Is the Worcester Market Falling? Fortune.com says it will.

Interesting article here in Fortune Magazine.

It predicts that there is a 50-75% chance that prices in Worcester will decline in the next 12 months.

https://fortune.com/2021/12/07...

What does that mean to Multi-Family investing?

First off let's establish that:

2 families for the most part are single family alternatives, basically a mortgage helper. 

3 families have more of and investment feel and work for small investors, as well as certain 3s with big lots and garages, that work once again like a mtg helper as they live like single families.

4+ buildings are strictly investments for the most part.

From the feel of the article I believe they are speaking mostly about single family houses.  

Where are the coming up with this information?  And what is going to cause this drop in values?

I think the biggest factor here is Forbearance and how it will affect the market.

A simple explanation of Forbearance and how it works:

Forbearance is when your mortgage servicer or lender allows you to pause or reduce your mortgage payments for a limited time while you build back your finances.

For most loans, there will be no additional fees, penalties, or additional interest (beyond scheduled amounts) added to your account, and you do not need to submit additional documentation to qualify. You can simply tell your servicer that you have a pandemic-related financial hardship.

Forbearance doesn’t mean your payments are forgiven or erased. You are still obligated to repay any missed payments, which, in most cases, may be repaid over time or when you refinance or sell your home. Before the end of the forbearance, your servicer will contact you about how to repay the missed payments.

Homeowners have been eligible for forbearance since March of 2020 and there are a lot of people who have paused making payments. Most of these will last for 3 to 6 months but can be extended up to 12 months.  Looking at that timing, the next 3- 6 months will tell the tale.

According to reports there are 1.6 million homeowners who took this option.  How many are in Worcester, and how many of those are in MULTI FAMILY.

When Forbearance ends homeowners have the option to start making payments and add term to the end of their loan (out to 360 months) or they can try to work out a loan modification.

Since values have gone up since most of these people purchased their homes, they have the option to sell their homes and likely be made whole.  Will this result in more homes hitting the market and driving down prices.  That is likely.

HOW WILL THIS IMPACT MULTI FAMILY?  I don't think it will have a lot of impact.  Currently we have the lowest on MLS inventory of MULTIS in Worcester in 4 years at 33 buildings.  There are ample buyers ready to buy at the current prices.  Additionally rents have gone up significantly in the last 3 years.

What we also know is that GOOD MULTIS ONLY TRADE IN AN UP MARKET.

Let's define that term. GOOD MULTIS:

-In predominantly Single Family Neighborhoods

-Have large parcels, over 7000 SF Lots, and likely have good parking and a garage

- Are in good condition

-Typically have stable tenants since they are in places people want to live

GOOD MULTIS trade at higher prices since they are good places to live and are alternatives to Single Families and work well for extended families.

If you are buying a GOOD MULTI or want to own one, NOW IS THE TIME.  If prices dip, then investors and homeowners who own these products will not sell them because they don't have to.

The GOOD MULTIS always have value because they offer the livability that other Multis do not have.

THE PRICING MULTIS WILL BE AFFECTED IF PEOPLE STOP PAYING THEIR RENTS.  MAKE SURE YOU BUY A PLACE WHERE YOU CAN GET THE TENANTS YOU WANT.