According to Core Logic’s Home Price Index, home values in this country have risen faster over the last year than they have in 45 years. Showing that he has no idea what caused the meteoric rise, CoreLogic CEO Frank Martell explained it as follows:
“New household formation, investor purchases and pandemic-related factors driving demand for the limited supply of available for-sale homes continues to propel the upward spiral of US home prices.”
Pandemic-related factors? In addition to new household formation and investor purchases? So, in other words he has no idea what caused it. Core Logic never lets not knowing something stop them from explaining it.
In any case, I don’t care what caused the fastest home value appreciation in 45 years, I only care that its happened… and what else is happening as a result because it’s not all good news. Higher home values make some people happy, but others not so much.
First time home buyers aren’t crazy about it, for example, but that’s the obvious answer. For other homeowners, higher home prices are about to prove themselves to be an actual real-life nightmare.
Follow the Money…
Arizona topped the list for home appreciation this past year, coming in at 24%, according to Core Logic. Idaho and Utah placed second and third, but who cares? Utah isn’t really a state, it’s a city surrounded by a trillion square miles of desert. And, Idaho is barely a state. There are only 1.7 million people in Idaho and 93% are “white alone,” so it’s no surprise that the state ranked #1 on the list of the most boring states in the country. (I’m not kidding about that, click the link.)
Arizona, however, is a suburb-of-sorts of Southern California, with almost eight million people now calling the Grand Canyon State home. Phoenix, Tempe and Scottsdale are very cosmopolitan, but there’s also Tucson and Flagstaff that have both become thriving towns on their way to becoming major cities.
I’ve spoken with quite a few Arizonans recently and they can’t stop talking about their newfound home equity driven wealth. You could say that homeowners in Phoenix and Scottsdale today are happier than snowbirds leaving for Canada in June.
The problem is, and no one seems to be talking about it, is that there’s another group that’s also thrilled with the appreciation in home values: debt collectors.
What Higher Home Prices Mean to Debt Collectors…
During the last mortgage meltdown, although it might not have seemed like it to those losing homes to foreclosure, servicers and debt collectors were in no hurry to foreclose. Why? Because home values had been cut in half in many cases and the phrase of the day was negative equity. Everyone remembers what being “underwater,” meant, right? Why would you rush to sell a home that’s worth less than what’s owed? The answer is: you wouldn’t.
Well, this time around, we’ve got a very different picture in play. Home values this past year have literally skyrocketed. Topping the list of metro areas with the greatest increases between August of 2020 and 2021 was Phoenix, boasting an inconceivable 30.9 percent, according to the most recent Case Shiller Index.
But, San Diego reported a 23.2 percent increase, and it’s not like home prices in San Diego were cheap to begin with. Las Vegas homes rose by 22.2 percent, Denver by almost 20 percent… even a mature market like Chicago showed a 10 percent increase.
Everyone should realize that double-digit increases in home values is not a sustainable thing, nor is it something that happens very often. Technically, the last time we saw double-digit increases in home prices was 2013, but much of that was because the prices in 2012 were so low. This past year, we managed to go from high home prices to even higher.
If you’re a homeowner, this is cause for celebration. Everyone likes having equity and this past year equity was growing almost everywhere.
A Gift to Debt Collectors…
Debt collectors are the other folks that are celebrating the higher home values… especially those holding judgments for unsecured debt that they likely bought for some number of pennies on the dollar.
Higher home prices mean more home equity and more home equity means that it might be easier to collect from homeowners who have old judgments hanging around, especially if you can force the sale of someone’s home, which in many states, shockingly, you can.
In Arizona alone this December, there are roughly 1,000 sheriff’s sales on the calendar. Those are “sheriff’s sales,” not trustee sales, as would be the case post-foreclosure. In many states, sheriff’s sales happen without much notice or judicial intervention.
And it makes sense that homeowners wouldn’t be prepared for what’s happening, because it wasn’t happening before the equity boom of the last year or two. The increase in home equity has made it profitable to sell homes, rather than negotiate settlements with homeowners.
A Real-Life Case Study that Should be a Warning to all Homeowners…
I recently tried to help a homeowner in Scottsdale, Arizona, negotiate a settlement of a 12-year-old judgment that resulted from a credit card that he couldn’t pay back in 2008. It started out at $6,000, but after all the years and with roughly an 11% interest rate, it had grown to almost $20,000. I suggested that he try to settle it and I contacted the creditor to make an offer of $10,000, which seemed more than fair to me.
I wrote up the offer, explained the hardship and what happened and submitted it to the creditor… and after a few days, two things happened that shocked me.
First, they not only turned down the $10,000 offer, but they also said that they wouldn’t accept even a nickel less than the full amount. Frankly, I was shocked to hear that… absolutely shocked. I’ve helped dozens of homeowners get old, unsecured debts settled over the years, and that’s the first time anyone said no to any sort of settlement.
The second thing that happened was that the creditor filed for the home to be sold at a sheriff’s sale in just a few weeks. I was aghast. How could that be possible? It was a 12-year-old judgment for what was unsecured debt… and now after all those years of doing nothing about it, now the creditor could simply have the home sold at a sheriff’s sale?
And, in just a few weeks? For many people, that wouldn’t even be time to find and hire an attorney, let alone get him or her up to speed. How could that be possible? There was no foreclosure, he was current on his mortgage payments and still, his home would be sold out from under him to satisfy an old lien from an unsecured debt that no one had even thought about in years.
Better Call Saul…
I contacted several experienced lawyers in Arizona to ask them what could be done and was told that there were only two options. Either pay it in full immediately or file bankruptcy… all because of an unpaid credit card in 2008… that turned into a $20,000 judgment lien on a home worth $600,000. And, based on that, his home would be sold at a sheriff’s sale in a matter of weeks.
You see, what I learned was that the only reason the creditor was taking this step was that there was significant equity in the home. Obviously, that’s also why the creditor wouldn’t even consider settling for anything less than the full amount.
So, I’m writing this for two reasons:
- To warn homeowners that old judgments or unsecured debts that haven’t been paid and that no one has given any thought to in years may now be taking steps towards selling their homes at a sheriff’s sale. Why? Because of the appreciation in home prices this past year, that’s why.
- Because I think the laws that allow this absolutely stink, obviously as far as homeowners are concerned. For bottom-feeding debt buyers and unsecured creditors, of course, it’s a windfall. But, to my way of thinking, no one should be able to force the sale of a home to collect on a judgment lien resulting from an unsecured debt that could include a credit card, or an unpaid medical bill or anything else for that matter. Didn’t pay your hospital bill… now that can mean losing your home at a sheriff’s sale. Wow.
And I’m certain that very few homeowners are aware that this sort of thing can happen because if the creditor hasn’t done anything to collect on the judgment for 10 years, why would someone assume that it could happen now, all of a sudden?
This past year, Arizona passed a new law, HB2617, that means that all unsecured judgments automatically attach to title, even if there’s a homestead exemption recorded. Basically, the new law makes the homestead exemption almost worthless and that hasn’t been the case in Arizona since it became a state back in 1912.
Arizona bankruptcy attorney, Diane Drain, has written about Arizona’s new law and you can see what she has to say by clicking the link below. I’ll be interviewing her tomorrow, so watch for my post on HB2617 in the next few days. All homeowners need to know what’s happening out there.
HB2617 is a Trojan Horse – Will Take Away Decades of Protection from AZ Homeowners
This is just one more example of how laws largely written by debt collectors do nothing to protect homeowners and they don’t care what’s fair or right. It’s like I’ve been saying for years: The answer is money. What was your question?
Just for fun, I thought I’d close with a comment by CoreLogic’s CEO Frank Martell, who said in a recent statement.
“However, we expect home price growth to moderate over the near term as many buyers take a break for the holidays.”
A break for the holidays? Does that mean that he expects new households to be forming slower over the holidays, or is that investors take Christmas off? And what about those pesky pandemic related factors that he said contributed to the run-up in home prices? They haven’t abetted, have they? Isn’t the pandemic still with us?
Thanks Frank.
Look, no one really knows what’s happening in our economy today. No one can explain why home prices saw a meteoric rise over the last year and no one knows how long this sort of double-digit appreciation will last. Anyone who tells you otherwise is selling something.
Here’s the only thing they do know… meteoric home appreciation means a windfall for creditors and debt buyers trying to collect unsecured debt… and they don’t want anything to get in the way of that.
Mandelman out.
P.S. If you are dealing with a judgment lien that is attempting to sell your home, please write to me at mandelman@mac.com. Not only do I want to know what’s happening but others will too.
