AZ Forbearance Update 3/31/2021

In this 11 minute video, Lydia Wietsma and I discuss the latest in forbearance, inflation, and foreclosures.

Predictions & Inflation:

There is a lot of talk about what will happen next. While we do not have a crystal ball and the real estate market is unpredictable, there are a few assumptions we can make based on the numbers. There are tons of headlines and YouTube videos all about how the market will crash in 2021. The problem with many of these predictions is that they exclude very important data. Today I saw a YouTube video with many thousands of views and used lots of numbers to illustrate his point. Throughout the entire video, he never made mention of buyer demand or homeowner equity. Remember, the foundation for all economics is the relationship between supply AND demand.

While, yes the supply could and will likely rise as the foreclosure moratorium is lifted. But these will be for properties with equity and the homeowners can do a normal sale and walk away with money in their pocket. 40% of residential housing is owned free and clear and And nearly 57% of mortgaged homes have at least 50% equity. In 2020 alone, homeowners gained $1.5 trillion in equity.

With all the of stimulus being pumped into the market, concerns over inflation are rising. The feared inflation is already here but rather than oil companies or grocery stores increasing their prices, it is homeowners increasing sale prices of their property.

Logan Mohtashami of HousingWire described inflation as, “As a general economic rule, widespread inflation is caused by a shortage in goods and services – or in common vernacular, too many dollars chasing too few goods.” This is what we are going through in housing; a severe supply and demand imbalance. Consumers call it appreciation and economists call it inflation.

Forbearance Numbers:

Now, let’s talk about the forbearance numbers. We saw improvement again last week and dropped down to a new low in a year. We decreased from 5.05% of mortgages in a forbearance plan to 4.96% or about 2.5 million borrowers.

Forbearance by Stage:

  • 13.8% are in the initial stage, down from 13.9% last week and reached their lowest level in a year.
  • 83.4% are on extension, down from 83.5% last week. About 17% of borrowers in this category have passed the 12 month mark in a forbearance plan.
  • 2.8% are re-entries, up from last week’s 2.6%.

Forbearance exits from June 1, 2020, through March 21, 2021:

  • 41.7% of borrowers either continued making their payments throughout their forbearance plan or got caught up upon exit.
  • 14.1% of borrowers exited their plan, still behind on their payments and without a loss mitigation plan in place. This is the group that needs the most attention. They need to know they have options.

CFPB website with solutions for struggling renters and owners: https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/

Foreclosures:

There were 250,000 foreclosures in process before the pandemic. They will likely be restarted at the same stage where they were in foreclosure before. Based on those numbers and the potential borrowers who may be still struggling after their forbearance plan, we might see around 500,000-750,000 foreclosures in 2021. After the market crashed in 2008 there were nearly 10 million foreclosures.  

Published by Sarah Perkins

Sarah has been with Lawyers Title of Arizona since 2004. As an award-winning sales executive, Sarah's role is to bring transactions to Lawyers Title. To do this, she focuses on supporting her clients and helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today's home buyers and sellers.

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