AZ Forbearance Update 5/5/2021

In this 13 minute video, Lydia Wietsma and I discuss the latest in forbearance, delinquencies, servicing, and federal rulings.

Bull vs Bubble Market

There is a lot of panic and tons of headlines about a bubble. Today’s market is a bull real estate market, not a bubble.

• Is it true or false demand? Are the properties occupied by either renters or owners? True demand is when people are living in the property. False demand is when investors park money in the asset with no plans of using the property. Today homes are lived in.
• Not only that but today we have among the best buyer demographics. There are about 32M American nationwide aged 27-34, prime home buying age. It is expected the buyer demand will remain elevated through the end of 2024, despite what interest rates do.
• Are rents increasing with sales prices? Rents, like sales prices, increase with greater demand and less supply and decrease with less demand and increased supply. Rental rates decreased during 2004-2006 and today they are increasing faster than sales prices in greater Phoenix.
• Huge increases of speculative buying on credit (bubble) versus cash buyers and down-payment buyers (bull). Credit worthy borrowers.

Everything comes down to supply and demand. The market did peak. It did so in the middle of March. Demand has been dropping, slowly since then. Here locally it remains 7% above normal while supply is 77% below normal. Until supply exceeds demand we will stay in an appreciating market.

With home prices continuing to appreciate and the economy mending from the pandemic, there are few signs of a looming foreclosure crisis. Even though nearly 2 million homeowners are three months or more behind on their mortgage payments, many homeowners who entered into forbearance early in the pandemic are now resuming payments paying their mortgages off.

Forbearance Numbers:

Forbearance has been a successful program. When it was initially created it was expected there would be 30 million borrowers in forbearance, we peaked at 8 million and as of last week, we are down to 2.23 million or 4.47% of borrowers, down from the previous week’s 4.49%.

Forbearance by Stage:

• 12.8% of loans in forbearance are in the initial stage, down from the previous week’s 12.9%.
• 82.3% are on extension, down from last week’s 82.4%.
• The remaining 4.9% are re-entries, up from the previous week’s 4.8%.

Forbearance Exits from June 1, 2020 through April 25, 2021

47.2% of borrowers continued making their payments, got caught up upon exit, or paid off the loan with a refinance or sale upon exit. Down slightly from the previous week’s 47.3%.

14.6% of borrowers exited their plan, still behind on their payments and without a loss mitigation plan in place. This number remained flat from the last 2 weeks.

Breaking News:

The federal court’s ruling that lifted the CDC’s ban on nationwide evictions has been overturned and is still set to expire at the end of June.