Foreclosure Tidal Wave

Foreclosure Tidal Wave

 

I watched a pretty cool TED talk on how tidal waves are formed recently, and I learned some really interesting stuff I would like to share with you.

 

The first thing I learned was that the name of tidal wave is a little bit of a misnomer because they have nothing to do with the ocean tidal system. Then I learned about the term tsunami, which is a conjunction of two Japanese words. Tsu, meaning harbor, and nami, meaning wave. So, a harbor wave is probably a good description of what a tidal wave is because at the coastline is where you see them the best. But the coast is not where they are created.

 

Tidal waves start in the deep ocean. Unlike regular waves which are caused by wind, tsunamis are caused by an underwater disturbance that forces energy up and outward, displacing the water above it. Think about when you drop a pebble into some water. The pebble dropping in creates a dip in the water where it fell, causing the water around it to be displaced. The surrounding water tries to fill itself back in where the pebble fell, resulting in the ripples we are accustomed to seeing — which are just tiny waves.

 

In a similar fashion, when an earthquake or an underwater volcano erupts, the water above gets pushed up with a lot of force. And as the water tries to smooth itself back out, waves are formed. And more than one is formed at this time, which is something I didn’t know.

 

Because of how it’s formed, a tidal wave is different than a regular wave. The energy that goes into it from the disturbance moves very fast, reaching speeds of over 500 miles per hour in the open ocean. What’s interesting is that if you were to encounter one out there, you would probably not notice it because it would be less than three feet tall.

 

But as it hits the coast and shallow water, the tidal wave slows down and increases in size and can easily reach a height of 33 feet. That being said, there was a “mega tsunami” that happened in 1958 in Alaska. It had a wave size of 1,720 feet. That’s crazy!

 

But like regular waves, tsunamis have a trough (a low point) and a crest (the high point.) What is interesting is that depending on how the tidal wave hits, it can start with a surge where you see a big wave coming because the crest is in front. Or, if the trough is first, it can suck water way out to sea, like in an extreme low tide, and expose the sea floor for great distances.

 

As a matter of fact, there is a story from 479 BC where the Persians went to attack the Greek City of Potidaea. As the Persian army closed in on the city, they noticed the ocean retreated back much further than normal on shoreline, causing a shorter direct line of approach to city. But as the Persians got closer, a wall of water came in and crashed on them, killing the entire army. The Potidaean’s celebrated, assuming Poseidon had saved them. But it was most likely the result of a tsunami.

 

So, you may be asking what this has to do with real estate investing. Well, I’ll tell you. The real estate market is an ocean, and we just had a major disturbance. It was called COVID-19. It caused a wave out in deep water, and I suspect it is getting closer to the coastline.

 

Instead of water, we have houses. And if you’ll notice, the inventory of homes has receded greatly. And shortly after the federal moratoriums are lifted, a foreclosure tidal wave is going to hit.

 

According to one article I was reading, as of June 22, 2021, more than 2.09 million homeowners were in some sort of COVID-19 related forbearance program with their mortgage companies, and more than 3% of all borrowers in the US were behind four months or more making them susceptible to foreclosure. The article said that is larger than the stats from the Great Recession.

 

So, it’s coming. Will it be a mega tsunami like after 2008? I don’t know. But a foreclosure tidal wave is defiantly on its way. Are you prepared react when that time comes?

 

Joe and Ashley English buy houses and mobile homes in Northwest Georgia. For more information or to ask a question, go to www.cashflowwithjoe.com or call Joe at 678-986-6813.

 

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