Lydia Wietsma and I discuss the latest news in forbearance trends and where borrowers can go for help. We have some suggestions for borrowers to stay in their homes after they exit their forbearance programs. Click below to watch our 19 minute video.
Today’s Takeaways:
The worst thing for the housing market is to have empty houses. We went through that 10 years ago. This time around with the forbearance programs, they were designed to keep homeowners in their homes, which keeps the housing market healthy.
Let’s talk about what we know. We know that for the past 17 weeks in a row, total loans in forbearance has continued to drop. Last week the rate dropped to 6.81%, down from the previous week at 6.87%. This means roughly 3.4 million mortgages in forbearance.
“The significant churn in the labor market now, more than six months into the pandemic, is still causing financial distress for millions of homeowners. As a result, more than 70 percent of loans in forbearance are now in an extension.”
Mike Fratantoni, MBA’s Senior Vice President and Chief Economist
In order for a borrower to leave forbearance they have to make 3 consecutive payments and come up with a plan with their servicer or lender on how they will pay back the forborne amount that was deferred while they were in forbearance. One thing that is very important for everyone to know is that forborne payments will be repaid, they are not forgiven.
There are a number of ways a borrower can leave forbearance, not all of them require the owner to sell their property. Some of these options include:
Utilizing a 401K in two ways.
Individuals are allowed to borrow from their 401K with the option of paying themselves back with interest, since it is a loan being paid back, essentially paying yourself back there are no penalties. Talk to your 401K administrator for details.
Through provisions of the CARES act an individual can also withdraw an amount of their 401K with no penalties. Again, talk to your 401K administrator for details.
Permanent loan modification or refinance, after making 3 payments in a row, to something that allows borrowers to stay. Some scenarios include adding the forborne amount at the end of the loan, some pay a lump sum to get caught up, some offer payment plans to get caught back up.
Rentals are in high demand with quickly appreciating values. What about moving out of the property and renting it out to make up the difference in payments.
Sell and buy something more affordable, after 3 payments in a row have been made. Pay off the loan and get a new loan with more agreeable terms.
Sell, pay off the loan and forborne amount and rent/move in with family.
We are watching total delinquencies as well, which is tougher to monitor but what we are seeing is that new single family delinquencies continue to drop but older delinquencies, 90 days and up are growing. Here is a chart that is hard to see but shows that residential delinquencies are decreasing. The huge one is lodging.
I do want to touch briefly on unemployment. September’s numbers came out last Friday showing that our economy added 661,000 jobs. This was below expectations. They did revise up the total of new jobs from August though. The unemployment rate is now 7.9% and we have made up over 50% if jobs lost in March and April.
Elliott Pollack expects a full recovery of all industries in Arizona by the end of 2022. It would be great to be back at full employment in two years.
Please share this with your colleagues and clients.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
Every Monday I spend 15 minutes (or less) discussing what happened this week in real estate, lending, and the economy.
I apologize for the blurry video! I tried a new platform today.
Today’s Takeaways:
Breaking News:
Judge denied NAR’s motion to dismiss the class action buyer commission law suit filed 18 months ago. Expect more motions in the future. (Inman)
The AZ Market:
Supply: New listings have increased by 11% but they were absorbed as quickly as they arrived so our total inventory remains very low. As of yesterday, our inventory is 63.8% below normal. Active listings excluding under contract accepting backups (UCB) are still around 8,100 (we should have 25,000) down over 41% year over year.
Demand: Pending sales are up 25% year over year, huge despite our low inventory and time of year. Our demand is nearly 27% above normal. Demand rates slowed early in September and picked up some speed towards the end of the month.
National Real Estate:
In August we hit 6 million (seasonally adjusted annual rate) existing home sales. The last time we hit that number was December of 2006. Sales were up 10.5% year over year. This is particularly surprising since there were only 1.41 million properties (annualized rate) on the market in August, the lowest level on record, with limited data prior to 1999. (Matthew Gardner, Windermere Chief Economist)
The Fannie Mae Home Purchase Sentiment Index illustrates consumer confidence for buying and selling real estate. According to the most recent update, from August, consumers believe it is a good time to buy. The buyer consumer confidence index has fully recovered to pre-pandemic levels. What is interesting is that seller consumer confidence has not fully recovered. This is seen in our low inventory levels with continued high demand.
Many expect that when consumer confidence for selling fully rebounds is when we will see an increase in inventory. As sellers gain confidence and enter the market the extreme sales price appreciation will slow and buyers will have more choices. This will be good for buyers and for the overall health of the real estate market.
Real Estate News:
Realtor.com and Rocket Mortgage announced an advertising partnership that directs buyers to Rocket Mortgage’s pre-approval application for a digital mortgage approval.
Facebook announced it is working on a new augmented reality glasses project. Remember Google Glass? Similar but with newer technology. The project is several years from completion. Proptech investors are already planning on how to use it within real estate and property management. Starting in San Francisco and Seattle, Facebook has teams out collecting information via sensors gathering video, audio, and location data. Facebook is collecting data from inside buildings as well.
Forbearance:
For the 16th straight week loans in forbearance decreased. They went from 6.93% to 6.87% dropping the number to roughly 3.4 million mortgages enrolled in a forbearance plan. (MBA)
Remind your clients that there are options to keep them in their houses.
Resources:
Rental assistance is available through the Arizona Department of Housing website at saveourhomeaz.gov.
College enrollment is down 2.5% year over year. During economic downturns, community colleges tend to see an increase in enrollment however, this year enrollment is down 7.5%. (National Student Clearinghouse Research Center)
Personal savings rates have increased to 24% compared to early March when they were 7%. Bank deposits are up $2 trillion in 6 months. (Matt Stephani, Cavanal Hill Investment Management)
Elliott Pollack expects that nearly all industries in Greater Phoenix will be fully recovered by the end of 2022 and that housing will continue being the strongest sector.
Nationally, new business applications dropped from 27,000 a week to 18,000 a week from mid-March through mid-April. By early July they were up to 40,000 a week, the average is 22,500 a week. Applications have dropped since July but remain 20% above normal. This economy is driving entrepreneurship! (Elliot Eisenberg)
Please share this with your colleagues and clients.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
Our economic recovery is complicated and Q4 2020 will be a continuation of the complication. I expect we will see more of the same; tight inventory, high demand, continued recovery – slower than we would like but progress nonetheless, and holiday commercials will replace political ads.
The AZ Market:
Real estate consultant Jim Belfiore expects to see a coming wave of new home construction in Pinal County, specifically in Coolidge, Florence, and Casa Grande.
Cromford Market Index (CMI): Is the best leading indicator available (balance is 100, above 100 is a seller’s market, below 100 is a buyer’s market, prices rise at 110, and drop at 90). Yesterday it was 350.2, way above the pre-COVID peak of 241 and over 200 points above the 145.2 we hit on May 15. The past 7 days saw a 5.1 point increase.
Supply: New listings have increased by 11% but they were absorbed as quickly as they arrived so our total inventory remains very low. As of yesterday, our inventory is 63.8% below normal. Active listings excluding under contract accepting backups (UCB) are still around 8,100 (we should have 25,000) down over 41% year over year.
Southeast Valley New Listings: This a bi-weekly comparison of new listings in 2019 and 2020 for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek. 2019 followed the typical annual cycle showing more activity in the first half of the year. 2020 is not following any typical patterns. Which makes it impossible to know what the orange line will do next.
Demand: Pending sales are up 25% year over year, huge despite our low inventory and time of year. Our demand is nearly 27% above normal. Demand rates slowed early in September and picked up some speed towards the end of the month.
Sales & Prices: In August, 35% of homes closed over asking price. Phoenix metro area closed sales are up nearly 17% year over year. The median sales price is $326,800, up 17% year over year. Healthy appreciation is 3% annually.
Southeast Valley New Listings, Pendings, and Closings: This week over week comparison for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek since March 15 illustrates our pandemic real estate rollercoaster.
National Real Estate:
In August we hit 6 million (seasonally adjusted annual rate) existing home sales. The last time we hit that number was December of 2006. Sales were up 10.5% year over year. This is particularly surprising since there were only 1.41 million properties (annualized rate) on the market in August, the lowest level on record, with limited data prior to 1999. (Matthew Gardner, Windermere Chief Economist)
The Fannie Mae Home Purchase Sentiment Index illustrates consumer confidence for buying and selling real estate. According to the most recent update, from August, consumers believe it is a good time to buy. The buyer consumer confidence index has fully recovered to pre-pandemic levels. What is interesting is that seller consumer confidence has not fully recovered. This is seen in our low inventory levels with continued high demand.
Many expect that when consumer confidence for selling fully rebounds is when we will see an increase in inventory. As sellers gain confidence and enter the market the extreme sales price appreciation will slow and buyers will have more choices. This will be good for buyers and for the overall health of the real estate market.
Do not let the idea of rising inventory levels scare you. We desperately need more available listings across the country. Nationwide available inventory is down 36.4% year over year. (NAR)
New home sales hit a 14 year high in August and crossed the 1M in sales mark. While new home listings decreased by 4.1% in August. Labor shortages and high cost of lumber are likely factors. (Redfin)
Commercial Real Estate:
90.1% of apartment renters made full or partial payments by September 20, up from 90% in August. (National Multifamily Housing Council)
Investor confidence continues to struggle for commercial real estate in most sectors. (Green Street)
Real Estate News:
Spencer Rascoff, the former CEO of Zillow, is co-chairing a new special purpose acquisition company (SPAC) with a goal of taking a tech company public. It is through a SPAC Opendoor and UWM will go public. (Inman)
Realtor.com and Rocket Mortgage announced an advertising partnership that directs buyers to Rocket Mortgage’s pre-approval application for a digital mortgage approval.
Facebook announced it is working on a new augmented reality glasses project. Remember Google Glass? Similar but with newer technology. The project is several years from completion. Proptech investors are already planning on how to use it within real estate and property management. Starting in San Francisco and Seattle, Facebook has teams out collecting information via sensors gathering video, audio, and location data. Facebook is collecting data from inside buildings as well.
Mortgage & Forbearance:
For the 16th straight week loans in forbearance decreased. They went from 6.93% to 6.87% dropping the number to roughly 3.4 million mortgages enrolled in a forbearance plan. (MBA)
Mortgage applications are up 22% year over year.
“The share of loans in forbearance continues to decline and is now at a level not seen since mid-April. Many homeowners with GSE loans are exiting forbearance into a deferral plan and resuming their original mortgage payment, but waiting to pay the forborne amount until the end of the loan.”
Mike Fratantoni, MBA’s Senior Vice President and Chief Economist
Resources:
Rental assistance is available through the Arizona Department of Housing website at saveourhomeaz.gov.
College enrollment is down 2.5% year over year. During economic downturns, community colleges tend to see an increase in enrollment however, this year enrollment is down 7.5%. (National Student Clearinghouse Research Center)
Personal savings rates have increased to 24% compared to early March when they were 7%. Bank deposits are up $2 trillion in 6 months. (Matt Stephani, Cavanal Hill Investment Management)
Elliott Pollack expects that nearly all industries in Greater Phoenix will be fully recovered by the end of 2022 and that housing will continue being the strongest sector.
Hotel occupancy rates in August in Arizona were 47.9%, up from 46.5% in July, and down from 64.6% in August 2019.
One in six or about 100,000 restaurants have closed permanently, leaving about 3 million people out of work and an expected $240 billion in losses by the end of the year. (New York Times)
In July, the most recent available data, US airlines carried 73% fewer passengers than in July 2019, better than the 96.1% drop seen in April 2020 compared to a year earlier. (US Department of Transportation)
Nationally, new business applications dropped from 27,000 a week to 18,000 a week from mid-March through mid-April. By early July they were up to 40,000 a week, the average is 22,500 a week. Applications have dropped since July but remain 20% above normal. This economy is driving entrepreneurship! (Elliot Eisenberg)
Unemployment:
This morning September’s numbers were released and I will go deeper into those next week.
Elliott Pollack on Phoenix unemployment, “While the United States was losing 98 percent of all jobs created between the last recession and February, greater Phoenix only lost 41 percent.”
Initial unemployment claims were 837,000 last week, a decrease of 36,000. (US Department of Labor)
Last week, continuing unemployment decreased 980,000 dropping to 11,767,000. (US Department of Labor)
Final Thoughts:
Matthew Gardner said, “In all, the reports were very solid and show housing as being the shining light in an economy that is still mired by the COVID-19 pandemic.”
Please share this with your colleagues and clients.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
Lydia Wietsma and I discuss the latest news in forbearance trends and where borrowers can go for help. Freddie Mac shared some interesting info this week!
Today’s Takeaways:
Unemployment:
The national unemployment rate is 8.4%. Weekly initial claims have dropped below 1 million but remain high. Our continuing unemployment has dropped below 13 million.
Some headlines read “25 million American remain unemployed.” Those numbers are based on all of the different unemployment categories. We mostly talk about initial and continuing claims. There is also the Pandemic Unemployment Assistance program which, for the first time ever, provides unemployment benefits to independent contractors who otherwise are not eligible for regular benefits. There are about 12 million people on this program. (US Department of Labor)
Arizona has regained 60% of the jobs lost since in March and April and the state’s unemployment rate of 5.9%. Which is #3 for best performing state job market, behind Utah and Idaho. (Elliott Pollack)
Most of the unemployment is focused in service sectors, which the largest group in leisure & hospitality including restaurants. Also, in this group are non-life threatening medical services like dentist offices. The average weekly income of these sectors is $400. This means that today’s level of unemployment benefits do replace lost wages. (Wells Fargo)
An unemployment rate of 4.1%-4.7% is considered full employment. The US Bureau of Labor Statistics and Wall Street Journal survey of economists projects 2023 to be the year we get back to being, at least close to full employment. (KCM)
Demand:
Real estate demand is pushing prices higher giving owners more equity and more options should they refinance, modify, or sell. If homeowners need to sell they will be able to do so easily and quickly without going into foreclosure or doing a short sale.
28.7% of Redfin’s users looked to move to another area, up from 27.4%, and is the highest percentage yet. Sacramento, Austin, and Phoenix topped the charts for destination cities; affordability being one the biggest drivers.
Our demand is 26% above normal.
Given the unexpected, continued demand, despite high unemployment rates, major real estate companies adjusted their future price projections significantly. Zillow initially predicted a 3% decrease in home prices and now is predicting a 3.6% increase. Corelogic the outlier from the start went from a 6.6% decrease to a 0.6% increase. (must have missed the 16% appreciation in greater Phoenix!)
Forebearance:
Total loans in forbearance dropped to 6.93%, down from 7.01% last week, continuing the 5-month decline. Roughly 3.5 million loans are in forbearance programs. (MBA)
Roughly 680,000 homeowners are late on their mortgage and are eligible for a forbearance plan but are not in a forbearance plan. A recent survey shows the lack of participation is due to confusion, fear, and lack of awareness of such options. (Wall Street Journal)
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
Every Monday I spend 15 minutes discussing what happened this week in real estate, lending, and the economy.
Today’s Takeaways:
In August resale home sales increased 10.5% year over year with the most sales since 2006. It was the 102nd straight month of annual gains. (NAR)
New homes crossed the one million sales threshold in August, the first time since 2006. (US Census Bureau)
Lumber shortages due to mill closures and massive wildfires have driven up prices 170%, adding, on average, $16,000 to the cost of a single-family new build. (NAHB)
Given the unexpected, continued demand, despite high unemployment rates, major real estate companies adjusted their future price projections significantly. Zillow initially predicted a 3% decrease in home prices and now is predicting a 3.6% increase. Corelogic the outlier from the start went from a 6.6% decrease to a 0.6% increase. (must have missed the 16% appreciation in greater Phoenix!)
Supply: Inventory has actually increased by 11%, but it is easy to miss since it is absorbed so quickly. As of yesterday, our inventory is 64.0% below normal!!! Active listings excluding under contract accepting backups (UCB) remain around 8,100 (we should have 25,000) down 42% year over year and down over 2.5% month over month. This is the time of year when we typically see inventory increases.
New build permits were up 25.3% in August, year over year and up 11.9% year to date. (RL Brown)
Demand: Pending sales up 23% year over year, huge despite our low inventory and time of year. Our demand is over 25% above normal. After demand increases began to slow, it has started increasing a little faster again.
Zillow:
Zillow announced on Wednesday that it is changing the structure of its iBuyer, Zillow Offers. Soon its iBuyer purchases and sales will be handled by a licensed, salaried, Zillow employee.
This change will take effect January 2021 in Atlanta, Phoenix, and Tucson with other markets to follow. All properties for sale will be listed on the local MLS which means that Zillow Homes, the brokerage, and its agents are members of NAR. Zillow Offers currently operates in 25 markets nationwide.
Combined with Zillow’s mortgage company, Zillow Home Loans, and title company, Zillow Closing Services, Zillow can now offer a complete end to end transaction.
Zillow maintains its stance that it does not want to represent buyers and sellers outside of properties it does not own or purchase directly. Although many believe this is Zillow’s soft launch into traditional real estate.
Unlike Opendoor and Offerpad who both now offer listing services, Zillow will continue working with its partner Realtors, non Zillow agent-employees, in referring the sellers of properties not purchased by the iBuyer. Zillow Offers currently purchases about 2% of all seller inquiries.
Given Zillow Homes’ local MLS membership, Zillow will be adjusting its previous data feeds, which currently come from around 10,000 agreements, to come through a direct IDX feed. This will allow it complete access of current listing information and roughly 600 data feeds to manage. This is a game changer for Zillow. Not only does this reduce data costs, it will improve accuracy, timeliness, and provides the ability for far more detailed data aggregation. It will have the ability to have the accuracy of Redfin for its 200 million monthly unique visitors. Web traffic and effective data aggregation are what built giants like Facebook, Amazon, and Google.
The IDX feed may impact the brokerages who currently do not syndicate to Zillow.
The appearance of listings on Zillow will be subject to the local MLS regulations. Buyer’s agents contact information will now be shown separately from the listing agent’s information. Premier Agents will see some changes in customer-facing advertising but not in lead flow.
Zillow and Trulia will be discontinuing their “featured listings” option.
Deutsche Bank, one of the world’s leading financial services providers and international investment bank, for the second month in a row upgraded Zillow’s stock price, this time due to Opendoor’s recent announcement of going public. The bank believes that Opendoor’s movement will draw further attention to iBuying thus driving more business to Opendoor and its biggest competitor in the iBuying space, Zillow Offers, meaning more business for Zillow Homes and its agents. As they say, “a rising tide lifts all boats.”
The research analysts said, “We see Zillow’s conversion to a more formal brokerage model as it relates to sales of Zillow Offers (ZO) homes in several markets as a natural evolution to improve unit economics in ZO and vertically integrate to better control the user experience and cross sell other Zillow products.”
The bank sees this as a positive financial move for Zillow, furthering the separation from being a media company to becoming a portal with significantly greater earning potential.
Mortgage & Forbearance:
Mortgage applications increased last week by 6.8% from the previous week. 64.3% of those applications were for refinances, up from 62.8% last week. (MBA)
Total loans in forbearance dropped to 6.93%, down from 7.01% last week, continuing the 5-month decline. Roughly 3.5 million loans are in forbearance programs. (MBA)
Roughly 680,000 homeowners are late on their mortgage and are eligible for a forbearance plan but are not in a forbearance plan. A recent survey shows the lack of participation is due to confusion, fear, and lack of awareness of such options. (Wall Street Journal)
Big money keeps getting bigger with sky-high valuations and it is coming after real estate, that isn’t new, but the volume of capital is. I expect demand to continue to be strong, as long as rates stay low. At some point, likely in the not too distant future, more homeowners will realize how much equity they are sitting on and will be inspired to list bringing up inventory levels and providing buyers more options.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
Lydia Wietsma with Nexthome Elite Realty and I spent 15 minutes talking about mortgage forbearance, different options, what to plan for in the coming weeks and months.
Today’s Takeaways:
The goal of the banks today is different than it was 10 years ago. 10 years ago it was about enabling homeowners to complete short sales. Today it is about keeping struggling homeowners in their homes.
Total loans in forbearance have dropped for 15 straight weeks. It is now only 6.93% of all loans, which is about 3.5 million loans.
If 25% are current means that 875,000 are current of the 3.5M in forbearance. Just over 2.6 million are delinquent. About 1 million loans, or 21%, have left forbearance status since the peak in May.
Foreclosure filings are down 81% year over year. Filings are down because the courts are not moving forward with foreclosures in forbearance. Many courts across the country remain closed due to the pandemic. Foreclosure filings and processes are different across the country.
Delinquencies are still tracked but not turning into foreclosures due to forbearance protections making true numbers very difficult to track.
We do know that 30-day delinquencies are down while 60 and 90 day delinquencies are up. There are about 1.8 million more 90 day delinquencies now than there were in February.
In 2017, right after Hurricane Irma hit, there were the same number of delinquencies as today. There was not a housing crash in 2017.
Remember in 2008-2010 there were 8.8 million foreclosures nationwide. We are not on track to come close to this number based on what we are seeing now.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
As we approach the fourth quarter new and/or updated projections for the coming year are emerging. Politics aside, nothing about 2020 has been predictable; economists and analysts struggle to make sense of it all.
“The US economy and labor market are recovering from the coronavirus-related downturn more quickly than previously expected, economists said in a monthly survey.
Business and academic economists polled by the Wall Street Journal expect gross domestic product to increase at an annualized rate of 23.9% in the third quarter. That is up sharply from an expectation of an 18.3% growth rate in the previous survey.”
Harriet Tory, Wall Street Journal
National Real Estate:
In August resale home sales increased 10.5% year over year with the most sales since 2006. It was the 102nd straight month of annual gains. (NAR)
New homes crossed the one million sales threshold in August, the first time since 2006. (US Census Bureau)
“Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market. Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3 percent and with continued job recovery.”
Dr. Lawrence Yun, nar’s Chief economist
Lumber shortages due to mill closures and massive wildfires have driven up prices 170%, adding, on average, $16,000 to the cost of a single-family new build. (NAHB)
Given the unexpected, continued demand, despite high unemployment rates, major real estate companies adjusted their future price projections significantly. Zillow initially predicted a 3% decrease in home prices and now is predicting a 3.6% increase. Corelogic the outlier from the start went from a 6.6% decrease to a 0.6% increase. (must have missed the 16% appreciation in greater Phoenix!)
The AZ Market:
Cromford Market Index (CMI): Is the best leading indicator available (balance is 100, above 100 is a seller’s market, below 100 is a buyer’s market, prices rise at 110, and drop at 90). Yesterday it was 347.6, way above the pre-COVID peak of 241 and over 200 points above the 145.2 we hit on May 15. The past 7 days saw a 2.5 point increase, a far cry from the 20 point increases we saw in June.
Supply: Inventory has actually, slightly, increased, but it is easy to miss since it is absorbed so quickly. As of yesterday, our inventory is 64.0% below normal which is actually up 0.1%!!! Active listings excluding under contract accepting backups (UCB) remain around 8,100 (we should have 25,000) down 42% year over year and down over 2.5% month over month. This is the time of year when we typically see inventory increases.
New build permits were up 25.3% in August, year over year and up 11.9% year to date. (RL Brown)
Demand: Pending sales up 23% year over year, huge despite our low inventory and time of year. Our demand is over 25% above normal. After demand increases began to slow, it has started increasing a little faster again.
Sales & Prices: In August, 35% of homes closed over asking price. Phoenix metro area closed sales are up nearly 19% year over year. The median sales price is $325,000, up 16% year over year. Healthy appreciation is 3% annually.
Southeast Valley New Listings, Pendings, and Closings: This week over week comparison for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek since March 15 illustrates our pandemic real estate rollercoaster. What stands out to me is the September spike.
Commercial Real Estate:
With an affordable home shortage of 7 million, mobile home parks continue to be one of the best performing real estate investments and are often considered recession-proof. There are roughly 45,000 parks nationwide. On average they bring a 4% annual rate of return and have low vacancy rates of 4%-6%. (Inman)
Startup, Civvl, is a new company created to “connect landlords with gig workers to help with evictions.” The legality is questionable particularly given the CDC’s eviction moratorium. Several tenants’ rights groups have raised concerns as well. (Bisnow)
There are roughly 48 million rental units nationwide and The Urban Institute estimates it would cost about $16 billion a month to directly support tenants, which by default would support their landlords.
New lawsuits have been filed against the CDC stating that the federal government has overstepped its authority with the nationwide eviction moratorium. (Rose Law Group)
Zillow:
Zillow announced on Wednesday that it is changing the structure of its iBuyer, Zillow Offers. Soon its iBuyer purchases and sales will be handled by a licensed, salaried, Zillow employee.
This change will take effect January 2021 in Atlanta, Phoenix, and Tucson with other markets to follow. All properties for sale will be listed on the local MLS which means that Zillow Homes, the brokerage, and its agents are members of NAR. Zillow Offers currently operates in 25 markets nationwide.
Combined with Zillow’s mortgage company, Zillow Home Loans, and title company, Zillow Closing Services, Zillow can now offer a complete end to end transaction.
Zillow maintains its stance that it does not want to represent buyers and sellers outside of properties it does not own or purchase directly. Although many believe this is Zillow’s soft launch into traditional real estate.
Unlike Opendoor and Offerpad who both now offer listing services, Zillow will continue working with its partner Realtors, non Zillow agent-employees, in referring the sellers of properties not purchased by the iBuyer. Zillow Offers currently purchases about 2% of all seller inquiries.
Given Zillow Homes’ local MLS membership, Zillow will be adjusting its previous data feeds, which currently come from around 10,000 agreements, to come through a direct IDX feed. This will allow it complete access of current listing information and roughly 600 data feeds to manage. This is a game changer for Zillow. Not only does this reduce data costs, it will improve accuracy, timeliness, and provides the ability for far more detailed data aggregation. It will have the ability to have the accuracy of Redfin for its 200 million monthly unique visitors. Web traffic and effective data aggregation are what built giants like Facebook, Amazon, and Google.
The IDX feed may impact the brokerages who currently do not syndicate to Zillow.
The appearance of listings on Zillow will be subject to the local MLS regulations. Buyer’s agents contact information will now be shown separately from the listing agent’s information. Premier Agents will see some changes in customer-facing advertising but not in lead flow.
Zillow and Trulia will be discontinuing their “featured listings” option.
Deutsche Bank, one of the world’s leading financial services providers and international investment bank, for the second month in a row upgraded Zillow’s stock price, this time due to Opendoor’s recent announcement of going public. The bank believes that Opendoor’s movement will draw further attention to iBuying thus driving more business to Opendoor and its biggest competitor in the iBuying space, Zillow Offers, meaning more business for Zillow Homes and its agents. As they say, “a rising tide lifts all boats.”
The research analysts said, “We see Zillow’s conversion to a more formal brokerage model as it relates to sales of Zillow Offers (ZO) homes in several markets as a natural evolution to improve unit economics in ZO and vertically integrate to better control the user experience and cross sell other Zillow products.”
The bank sees this as a positive financial move for Zillow, furthering the separation from being a media company to becoming a portal with significantly greater earning potential.
Real Estate News:
United Wholesale Mortgage (UWM) plans to go public in Q42020 via special purpose acquisition company (SPAC) or blank check company. Gores Holdings IV is already publicly traded and will merge with UWM. The valuation is estimated to reach $16.1 billion, which makes this the largest SPAC deal ever. (Wall Street Journal)
LoanDepot is considering an IPO with a potential valuation of $12-$15 billion, which could happen as early as Q42020. (Bloomberg)
28.7% of Redfin’s users looked to move to another area, up from 27.4%, and is the highest percentage yet. Sacramento, Austin, and Phoenix topped the charts for destination cities; affordability being one the biggest drivers.
Mortgage & Forbearance:
Mortgage applications increased last week by 6.8% from the previous week. 64.3% of those applications were for refinances, up from 62.8% last week. (MBA)
Total loans in forbearance dropped to 6.93%, down from 7.01% last week, continuing the 5-month decline. Roughly 3.5 million loans are in forbearance programs. (MBA)
Roughly 680,000 homeowners are late on their mortgage and are eligible for a forbearance plan but are not in a forbearance plan. A recent survey shows the lack of participation is due to confusion, fear, and lack of awareness of such options. (Wall Street Journal)
You may hear about 25-30 million unemployed Americans. There is a variety of unemployment categories; these are the biggest ones from yesterday’s report. Despite the slowing of these drops, most of these are going in the right direction. (US Department of Labor)
Initial unemployment claims
National: 870,000 an increase of 4,000 from the previous week.
Arizona: 10,015 a decrease of 1,328 from the previous week.
Continuing unemployment claims
National: 12,580,000 a decrease of 167,000 from previous week.
Arizona: 194,479 a decrease of 5,705 from the previous week.
There were 630,080 initial claims for Pandemic Unemployment Assistance which provides unemployment benefits to independent contractors who otherwise are not eligible for regular benefits. A decrease of 45,074 from the previous week.
There were 11,510,888 continuing claims for Pandemic Unemployment Assistance. A decrease of nearly 3 million from the previous week.
Greater Phoenix continues to be the best performing job market in the country for 2020. Arizona is #3 for best performing state job market, behind Utah and Idaho. (Elliott Pollack)
An unemployment rate of 4.1%-4.7% is considered full employment. The US Bureau of Labor Statistics and Wall Street Journal survey of economists projects 2023 to be the year we get back to being, at least close to full employment. (KCM)
Final Thoughts:
Big money keeps getting bigger with sky-high valuations and it is coming after real estate, that isn’t new, but the volume of capital is. I expect demand to continue to be strong, as long as rates stay low. At some point, likely in the not too distant future, more homeowners will realize how much equity they are sitting on and will be inspired to list bringing up inventory levels and providing buyers more options.
To quote Bob Dylan, “The times they are a-changin’.”
Please share this with your colleagues and clients.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
Every Monday Amber Kovarik and I spend 15 minutes discussing what happened this week in real estate, lending, and the economy.
Today’s Takeaways:
In August, 35% of homes closed over asking price. Phoenix metro area closed sales are up nearly 19% year over year. The median sales price is $325,000, up 16% year over year. Healthy appreciation is 3% annually.
National median sales price increased by 11% year over year. Tight inventory and high demand continue to push prices up. Only San Francisco and NYC have seen significant inventory increases as residents now have more affordable options outside of these cities. (Redfin)
This map shows the year over year decrease in available inventory. (NAR)
Forbearance:
Mortgages in forbearance dropped to 7.01% last week from 7.16% putting roughly 3.5 million homeowners in forbearance plans. (MBA)
9.48% of the forbearance exits were due to permanent loan modifications. (MBA)
It is believed that roughly 25% of borrowers in forbearance are current on their payments.
“The COVID-19 pandemic will lead to a rise mortgage defaults and foreclosures. But as the housing market muscles through this economic downturn, it looks as if foreclosures will for a trickle rather than a flood, housing experts says.”
JEFF OSTROWSKI, SENIOR MORTGAGE REPORTER AT BANKRATE
Unemployment:
August unemployment rate is 8.4%.
Continuing unemployment decreased by 916,000 down to 12,628,000. (US Department of Labor)
The leisure and hospitality sector (which tend to be renters) August unemployment rate was 21.3% while the financial activities sector August unemployment rate was 4.2% (essentially full employment) another illustration as to why real estate remains strong. (US Department of Labor)
Real Estate News:
The National Association of Home Builders/Wells Fargo Housing Market Index hit 83 this month, a record high for the 35-year-old index. There is a looming shadow though, lumber prices have increased 170% since April and the raging west coast wildfires are putting lumber stocks at risk. (CNBC)
From February to July the number of young adults, aged 18-29, living with their parents has increased from 47% to 52% or 26.6 million, the first time this number has been above 50%. Closed college campuses and the higher unemployment rates for younger people are the leading causes. (US Census Bureau & Pew Research)
Opendoor:
After the rise and fall of iBuyer marketshare, from roughly 0.6%, nationally, in January to 0.1% in July. These companies are scrambling to reinvent themselves. Even Phoenix, where Opendoor launched in 2014, saw the marketshare drop from 6% in January to 1.4% in July.
After a few days of rumored talks, on Tuesday, Opendoor announced it is going public. In order to avoid pre-IPO scrutiny, which took down WeWork, Opendoor merged with Social Capital II, a special purpose acquisition company or SPAC, also knows as a blank-check company. Since Social Capital II is already publicly traded Opendoor will not have to explain to Walls Street why they want to go public but still have never turned a profit. Social Capital’s business is solely for taking companies public and has no other business. (Bloomberg)
Despite an impressive $4.7 billion in revenue in 2019, Opendoor had a net loss of $327 million, up from the $192 million in net losses in 2018. The merger gives Opendoor a valuation of $4.8 billion and a likely infusion of $1 billion in capital.
Winning Offers:
Amber discussed ways to leverage lending to help your buyers win offers. Options include a Recast, put down minimum of 5% for new loan and lock in the interest rate. When the current property sells, borrower may apply additional funds to new loan and reconfigure the payment, keeping the rates the same. Recast allows borrowers to purchase without a sale contingency.
Other strategies include offering over asking, negotiating difference based on likelihood that it won’t appraise. Create a strategy for an aggressive offer with a local loan officer who understands the nuances of the local market.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
Last week I received additional questions regarding forbearance, so let’s start there.
Forebearance:
Mortgages in forbearance dropped to 7.01% last week from 7.16% putting roughly 3.5 million homeowners in forbearance plans. (MBA)
9.48% of the forbearance exits were due to permanent loan modifications. (MBA)
33.69% of loans in forbearance are in the initial plan state, 65.35% are in an extension, and 0.96% are re-entering into forbearance.
The literal meaning of forbearance is “holding back”. It is a temporary postponement of mortgage payments resulting in a form of relief for the borrower in lieu of forcing a property into foreclosure. The borrower will have to pay the postponed payments back later.
If you see headlines stating “delinquency rates on the rise” those rates include mortgages in forbearance which are planned deferrals. According to Black Knight Financial, there are about 2 million more delinquent mortgages than there were in February. This chart shows that 30-day delinquencies are 14% lower than pre-pandemic numbers and the initial wave is subsiding.
“The COVID-19 pandemic will lead to a rise mortgage defaults and foreclosures. But as the housing market muscles through this economic downturn, it looks as if foreclosures will for a trickle rather than a flood, housing experts says.”
Jeff Ostrowski, Senior Mortgage Reporter at BankRate
Unemployment:
There were 860,000 initial unemployment claims this week, down 33,000 from last week.
Continuing unemployment decreased by 916,000 down to 12,628,000. (US Department of Labor)
The leisure and hospitality sector (which tend to be renters) August unemployment rate was 21.3% while the financial activities sector August unemployment rate was 4.2% (essentially full employment) another illustration as to why real estate remains strong. (US Department of Labor)
In March and April Amazon hired 175,000 new warehouse employees. Now Amazon plans to hire another 100,000 employees and has 33,000 available positions. Amazon is looking to add over 300,000 employees in 2020! (Bisnow)
National Real Estate:
National median sales price increased by 11% year over year to $328,400. Tight inventory and high demand continue to push prices up. Only San Francisco and NYC have seen significant inventory increases as residents now have more affordable options outside of these cities. (Redfin)
A recent report from Realtor.com shows inventory declines are slowing as homeowners are realizing how quickly prices are going up while demand has slowed, only slightly.
The week ending September 5 was the 17th straight week of price increases at or above the previous week’s increases, illustrating why we have surfaced pre-pandemic numbers.
The AZ Market:
Cromford Market Index (CMI): Is the best leading indicator available (balance is 100, above 100 is a seller’s market, below 100 is a buyer’s market, prices rise at 110, and drop at 90). Yesterday it was 345.1, over 100 points above the pre-COVID peak of 241 and nearly 200 points above the 145.2 we hit on May 15. The past 7 days saw a 2-point increase, a far cry from the 20 point increases we saw in June.
Supply: Inventory remains low but has stopped dropping. As of yesterday, our inventory is 64.1% below normal. Active listings excluding under contract accepting backups (UCB) are at 8,100 (we should have 25,000) down over 40% year over year and down 2.5% month over month.
Southeast Valley New Listings: This a bi-weekly comparison of new listings in 2019 and 2020 for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek. 2019 followed the typical annual cycle showing more activity in the first half of the year. 2020 is not following any typical patterns. Which makes it impossible to know what the orange line will do next.
Demand: Pending sales up 21% year over year, huge despite our low inventory and time of year. Our demand is nearly 24% above normal. The demand continues to rise but at a very slow rate.
Sales & Prices: In August, 35% of homes closed over asking price. Phoenix metro area closed sales are up nearly 19% year over year. The median sales price is $325,000, up 16% year over year. Healthy appreciation is 3% annually.
Southeast Valley New Listings, Pendings, and Closings: This week over week comparison for Tempe, Mesa, Chandler, Gilbert, Apache Junction, and Queen Creek since March 15 illustrates our pandemic real estate rollercoaster. What stands out to me is the lack of end of August closing spike.
Commercial Real Estate:
Q4 2020 Projections (Bisnow):
Industrial: Strongest performing asset type driving tons of building which could lead to increased vacancy rates.
Office: Prior to the pandemic roughly 5% of employees worked from home. In May it was estimated that 42% of employees were working from home. An estimated 15% will work from home as we come out of the recession. Office rents are decreasing and sub-leases are increasing.
Hotel: Demand bottomed out at nearly an 84% drop the week of April 11. The increases have been small and the end of the year it is expected demand will still be down 60%-70% year over year.
Retail: US retail space was struggling prior to the pandemic with mall closures. Analysts expect 20,000-25,000 store closures this year.
Multi-Family: Vacancy has increased slightly from 4.3% to 4.6%, less than expected. Surprisingly enough apartment rent payments are strong. As of August 27, 92% of apartment rents were paid either partially or fully. With the CDC moratorium on evictions many housing associations are voicing their concerns for lack of landlord support.
Restaurants: In January restaurants were expected to see a 4% growth rate in 2020. However, according to Yelp in July 16,000 restaurants that were temporarily closed, shut their doors permanently. Aaron Allen & Associates, a restaurant consulting firm expects 231,000 to close permanently this year.
Real Estate News:
Summer vacation rentals across the country are turning into fall and even winter vacation rentals as remote working allows employees new-found freedom. (Redfin)
The National Association of Home Builders/Wells Fargo Housing Market Index hit 83 this month, a record high for the 35-year-old index. There is a looming shadow though, lumber prices have increased 170% since April and the raging west coast wildfires are putting lumber stocks at risk. (CNBC)
The 4 largest builders in Lexington, KY stopped building altogether due to the sky-high lumber prices. (Sherri Kelley)
From February to July the number of young adults, aged 18-29, living with their parents has increased from 47% to 52% or 26.6 million, the first time this number has been above 50%. Closed college campuses and the higher unemployment rates for younger people are the leading causes. (US Census Bureau & Pew Research)
Phoenix has the 8th highest rate for data center leasing. Considering we are fairly new to this market and more and more are coming here each year, expect this to increase. (AZ Big Media)
Opendoor:
After the rise and fall of iBuyer marketshare, from roughly 0.6%, nationally, in January to 0.1% in July. These companies are scrambling to reinvent themselves. Even Phoenix, where Opendoor launched in 2014, saw the marketshare drop from 6% in January to 1.4% in July.
iBuyers like Knock.com completely changed course and opted to focus on bridge loans and are no longer purchasing property at all. Others pivoted towards traditional sales and higher agent referrals, Offerpad is now paying a 3% referral fee, up from the previous 1%, and partnerships like Realtor.com and Opendoor.
Since the beginning none of them have turned a profit. Softbank’s Vision Fund, the largest investor in Opendoor is paying more attention to profitability. If any of the iBuyers lose their funding they will not be able to survive at all, despite any of these recent pivots.
After the disastrous 2019 IPO attempt by WeWork, another organization funded by Softbank’s Vision Fund, profitability has taken center stage for the multi-billion dollar investor.
After a few days of rumored talks, on Tuesday, Opendoor announced it is going public. In order to avoid pre-IPO scrutiny, which took down WeWork, Opendoor merged with Social Capital II, a special purpose acquisition company or SPAC, also knows as a blank-check company. Since Social Capital II is already publicly traded Opendoor will not have to explain to Walls Street why they want to go public but still have never turned a profit. Social Capital’s business is solely for taking companies public and has no other business. (Bloomberg)
Despite an impressive $4.7 billion in revenue in 2019, Opendoor had a net loss of $327 million, up from the $192 million in net losses in 2018. The merger gives Opendoor a valuation of $4.8 billion and a likely infusion of $1 billion in capital.
Final Thoughts:
Real estate continues to thrive despite significant headwinds. We continue to watch rentals, eviction moratoriums, and what that means to landlord survival. Home has never been more important and for the 160 million employed American there are options.
Please share this with your colleagues and clients.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
Lydia Wietsma with Nexthome Elite Realty and I spent 15 minutes talking about mortgage forbearance, different options, what to plan for in the coming weeks and months.
Today’s Takeaways:
The literal meaning of forbearance is “holding back”. It is a temporary postponement of mortgage payments resulting in a form of relief for the borrower in lieu of forcing a property into foreclosure. The borrower will have to pay the postponed payments back later. The terms of when and how depends on the details of the forbearance agreement accepted by both parties but one of the biggest benefits of this type of agreement is the lender delays its right to exercise foreclosure if the borrower can catch up to its payment schedule by a certain time. Loan owners, servicers and loan insurers may be willing to negotiate forbearance options because the losses generated by a foreclosure action typically fall on them.
Lydia works with a loan servicing company and she is getting more and more inspection requests. Not all will go into foreclosure but some will. She is seeing a consistent trickle coming in, no flood. All of these properties are maintained and well-kept; unlike 10 years ago when many properties were trashed before they went to foreclosure. Different mindset and attitude.
We will more likely see a trickle of foreclosures rather than a flood for several reasons. The housing recovery is a big reason. We have made up everything that was lost and then some.
Unemployment is high still, yes, but it is going down, putting more and more borrowers in a better place to make their payments.
Additionally, mortgages in forbearance are also decreasing. The most recent update from the Mortgage Bankers Association shows that we are down to roughly 3.5 million loans are in forbearance.
Foreclosures require two simultaneously occurring issues; economic distress and negative equity. The average American homeowner has $177,000 in equity and 90% of homeowners have at least 10% equity. We may sellers who need to sell but they will be regular sales versus foreclosures and short sales. (First American, KCM)
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
