In this 12 minute video Amber Kovarik and I talk about what is happening this week in real estate.
Today’s Takeaways.
Right now there are a lot of headlines about how the housing market is softening, that we are turning into a buyers market. That is not the case. What is the case is that there was a slight decrease in contract signings from September to October, a 1.1% decrease. That doesn’t mention that there was still a 20% year over year increase. Seasonality could be coming into play now, in that it does get a little quieter around the holidays. What the bigger factor is lack of inventory. A buyer cannot write an offer on a property that is not for sale.
To put it in perspective, in the US there are about 140 million housing units. Of those, about 84 million are single family homes. (Greater Phoenix has about 2 million housing units and just over 1.4 million single family homes) Last week, for the first time in history, the number of single family homes for sale nationwide dropped to just below 500,000.
Greater Phoenix has about 4 buyers for every available listing. In order for the Phoenix market to be balanced we would need 25,000-35,000 active listings, we have 7,300. Aside from New York and San Francisco all other major metros are in similar situations. There are some areas in the country that have sufficient inventory for the demand giving us a national average of about 3 buyers for every listing nationwide.
Interesting Facts.
Demand for primary homes is up 50% and for second homes is up 100%, year over year (Redfin)
19% of buyers paid cash in 2019 and 2020. (HousingWire)
For the fourth time, FHFA extended the foreclosure and eviction moratoriums to January 31, 2021. (HousingWire)
Mortgage interest rates have hit all-time lows 14 times this year. (MBA)
Every time we get news that is not favorable for the economy interest rates have gone down. There is so much uncertainty that the fed has just keeps buying more and more mortgage-backed securities. It likely will not go much lower.
Appraisal delays continue. 45 day escrow periods can help make things go more smoothly. Bring on the harmony to a real estate transaction!
With the new conforming loan limits a buyer can now purchase a property for $577,000 with 5% down without having to get a jumbo loan.
With the new FHA limits a buyer can now buy a property for $381,000 with 3.5% down.
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.
In this 11 minute video, Lydia Wietsma and I discuss the four things you need to know about mortgage forbearance. The bottom line is that borrowers have options but they have to take action NOW as the COVID forbearance options are expiring in 21 business days. Watch the full video for details.
We do these updates to help real estate professionals and consumers understand forbearance, to let struggling borrowers know that although experts are forecasting a tough winter, there are options.
One.
Time is of the essence. There are 21 business days left this year to get into a forbearance plan. The CARES Act programs expire on 12/31/2020.
*Please note that FHFA extended their foreclosure and eviction moratorium to 1/31/2021 after this video was recorded.*
Two.
After 25 weeks without having an increase in loans in forbearance last week was the second week in row with increases. We went from 5.48% to 5.54% of loans are in forbearance which is around 2.8 million borrowers. The biggest reason for the increase is that fewer borrowers are leaving their forbearance programs than in the previous weeks. Other reasons are that re-entries increased slightly and loans in extension increased slightly. Initial entries remained about the same.
Three.
Don’t panic sell. Call someone to guide you through the process that is best for you and your current situation.
Four.
Foreclosures are coming. Not a wave but there will be some. Foreclosures have specific timelines before the property goes to auction and struggling borrowers have 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.
In this 4 minute video, I talk about the 4 things that happened this week in real estate that you need to know about.
ONE.
Supply. In past years, October usually sees a slight increase in new listings and then a decline in November and December. In October we had a 5% increase in new listings which basically kept up with the elevated levels of demand. In November we have had a decline in new listings, although not as large of as decline in past years. Despite that, demand continues to increase and the new listings are once again no longer keeping up with the demand and inventory is dropping. Demand is over 35% above normal and supply is 64% below normal. As of yesterday we only had about 7700 active listings available, excluding UCB. Low supply with high demand pushes prices higher, which is why we are looking at a potential appreciation of 20% this year. Normal is 3%!
TWO.
The build to rent phenomenon continues to gain traction. Greater Phoenix is will soon be home to the largest build to rent community in the country. This year Christopher Todd Communities purchased and is developing 5 separate build to rent neighborhoods, totaling 943 homes.
THREE.
Last week, CoStar, the nation’s largest commercial real estate data provider, agreed to purchase Homesnap for $250 million. This is part of an effort to enter the residential real estate space. It already owns apartments.com and purchased the company behind auctions.com earlier this year. CoStar is also a possible contender for the purchase of CoreLogic, the nation’s largest MLS data provider. CoStar founder and CEO, Andy Florance has his sights set on disrupting Zillow’s position as top residential real estate portal.
FOUR.
This year we have hit all-time lows for mortgage interest rates on a 30 year fixed mortgage 13 times!
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.
In this 11 minute video, Lydia Wietsma and I discuss the latest news in forbearance and emerging trends. The bottom line is that borrowers have options but they have to take action NOW as the COVID forbearance options are expiring in 5 weeks. Watch the full video for details.
We do these updates to help real estate professionals and consumers understand forbearance, to let struggling borrowers know they have options, and to reassure everyone that today’s market is not like the 2005 bubble/2008 crash.
Today’s Takeaways:
We are in the busiest 3rd quarter real estate has seen. The crazy low inventory has pushed house prices up around 20% this year. The news of the highly effective vaccines pushed the stock market even higher as the bull market continues.
With all of the good news, there is some less good news. Unemployment increased slightly. The number of loans in forbearance increased, very slightly last week from the previous week. It went up from 5.47% to 5.48% of loans are in forbearance, or roughly 2.7 million loans.
The increase comes from a reduced number of borrowers leaving their forbearance plans. The past few weeks we have seen a large number of forbearance plans exits. This past week saw a reduction in exists. The new entries remained about 21% of all loans in forbearance and just under 77% are in an extension plan. Re-entries remain at just under 2%.
“Incoming housing market data remain quite strong, with existing-home sales in October reaching their fastest pace since 2005, and the inventory of homes on the market hitting a record low. However, renewed weakness in the latest job market data indicates that many homeowners are continuing to experience severe hardships due to the pandemic and still need the support that forbearance provides.”
Mike Fratantoni, Chief Economist for MBA
Affordability is taking a main stage with economists and housing experts. According to the Home Opportunity Index, the Phoenix area saw a nearly 3% decrease in affordability from Q2 to Q3 while wages remained the same. The inequities in the balance is putting pressure on our market which will only increase.
Enrollment into the current COVID-19 forbearance protections created in the CARES Act are expiring on 12/31/2020. Struggling borrowers need to contact their mortgage servicer for options before the end of the year. The time is now to get started.
The servicer Lydia works with is changing their tune slightly. The questions are changing as they are asking about the state of the owner, for example, they are asking: Are the owners living in the property? Is it abandoned? Etc.
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.
In this 10 minute video I talk about the 3 things that happened this week in real estate that you need to know about.
One.
Thursday the Department of Justice (DOJ) simultaneously filed an anti-trust lawsuit against NAR and a proposed settlement. The two organizations had confidentially reached an agreement that makes changes to NAR’s code of ethics and MLS policies regarding providing information on commissions and MLS participation. Click here for details from the DOJ. Click here for details from NAR.
Two.
Last week NAR’s board of directors approved changes to its Code of Ethics and Standards of Practice. According to Andrea Brambila of Inman, the changes apply “to all of a Realtor’s activities, not just those related to real estate; prohibit hate and harassing speech against protected classes; prohibit all discrimination, not just willful discrimination, against protected classes; and recommend that ethics violations be considered under membership qualification criteria.”
Three.
Affordable housing is quickly becoming a big focus both locally and nationwide. Prices are rising very quickly, at unsustainable levels. That does not mean that prices will drop, it means that they will eventually rise more slowly. This will happen either when supply increases or demand decreases. Prices only decrease in buyer’s markets, not in balanced markets.
The Home Opportunity Index measures affordability, the normal range is 60-75, meaning that Americans earning the current median income, can afford 60-75% of the homes on the market. The higher the number the more affordable the city.
Affordability dropped from Q2 2020 to Q3 2020. Nationally, it decreased from 59.6 to 58.3. Greater Phoenix remains more affordable than the national average but our quarter to quarter decrease was much more significant. We dropped from 64.8 in Q2 2020 to 61.9 in Q3 2020, which means Arizona households earning the median income of $72,300 can afford 61.9% of what is on the market. The median income did not change from Q2 to Q3. (NAHB/Wells Fargo)
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.
To say that these are times are weird would be an understatement we have confusing elections, a worldwide pandemic, high unemployment, and the residential real estate sector is supporting the US economy.
“Pending contracts are up strongly, implying that this winter may be one of the best winters for home sales activity. I mean, it’s not going to be spring or summer, so one has to compare this winter with other past winters. And by winter to winter comparison, this year could be one of the best based on the breakout of the pending contracts at a much higher level.”
Dr. Lawrence Yun, Chief economist for NAR
The chaos brings many questions. Are we in a housing bubble? No. Is this sustainable? No. Does that mean we are due for a crash? No.
The AZ Market.
Housing & Population Growth:
The worst thing for a housing market is vacant homes.
2001-2006:
Maricopa County’s population grew by 16%.
Single family inventory grew 23%.
Oversupply of housing.
Mortgages were easy to get, crazy appreciation, houses were purchased with no intention of being lived in, lots of vacant homes.
2006-2019:
Maricopa County’s population grew up by 26%.
Single family inventory grew only 17%.
Undersupply of housing.
Not at risk for lots of vacancies, there is not enough housing for the population.
2020:
Extreme undersupply of housing.
Inventory has been dropping for the past 6 years.
Very few vacant homes.
Supply:
In 2014 our inventory levels were normal at about 25,000 active listings. Inventory has been decreasing over the 6 years since then; we now have around 8,000 available listings, which is 63% below normal. In recent weeks, supply has stabilized for the most part and actually started to increase. The 13% increase of new listings in Q3 2020 – 5% increase in October alone – went unnoticed as they were absorbed as quickly as they came on the market. To put this into context, to have a crash, we would need supply levels like we had in 2007 (around 57,000 active listings) more than 7x the inventory today.
Demand:
While supply has stabilized, demand continues to rise. We are adding enough listings to maintain our listing position, even as demand increases. Demand is currently over 35% above normal. This time of year we normally see about 9,500 listings in escrow and this year we have over 13,000 in escrow. In normal cycles, November and December have decreased buyer demand, not this year!
Sales & Appreciation:
Sales volume is extraordinary for this time of year. In October 35.4% of sales closed over asking, the average is about $5,400. Sales were up 22% year over year in October.
October 2020 had a year over year appreciation rate of 19.7%. Tina Tamboer with the Cromford Report expects this number to continue to increase through the end of the year. In January 2020 when Tina mentioned a 10% appreciation for 2020 it was shocking, this is, well, twice as shocking!
Affordability:
Affordable housing is quickly becoming a big focus both locally and nationwide. Prices are rising very quickly, at unsustainable levels. That does not mean that prices will drop, it means that they will eventually rise more slowly. This will happen either when supply increases or demand decreases. Prices only decrease in buyer’s markets, not in balanced markets.
The Home Opportunity Index measures affordability, the normal range is 60-75, meaning that Americans earning the current median income, can afford 60-75% of the homes on the market. The higher the number the more affordable the city.
Affordability dropped from Q2 2020 to Q3 2020. Nationally, it decreased from 59.6 to 58.3. Greater Phoenix remains more affordable than the national average but our quarter to quarter decrease was much more significant. We dropped from 64.8 in Q2 2020 to 61.9 in Q3 2020, which means Arizona households earning the median income of $72,300 can afford 61.9% of what is on the market. The median income did not change from Q2 to Q3. (NAHB/Wells Fargo)
“Favorable mortgage rates will continue to bring fresh buyers to the market. However, the affordability situation will not improve even with low-interest rates because housing prices are increasing much too fast.”
Dr. Lawrence Yun
New Homes:
In October, greater Phoenix saw a 58% year over year increase in new construction sales. (Jim Belfiore)
In October, new homes made up 22% of all residential sales in greater Phoenix. (Jim Belfiore)
In addition to low supply driving prices up, lumber costs, due to shortages, have increased the cost of a new home by about $16,000. (Bureau of Labor Stats)
Rentals:
Rents have increased by 17% since April. Increasing rents is a sign of true demand. Vacant properties cause declining prices. Vacancies are incredibly low.
Monthly mortgage payments are lower, for the median house, than are rents. Rents are increasing faster than purchase prices.
Median monthly lease for a single family 1,500-2,000 square foot rental increased by $255 year over year to $1,850.
According to Corelogic, in September, Phoenix rents saw a 6.9% year over year increase, the largest in the country. Phoenix has topped the chart every month of 2020.
Real Estate News:
Yesterday the Department of Justice (DOJ) simultaneously filed an anti-trust lawsuit against NAR and a proposed settlement. The two organizations had confidentially reached an agreement that makes changes to NAR’s code of ethics and MLS policies regarding providing information on commissions and MLS participation. Click here for details from the DOJ. Click herefor details from NAR.
Last week NAR’s board of directors approved changes to its Code of Ethics and Standards of Practice. According to Andrea Brambila of Inman, the changes apply “to all of a Realtor’s activities, not just those related to real estate; prohibit hate and harassing speech against protected classes; prohibit all discrimination, not just willful discrimination, against protected classes; and recommend that ethics violations be considered under membership qualification criteria.”
Similar to Picasa, Gold Gate, a new commercial real estate firm, is offering fractional ownership for luxury real estate worldwide. Owners can buy “shares” or months in different luxury properties all over the world.
A $15,000 first time homebuyer credit is part of the housing proposal created by President-elect Joe Biden. Dr. Lawrence Yun stated that it is helpful for first-time buyers entering the market but it is only a part of the solution. He went on to say, “But that’s not the full story, the full story is that stimulating the demand just by itself I think is insufficient. Right now the housing market is facing a significant housing shortage. So if we add further stimulus to the demand without addressing the supply… it will simply bump up the prices even higher.”
Real Estate Trends:
In 2020 first time home buyers made up 31% of purchases, down from 33% in 2019 and the lowest level since 1987. (NAR) Increasing affordability challenges are the likely culprit.
October new home construction starts increased 14.2% year over year and hit the highest level since 2007. (US Census Bureau)
Year over year, iBuyer market share is expected to drop by 50% nationwide by the end of 2020. (Mike DelPrete)
Lending & Forbearance:
Phoenix is the #2 city for VA loan origination during the fiscal year 2020, Phoenix saw a 115% increase year over year, behind Washington DC. (Phoenix Business Journal)
The MBA revised its 2020 end of the year projections:
An estimated $3.9 trillion in total mortgage originations for 2020, the highest since 2003 and 50% up from 2019.
At $1.97 trillion, 2020 will have a 91.5% year over year increase in refinance originations, again highest since 2003.
At $1.42 trillion, 2020 will have a 16% year over year increase in purchase originations, the highest since 2005.
Last week total mortgages in forbearance dropped to roughly 2.7 million or 5.47%, down from 5.67% the week before.
Over 76% of loans in forbearance are on extension, meaning they have been in forbearance for more than 6 months. Just under 21% of loans in forbearance are in the initial stages. (MBA)
Final Thoughts:
Jobs continue to recover (we have made up over 50% of the jobs lost), albeit at a slower rate than we saw over the summer. Economists continue to be cautiously optimistic and expect improvement and growth in all sectors. The good news of highly effective vaccines drove Wall Street confidence up. The FED is carefully watching and will adjust its treasury holdings and mortgage backed security purchases to keep things as stable as possible. A busy winter season will likely lead into even busier spring and summer seasons. There is a light at the end of this tunnel and it is getting closer.
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.
In this 8 minute video, Amber Kovarik and I discuss the 5 things you need to know about that happened this week in real estate.
One.
Last week NAR’s board of directors approved changes to its Code of Ethics and Standards of Practice. According to Andrea Brambila of Iman, the changes apply “to all of a Realtor’s activities, not just those related to real estate; prohibit hate and harassing speech against protected classes; prohibit all discrimination, not just willful discrimination, against protected classes; and recommend that ethics violations be considered under membership qualification criteria.”
Two.
Supply & Demand. Single family rentals are appreciating faster than single family sales. Today a renter will pay more for the median single family home than would a buyer for the same property. Rents have increased 12% since May. Listings have increased but have been absorbed almost immediately so the inventory increase is not apparent. New listings increased 13% in Q3 2020. New listings in October increased by 5%. For the last month or so we have been hanging out at roughly 8400 active listings excluding UCB. We would like to see that number closer to 25,000.
Three.
A $15,000 first time homebuyer credit is part of the housing proposal created by President-elect Joe Biden. Dr. Lawrence Yun, Chief Economist for NAR stated that it is helpful for first time buyers entering the market but it is only a part of the solution. He went on to say, “But that’s not the full story, the full story is that stimulating the demand just by itself I think is insufficient. Right now the housing market is facing a significant housing shortage. So if we add further stimulus to the demand without addressing the supply… it will simply bump up the prices even higher.”
Four.
Fannie Mae and Freddie Mac have changed their guidance and will now categorize a sale as being caught up on a mortgage that had been in forbearance. There are two ways to be eligible for a new loan after being in forbearance. The borrower can get caught up, either through a sale or the forborne amount was paid in pull or 3 months of consecutive payments through the forbearance plan/loan modification.
Five.
Rate Update. Expecting low rates for the foreseeable future. Stocks are doing well due to the vaccine announcements. FED stated it will continue buying mortgage backed securities to maintain stability and will even increase purchasing if need be.
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.
Disclaimer: This update discusses the history of politics and housing based entirely on data and facts. At no point are personal political opinions inserted.
Over 68 million Americans have already voted and we will see that number significantly increase in the next few days as we approach what seems to be the most contentious election yet. I researched how Republican and Democratic administrations impact housing and the economy and was somewhat surprised by my findings; the president’s political party influences housing and the economy even less than I initially thought. And real estate’s relationship with the president and Congress is based almost entirely on policy created by both sides of the aisle.
Housing, the economy, and political leanings.
Wall Street:
Both housing and the stock market are influenced, not exclusively by the president but mostly by policy. The stock market does not like uncertainty. On average, it performs better in election years when the incumbent party wins, regardless of party. Since 1950, Wall Street investors have benefitted the most from a split Congress. This is because a split means less major policy change and Wall Street responds negatively to change.
On average, since 1950 Wall Street has had the greatest returns with a Democratic president and a Republican Congress at 18.3% per year, while a Republican president and Democratic Congress has been the weakest at 8.7% per year. (LPL Research, Bloomberg)
Ten of the past 11 recessions began with a Republican president, the one exception being President Carter in 1980.
In 20 of the last 23 elections, the incumbent party has been re-elected when the S&P 500 was positive in the three months before the election. On August 3, the S&P 500 closed at 3,295. Yesterday, it closed at 3,310. An almost unnoticeable 15 point difference.
The luxury and second home markets are impacted by the stock market more so than lower priced, occupied properties.
Example of Policy Impact on Wall Street – Maximum Corporate Tax Rates:
In 1986 Republican President Reagan dropped corporate tax rates from 46% to 28%.
In 1993 Democratic President Clinton increased corporate tax rates from 28% to 35%.
In 2018 Republican President Trump decreased corporate tax rates from 35% to 21%.
In 2020 Democratic Vice President Biden proposed a corporate tax rate increase to 28%.
US Corporate Tax Rates 1970-2020
US Corporate Tax Rates 1970-2020
Housing Policy:
In the 1990’s Democratic President Clinton started a big push to increase homeownership rates by instituting looser lending guidelines. Republican President Bush continued President Clinton’s strategy and homeownership rates peaked in 2005 at 69.1%. Homeownership rates then dropped to a bottom of 63% in 2016, the lowest rate since 1965; erasing all progress made by Presidents Clinton and Bush.
In 2009 the government sponsored a first-time home buyer’s credit which, briefly, pushed the market back into a seller’s market before dropping back down into an epic decline and buyer’s market.
In 2010 the Dodd Frank Act passed, despite being created for consumer spending protection this act has impacted how we close transactions.
Vice President Biden has proposed a new first time home buyer’s credit. This would increase buyer demand across the country like it did in 2009. Based on our current inventory levels this would push prices even higher and faster; increased demand on already low inventory drives prices up.
NAR’s Pending Home Sales Index:
Since 2001 the pending home sales index has followed along with the overall economy, regardless of who is in the White House. Not only that, in September, pending sales were up 20.5% year over year. (NAR)
“The demand for home buying remains super strong, even with a slight monthly pullback in September, and we’re still likely to end the year with more homes sold overall in 2020 than in 2019. With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future.”
Dr. Lawrence Yun, Chief Economist for NAR
According to a recent Redfin study, 16% of Americans said they would consider moving out of the country if their presidential candidate of choice is not elected, up from 9% during the 2016 election. That would help with our inventory struggles!
Mortgage Interest Rates:
Interest rates have been dropping consistently since the peak of 19% in 1981. Throughout the years there hasn’t been much more than a 2% increase before leveling out.
The Federal Reserve is the largest purchaser of mortgage-backed securities (MBS) in the world. The current rate at which the FED is buying the MBS is keeping rates at these historic lows. At some point, the FED will slow its purchases of MBS which will drive rates up. (MBA, Urban Institute)
Real Estate Campaign Donations:
Presidential campaign donations from the real estate industry favored Republican candidates in the 2004, 2008, and 2012 elections and favored Democratic candidates in the 2016 and 2020 elections. (Center for Responsive Politics):
2020 Election (through 10/23)
Biden Campaign (D) $34,059,973
Trump Campaign (R) $22,710,600
2016 Election:
Clinton Campaign (D) $15,552,405
Trump Campaign (R) $11,162,279
2012 Election:
Obama Campaign (D) $5,781,496
Romney Campaign (R) $15,470,102
2008 Election:
Obama Campaign (D) $11,571,746
McCain Campaign (R) $9,570,576
2004 Election:
Kerry Campaign (D) Did not make the top 5 and was less than $5.1M
Bush Campaign (R) $11,329,316
Rentals:
According to the Mortgage Bankers Association in September 8.5% or 2.82 million renters missed their payment. Many landlords that own single-family houses, duplexes, and/or triplexes will have equity and will be able to sell and make money on their investment, keeping them from defaulting on their commitments.
In Greater Phoenix, single-family rentals are now renting at higher rates than a mortgage payment for the same house, including taxes and insurance. (Tina Tamboer)
The apartment complexes will have more trouble. If there is a CARES Act 2 that provides assistance for landlords we may be ok but if not, there will be some fallout. The distress levels really depend on location, this will be a regional problem more than a national problem. San Francisco and New York City are already struggling with vacancies. Here in Greater Phoenix, places are full and a high percentage of renters are paying rent. My crystal ball is still blurry on what will happen next. Provided we do not shut down again or have mass hospitalizations everywhere in the country I would expect more of the same. If we have more of the same, delinquencies will continue to decrease and our economy will continue to recover.
Final Thoughts:
Regardless of who is sitting in the White House in January, residential real estate will, likely, continue to thrive and grow. Experts forecast 2021 to be another solid year with high demand. Real estate professionals should not be distracted by headlines or sensationalized news. Be part of the solution. If you haven’t already voted, VOTE! Early voting is still available, for more information and locations visit https://recorder.maricopa.gov/pollingplace/
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.
In this 12 minute video, Lydia Wietsma and I discuss the latest news in forbearance and emerging trends and improvements in the situation and options. The bottom line is that people have options but they have to take action, watch the full video for details.
Today’s Takeaways:
Forbearance:
Straight from MBA, “WASHINGTON, D.C. (October 26, 2020) – The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 2 basis points from 5.92% of servicers’ portfolio volume in the prior week to 5.90% as of October 18, 2020. According to MBA’s estimate, 3.0 million homeowners are in forbearance plans.
By stage, 25.02% of total loans in forbearance are in the initial forbearance plan stage, while 73.14% are in a forbearance extension. The remaining 1.84% are forbearance re-entries.”
This decrease is much smaller than the previous two weeks decreases when roughly 400,000 loans came out of forbearance.
One reason given for the 400,000 borrowers exiting forbearance plans over the past three weeks is because borrowers do not know they can stay on or further negotiate their plans. If borrowers do not contact their lenders or servicers they are automatically removed from their forbearance plan. This is a big deal.
News:
FHFA and FHA extended pandemic forbearance plan options to single-family owners with FHA loans through 12/31/2020. It was initially set to expire 10/30/2020. FHA forbearance plans are 6 months with an option to extend for an additional 6 months.
Delinquencies:
From the September Black Knight First Look Report all about delinquencies:
“The number of seriously delinquent mortgages (90+ days) fell by 43,000 in September, marking the first such improvement in serious delinquencies since the start of the pandemic
More than 2.3 million homeowners – five times the number entering 2020 – remain 90 or more days past due, but not in foreclosure
The national delinquency rate fell in September to 6.66%, down from 6.88% the month prior
Early-stage delinquencies continue to show strong improvement, with rolls from current to 30-days delinquent, as well as the number of borrowers less than 90 days delinquent, having returned to pre-pandemic levels”
Lending:
According to the MBA, purchase mortgage originations for 2021 are expected to increase by 8.5% from 2020. They expect 2021 will hit an all-time record of $1.54 trillion for purchase originations!
Rates are also expected to rise in 2021 likely to reach 3.3-3.5%
Real Estate:
Existing home sales surged 21% in September year over year, pushing us to a seasonally adjusted annual rate of 6.5 million sales, all while inventory is at record lows. (NAR)
Pre-pandemic 2020 projections were for about 5.8 million sales.
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.
In this 14 minute video, Amber Kovarik and I discuss the latest on housing, lending, and the economy. We go into detail on 2020 numbers, supply & demand, future projections in lending, forbearance, delinquencies, and some cool Arizona news!
Today’s Takeaways:
The AZ Market:
Supply: Inventory is 63% below normal. Active listings excluding UCB crept up slightly to about 8,400 but is still down 43% year over year.
Demand: Pending sales are up 24% year over year, incredible considering the low inventory. Our demand continues to rise quickly and is 31% above normal.
Sales & Prices: The median sales price is $330,000, up 18% year over year. The median sales price has increased by 12% since June.
Rentals: At 5.8%, Phoenix had the largest single family, rental appreciation in the country in August, year over year. Nationwide the increase was 2.1%. (Corelogic)
National Real Estate:
Existing home sales surged 21% in September year over year, pushing us to a seasonally adjusted annual rate of 6.5 million sales, all while inventory is at record lows. (NAR)
Pre-pandemic 2020 projections were for about 5.8 million sales.
In 2019 there were 5.35 million sales.
Rental growth is outpacing homeownership growth. Roughly 2/3 of households are owner-occupied while 1/3 are rentals. Lately, especially in the more expensive urban areas, rentals make up 50% of households. (Inman)
Through the first 9 months of 2020 there were 400,000 fewer listings on the market than there were through the first 9 months of 2019. (KCM)
Phoenix is the #2 metro area for in-migration from March through September. (Orbital Insight)
Nationwide people are moving to more favorable climates, with more favorable taxes, lower cost of living, and less social unrest. (Ivy Zelman)
Population growth in Arizona, Utah, Idaho, Texas, and Nevada was 20% from 2010-2020.
Population growth in Connecticut, Pennsylvania, New York, Illinois, and California was 3% from 2010-2020.
Wall Street:
More and more real estate companies are going public via IPO or SPAC.
On August 18 the S&P 500 closed higher than the previous all-time high on February 19, thus ending the shortest bear market in history. (Jeremy Kisner, Surevest)
Arizona Facts:
Arizona has the 3rd lowest percentage of persons born in state at 39.9%. We are behind Nevada at 27.2% and Florida at 35.8%. Louisiana has the highest at 77.6%. (Elliot Eisenberg)
The Greater Phoenix Economic Council (GPEC) was named top economic development organization in the country for cities with populations of 500,000 or more. (Rose Law)
Delinquencies:
Over 6 million households (renters and owners) were either late or missed their full or partial payment in September. (MBA, RIHA)
8.5% or 2.82 million renters missed their payment.
7.1% or 3.37 million owners missed their payment.
Early-stage delinquencies, less than 90 days, have dropped down to pre-pandemic levels. (Black Knight)
Seriously delinquent, 90+ days, mortgages dropped by 43,000 in September. The first sizeable drop since the onset of COVID 19. (Black Knight)
Forbearance:
FHFA and FHA extended pandemic forbearance plan options to single family owners with FHA loans through 12/31/2020. It was initially set to expire 10/30/2020. FHA forbearance plans are 6 months with an option to extend for an additional 6 months.
Mortgages in forbearance dropped from 6.32% to 5.92% to roughly 3 million loans, down from the previous week’s 3.2 million loans. (MBA)
This removes another 200,000 from forbearance programs. One reason given for the 400,000 over the past two weeks coming off is that borrowers do not know they can stay on or further negotiate their plans. If borrowers do not make any phone calls or connect with their lenders or servicers they are automatically being removed from their forbearance plan. This is a big deal.
Lending:
According to the Mortgage Bankers Association (MBA), purchase mortgage originations for 2021 are expected to increase by 8.5% from 2020. They expect 2021 will hit an all-time record of $1.54 trillion, just for purchase!
Once we are at 5% unemployment interest rates will be on the rise again. At the end of 2021 rates are expected to be around 3.5%.
With the slow rate increases refinances are expected to decrease from $1.8 trillion in total volume in 2020 to $950 billion in 2021 and $500 billion in 2022.
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.
