Since the market began to recover from 2008, homeowners and investors alike have reaped the benefits of historically low interest rates which fueled a real estate buying frenzy that has caused housing prices to appreciate year-over-year at an unprecedented rate.

Then COVID happened and the aftermath completely altered the real estate market. Although COVID is not the sole reason for the current market drop-off, the extremely low interest rates to keep the economy running definitely added accelerant to a correction that was long overdue.

The immediate fix for mass economic shutdown was to suspend foreclosures, give away money through PPP loans & stimulus checks and lower interest rates even more than the previous historic lows from the decade leading up to COVID. This took an already hot housing market and turned it on fire. Everyone was buying homes for personal, business and leisure. Hotel shutdowns pushed companies like AirBNB and VRBO to the face of alternative investing for mom & pop investors. Supply chain issues slowed builder production during the pandemic. Foreclosure & eviction moratoriums have kept houses from entering mls. Put all these factors with record low interest rates and a squeeze in the housing supply was created and many first-time home buyers jumped in at the height of the market but at a much lower rate than today. The avg. appreciation has been around 13% year-over-year for most of the country. 

Even though the housing market is finally starting to cool-off on the heels of multiple Fed interest rate hikes, housing prices are still historically high and housing volume is low. This has caused most retail buyers to rethink buying right now. Most prospective first-time homebuyers have only ever heard of their friends or parents receiving a sub-4% interest rate leading those on the fence of buying,  rethinking the idea of homeownership at the moment. There is a lot of sticker shock right now. 

Interest rates are up, and buyer interest is lowering, shouldn’t this be pushing housing prices lower too? They are coming down some, but we still have a few more months of investor 1031 exchange money keeping the housing prices from fully correcting.

During COVID, investors had to deal with historically low retail volume to choose from and a foreclosure moratorium that paused mortgage foreclosures nationwide. Many tax deed sales were also postponed. During a normal real estate market there are roughly 2.5 million homes for sale at any given time. During the pandemic we saw that number dip below 1 million homes for sale which sent many investors flush with cash looking for alternative ways to deploy capital. Many of these investors entered into the tax sale (liens and deeds) market to deploy their funds. Between the extra cash and lack of mortgage foreclosures, or really any real estate inventory, tax deed sales have grown increasingly popular over the past few years. 

Huge Increase in Competition for Tax Deeds

Don’t believe me? Have a look year-over-year at the results from any tax deed sale across the nation and you will notice an upward trend in the bid-up premium paired with a slew of new investors helping to drive the bidding price higher. We evaluate sale lists, results and bidders lists from the majority of tax sales across the country and all our data shows that new investors have taken the market by storm. Several other driving factors to the growing popularity of tax sales are the ever-popular DYOR educational resources and the ability to attend auctions online instead of in person. 

The popularity of counties moving their auctions online has now made bidding on tax sale properties easier than ever before. This is both good and bad for investors as newbie investors are getting burned left and right by not knowing how to research correctly (that right a lot of people do not check the date on the google map image or check for liens) and seasoned investors have successfully jumped across state-lines or even cross country. This new level of access has led to thousands of new investors nationwide.

Increased Online Auctions Opened up a Larger Bidders Pool

Fast-forward 9 months to the aftermath of COVID and there is now a completely different landscape for tax sales. The days of going to the court-house steps to win your tax sale are not coming back. There are still county offices across the country staffed at half capacity or closed a few days of the week. So, get used to the online platform for your tax sale auctions. The instability in the stock market has many investors hurting and not spending so the results from the most recent tax sales show many investors receiving properties at much lower prices than over the past few years. Although some counties have still not held a tax sale since COVID started, others have not missed an auction date yet. Surprisingly, just kidding….more like unsurprisingly, there was not a property tax moratorium.

\Only the big bad profiteering mortgage companies were left figuring out how to meet their financial obligations meanwhile, taxing entities still collected. But were property owners paying? Looking over several tax delinquency lists, it does not appear so. Since each state has different timelines in their statutes for selling the delinquent tax debt, it is likely that starting next year and going through 2028 the number of tax liens and deeds being sold through county auctions will be much greater than we are used to seeing. Once mortgage foreclosures are back in full swing, the bidding pool along with the max bids should shrink at tax sales as well. 

But what do we know? Tax Title Services has only qualified over 50k tax sale properties for title insurance over our 20yrs in business.