you're working, you know, like pre- foreclosure, probate, code violation, that that type of market, you know. 

 13:46: That's great advice. 

 13:47: Thank you, Randy. 

 13:49: so for homeowners who are struggling to keep up with the payments, what advice do you have? 

 13:54: are short sales a better option than, you know, potential foreclosure? 

 13:59: Well, well, it's a good, it's a very good question because we talked to a lot of homeowners and, and we have a process where, you know, we vet them through a local, you know, real estate attorney to that reviews their personal situation. 

 14:11: So, you know, as investors or even as licensed real estate agents or real estate brokers, you know, we're not necessarily lawyers, we're not tax professionals, we're not financial planners. 

 14:21: So it's one of those things that, you know, you can. 

 14:23: You can look at a home and you could say, well, you know, does the home need a a short sale? 

 14:28: Yeah, but does the person need a short sale? 

 14:31: So I always think that a person, the homeowner should consult somebody so they understand the ramifications. 

 14:36: Not that again, that's not the right word. 

 14:38: Like this is what goes on. 

 14:39: So they could understand the financial implications, if any, what's the best solution for them. 

 14:44: Should they pursue, you know, if they want to keep the house, should they pursue loan modifications or try to do workout programs with their lender, that's a potential option. 

 14:52: But, you know, for 99% of the population, an actual short sale is better than a foreclosure. 

 14:58: You know, a short sale doesn't really ding your credit, so to speak, because your credit's already kind of ding with the nonpayments. 

 15:04: We do know a foreclosure does, you know, add some additional hits to your credit, but the main issue with respect to foreclosures is that if you let it go to foreclosure, it's a judgment against you, right? 

 15:15: And in the majority of states around the US, you know, even after it sold the auction, the lender can still come and collect that judgment and harass you over the next number of years, which is not which is not that great. 

 15:27: So, you know, that's why I was like, you know, counsel, you know, find, talk to a professional, you know, as much as, you know, I am a licensed broker, you know, and I've been doing this for, you know, 20 years now, you know, there's still things that I don't know and, and as real estate agents, we're not really in a position to give financial advice, you see. 

 15:45: So the average agent, you know, says short sell, well, you, you know, to me that's, yeah, it probably makes sense, but you might want to do a little more research as a homeowner, just to make sure you understand what's gonna happen in the future, you know. 

15:56: Yeah, no, that's great advice and we always tell our audience and users to, that our platform helps with doing due diligence, but you always want to talk to a local expert and expertise and whether it's legal questions or you know, real estate questions, everything you should always talk to an expert. 

 16:15: So thank you, Randy. 

 16:15: That's, that's very helpful and, and, and thank you for sharing your wisdom with us today. 

 16:19: that, that's all the time we have for today. 

 16:21: , if anyone has questions about short sale opportunities, how can people get in touch with you? 

 16:28: Well, very straightforward. 

 16:29: you can look me up. 

 16:30: my email is straightforward, it's randy@luxurySortsales.com. 

 16:36: Randy at luxuryShort sales.com. 

 16:38: That's the best way. 

 16:39: I, that's what I primarily check. 

 16:40: You know, in the future, you'll start to see more videos. 

 16:43: From me, you know, Facebook, Instagram, whatever, I'm gonna start getting back into that. 

 16:48: But you know, the past year or so just plugging away at deals and building the pipeline and getting prepared for what's gonna be a pretty active next 3 to 5 years, let me tell you. 

 16:58: So, we thank you again for sharing. 

 17:00: We'll, we'll make sure to put a link, down to your channels below, OK? 

 17:04: , if you found this video helpful, please like it and subscribe to our channel. 

 17:10: don't forget about our free foreclosure email alerts. 

 17:14: until next time, I'm Tim Jones with foreclosure.com and thank you for joining us today.