the AZ market

Category: National Real Estate

  • Greater Phoenix Real Estate Update 9/17/2021

    Looking at housing, things look good and the market is attempting to normalize, but we do not see the whole picture. Wall Street, federal policy, a worldwide pandemic, labor and supply chain shortages also impact housing. But there is still more to consider: the intense and seemingly ever-increasing battle between the Department of Justice (DOJ) and the National Association of Realtors (NAR).

    NAR & DOJ:

    On Monday, NAR submitted a petition to prevent the DOJ from pulling out of their agreed upon settlement. Despite the lack of precedence and ongoing efforts, on July 1 the DOJ announced that it was pulling out of the November 2020 settlement. The DOJ stated that the settlement was not sufficient and that the DOJ wanted the freedom to investigate and pursue NAR further than the five items covered in the settlement, which include publicly sharing buyer agent commission, no longer calling a buyer agent’s services free, and lockbox access. Five days after pulling out the DOJ requested more data from NAR specifically regarding pocket listings and buyer agent commissions.

    The Clear Cooperation Policy, also known as the pocket listing ban, requires all listings to be entered into the MLS within one business day of public listing marketing. And is one of the items that the DOJ plans to further research. A number of opinion pieces promote the removal of the “Coming Soon” status as it is inconsistent and unfair to smaller companies. Real estate analysts are not able to use Coming Soon status data which ultimately skews the numbers as listings often go from Coming Soon to Pending, skipping Active status completely, thus confusing true inventory counts. The DOJ is researching the size and scope of the policy as it is very far reaching with few exceptions. TAN and PLS sued NAR for implementing this policy. Both cases are ongoing.

    The DOJ is also researching NAR’s rule that requires MLS and non-MLS listings to be displayed separately, steering based on commission offered, buyer/seller rebates, and the several class action, antitrust commission lawsuits. Given the size and scope of the requests, experts wonder if the DOJ has a game plan for execution.

    Andrea Brambila of Inman News wrote an extensive article outlining the four years of on-going strife between NAR and the DOJ which can be found here.

    National Real Estate:

    Last week single family inventory declined by 1.4% to 431,000 from the previous week’s 437,000. Declines are typical over holiday weekends. With nearly 400,000 forbearance exits expected this month, inventory is expected to increase slightly, not decrease. The majority of forbearance exits either restructured their loan or continued paying throughout the forbearance period.

    Home sales dropped by 1.4% from July to August and are down 6% year over year. Year over year comparisons are not useful because the pent up demand drove an end of the year purchasing frenzy that is unlike anything real estate has ever seen before.

    Builder costs declined by 1% in August. Lumber and other costs have been slowly declining in recent months and last month was the first time that builders saw any benefit to the declines in prices. It is unlikely that consumers will feel any savings for some time.

    The AZ Market:

    As previously mentioned, we do everything faster and bigger here, at least in regards to real estate. The shifts hit us first and usually with a greater magnitude. From 2008-2011 homes lost roughly 45% of their value while the country as a whole lost about 25%. While the rest of the country started seeing inventory levels flattening and even declining by 0.2% from July to August, our inventory has started to grow again after a few weeks or staying flat.

    July and August had a median sales price of $405,000. Since demand has increased, unseasonably, lately, September’s projected median sales price is $410,000.

    Absorption rate is a great way to monitor supply and demand. It is very seasonal and from the chart below you can see the four-year trend and see that August 2021 is an outlier. Absorption rate actually increased from July to August versus decrease.

    Tom Ruff of the Information Market wrote, “In August of 2020 nearly 91% of all homes purchased were by traditional buyers, for this analysis, we define a traditional buyer as individuals or married couples. In 2021 this number fell to 75%. We saw a significant increase in the number of properties purchased by iBuyers, large institutional investors as well as small investors.”

    Despite our recent affordability decline, for details see my update from 8/20 here, Greater Phoenix remains among the most affordable big cities in the country. According to a recent report by Roofstock, the cost of living in Greater Phoenix is 1.3% below the national average. About 56% of households can afford the median priced home which is lower than the ideal 60-75% range but is significantly better than California, Washington state, and New York who range from 13% to 41%.

    Nearly 300 companies are considering expanding or relocating to Greater Phoenix which means a potential of 16,000 new jobs and over $50 billion in capital investments.

    “On the business-attraction front, there really never has been more interest than greater Phoenix is seeing right now from firms across the globe looking to make investments and expanding and relocating to the region.” – Josh Reed with the Greater Phoenix Economic Council

    According to Realtor.com’s Best Time to Buy Report, nationally the best time to buy is from September 12 to October 17. In Greater Phoenix it is from January 10 to January 16. Buyers have, on average 31% more listings to choose from and sales prices are about $10,000 below seasonal highs.

    These are the first 10 markets in chronological order of the Best Time to Buy weeks.

    Lending:

    The Treasury and FHFA announced on Tuesday that they are suspending the 7% rule which limited Fannie Mae and Freddie Mac’s loan portfolio to allowing only 7% of their total loans to be secured by investment properties and second homes. This is good news!

    Next week the FOMC meets and many expect Fed Chairman Powell to announce bond and MBS tapering starting in Q4 2021. The tapering will increase mortgage interest rates anywhere from a quarter of a percent to a full percentage point. 54% of mortgage holders have an interest rate of 3.75% or less. If rates go above this amount, affordability will be pushed further. Remember in Q2 2021 housing affordability decreased below the healthy affordability range. Further pressure on affordability will push more buyers out of the purchase market. And this is challenging given that rents are up over 20% year over year. The pressure is not only on perspective buyers, but higher interest rates also prevent potential sellers from selling.

    Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting said, “Purchase applications – after adjusting for the impact of Labor Day – increased over 7 percent last week to their highest level since April 2021. Compared to the same week last September, which was right in the middle of a significant upswing in home purchases, applications were down 11 percent – the smallest year-over-year decline in 14 weeks.” The long term growth is consistent and doesn’t look like the bubble of 2005.

    Real Estate News:

    • High profile sellers are being exposed by high resolution images, tours, and video used to market listings. Identifying home décor, awards, plaques, etc. are readable. Several celebrities with listed homes have been identified through marketing.
    • HUD does not have to disclose flood risk on properties. HUD REO homes that sold from 2017-2020 were 75 times more likely to be in a flood zone than other homes sold during the same timeframe.

    Final Thoughts:

    This business is anything but boring (no matter what my brother says)!

    Copyright 2021 Sarah Perkins

  • Greater Phoenix Real Estate Update 9/10/2021

    A rising tide lifts all boats.

    Real estate creates wealth. It has created long-lasting, multi-generational wealth, and it has done the opposite. Why? Appreciation. Home price appreciation, overtime, benefits everyone.

    There is a lot of talk about softening, normalization, moderating, weakening, etc. They all mean the same thing; the real estate market is calming down. But before you exhale a sigh of relief, the market remains very, very hot.

    “We are seeing some signs of softening in the housing market, but context is important here… We’re still very much in a sellers’ market, but we are seeing some early signs of softening.”

    -ODETA KUSHI, DEPUTY CHIEF ECONOMIST, FIRST AMERICAN

    National Real Estate:

    The average American tenure in a home has increased substantially over the past 30 years and is now up to 10 years. A recent report stated that by 2037 we will be up to 15 years. At the rate we are going, we will reach that long before 2037. Less turn over = less available inventory = greater rate of appreciation (provided demand remains consistent).

    According to Fannie Mae’s August survey of homebuyer sentiment, consumers think it is a good time to sell a home but a bad time to buy a home due to high prices and low supply. Without the buyers, who do the sellers sell to?

    “The housing market has clearly become slightly more favorable to buyers. Homes are taking longer to sell, which gives buyers more time to make thoughtful decisions about whether to make offers. Home prices have plateaued, so buyers shouldn’t feel rushed to buy before prices rise further. And the fact that more sellers are dropping their list price is a sign that sellers have to be realistic about their price expectations.”

    -DARYL FAIRWEATHER, REDFIN’S CHIEF ECONOMIST

    While the market is normalizing, it is doing so from a very high level, so despite the recent declines in pending listings, we are still significantly above historic norms.

    Commercial real estate is also benefitting from the demand for real estate. In July, commercial property sales prices were up 1.2% month over month and 11.8% year over year. Unsurprisingly, multifamily has seen the highest rate of appreciation at 1.6% month over month and 13.5% year over year, the highest annual appreciation rate in 15 years.

    Prior to the pandemic, 60-75% of Zillow searches were for suburban homes, today it is 90%. At the same time, the number of suburban listings has declined 72% more than the urban listings.

    The AZ Market:

    Context truly is key. When the temperature cools from 514 degrees in March to yesterday’s 347, it is still super-duper hot (Cromford Market Index reference). The CMI measures the relationship between supply and demand and is the best leading indicator available. Anything over 100 is a seller’s market and prices rise at 110. Prices drop at 90. In order for prices to drop demand needs to be below supply. Demand is nearly 13% above balance while supply is 67% below balance.

    Despite the normalizing of the market, it is not normal. Demand has actually increased recently which is unusual because this is the time of year demand typically declines. After a 44% inventory increase over the past three months, inventory seems to be leveling out again and the increases have flattened. Leveling out at 7,400 listings is less than ideal. The size of the Greater Phoenix market calls for 25,000 listings and we haven’t seen 20,000 active listings since 2016.

    Jim Belfiore of Zonda is predicting that 35,000 new houses will be built in 2021, the most since 2007. There are 32,700 apartments in process but only 11,000 are expected to be completed this year. Apartment vacancy rates are close to 3% which is the lowest rate since the 1970s.

    iBuyers & Appreciation:

    In Q2 2021 iBuyers had a premium of 9.6% on their sales. Much of that gain was due to home price appreciation. This appreciation rate gave Opendoor and Zillow the confidence to move forward with extremely high offers, often significantly above market value. Acquisitions boomed and in July, iBuyers accounted for 8.1% of all home purchases in Maricopa County. This led to many flashy headlines about an upcoming giant Q3.

    The iBuyers must have missed my market update a couple of weeks ago when I wrote about the declining rate of appreciation. I wrote, “In January the Greater Phoenix median sales price was $340,000; now it is $405,000. That is over a 19% appreciation rate in this year alone. Most of those gains took place at the beginning of the year with 15.5% of the gain occurring from January to May. The median sales prices from May to August increased by 3.15% and from June to August the increase was 1.25%. The appreciation rate is slowing, and this is good for the overall health of the market.” You can find the full update here.

    On Wednesday, Mike DelPrete (with a little help from me) detailed how the changing home price appreciation rates are impacting iBuyer premiums in a big way. He wrote, “Home price appreciation rates are beginning to cool in major markets across the U.S., including Phoenix, where the median iBuyer home price appreciation has fallen 50 percent since May. Opendoor’s median home price appreciation for homes sold in August is just 2.7 percent, down a massive 75 percent from 10.7 percent in May.” Click here for his article and supporting graphs.

    Lending:

    The average mortgage borrower has $173,000 in equity which means that Americans as a whole have $9.1 TRILLION in equity, a record high. Cash-out refinances are increasing, interest rates are low and it makes a great headline. Keep in mind, while the refis are up, they are not near record highs and borrowers today have nearly double the amount of equity they had in 2005.

    Real Estate News:

    • Offerpad went public last week via merger with former Zillow CEO Spencer Rascoff’s SPAC. It launched with a $2.7 billion valuation and in recent days increased by 27% to its goal of $10 per share.
    • A Federal Judge denied NAR and Zillow’s motion to dismiss discount brokerage REX’s lawsuit stating that NAR’s “no-commingling rule” violates antitrust laws. NAR’s current rule states that MLS listed properties and non-MLS listed properties may not be “co-mingled” in the same section on a listing platform, like Zillow.
    • Opendoor recently acquired two home renovation companies, Skylight and Pro.com.
    • California Regional MLS, the nation’s largest MLS, is updating its requirements for the listing agent disclosure on online listing pages. Now, on all online CMLS listings the listing agent, contact info, and brokerage are required. Will this spread across the country?

    Final Thoughts:

    Today’s low levels of inventory created huge leaps in appreciation. As that calms, skittish buyers will return to the market and more sellers will list their homes. It will be a long time before we see 25,000 listings, but maybe we could get up to 10,000 in Q1 2022, and what a market that will be!

    Copyright 2021 Sarah Perkins

  • Greater Phoenix Real Estate Update 9/3/2021

    Inventory levels are up but not enough. Home price appreciation is starting to slow but not by very much. Mortgage rates remain low, but did everyone refinance last year? Conditions are improving but the market isn’t healthy, yet, but it is on its way. Remember when 8% appreciation was a lot? 2018 and 2019 each had 8% appreciation. That feels like a lifetime ago.

    Slow and steady wins the race. Gradual shifts are manageable, they sometimes even go unnoticed. Slow and steady does not create a bubble. Slow and steady does not lead to a crash. Slow and steady is boring and sometimes boring is good.

    National Real Estate:

    For the second month in a row, NAR’s Pending Home Sales Report declined. In July it dropped 1.8% from June and is down 8.5% year over year. The west was the only region to see a month over month increase but remained 5.7% below July 2020. Expect all year over year data to be negative through the end of the year as our market normalizes, 2020 was an anomaly.

    The median single family home sales price declined slightly since July when it reached $399,900, the year over year appreciation rate is declining. At $389,000; single family homes are up 10% year over year.

    The Case-Shiller National Home Price Index was released this week stating that home prices are up 18.6% year over year; that is true but the report is looking at June’s sales, not last week’s. Case-Shiller is used by Wall Street analysts and the federal government. It is very accurate and useful for industries and businesses that do not need to focus on the most timely data. For the 25th month in a row, Phoenix took the top spot for year over year appreciation at 29.3%. I expect that in the coming months this figure will decline some but will remain ahead of the rest of the country.

    “While the housing market feels like it has legs that never get tired, inventory and affordability constraints are still expected to put a damper on price growth. Some early data suggests that the buyer frenzy experienced this spring is tapering, though many buyers still remain in the market. Nevertheless, less competition and more for-sale homes suggest we may be seeing the peak of home price acceleration. Going forward, home price growth may ease off but stay in the double digits through year-end.”

    -Selma Hepp, CoreLogic Deputy Chief Economist.

    The FHFA also released its report showing that in Q2 2021 home sales prices increased 17.4% year over year. Q2 ended in June and today’s market is healthier than the June market.

    The top 10 markets for investors in 2020 (not in order) were Corpus Christi TX, Boise ID, Kansas City MO, Atlanta GA, Memphis TN, Salt Lake City UT, Wichita KS, Provo UT, Phoenix AZ, Springfield MO.

    For every accepted offer in July, there were 3.5 more offers written. In March it was not usual for sellers to receive 40, 50, 60+ offers on one listing.

    29% of new home inventory has yet to break ground.

    Last week was the first week in 16 weeks that single family inventory did not increase. It remained flat week over week at about 431,000 which is a 40% increase from the bottom we hit on April 30 at 307,000. Despite the significant increase, inventory remains tight. Experts are not sure if this is a blip or if inventory is leveling out far lower than expected. This is also the case for Greater Phoenix, since April 30 our inventory is up 52%, and in the past three weeks our inventory if up by just over 2%.

    The AZ Market:

    Despite all of the new apartment buildings coming, experts say that we are not at risk of overbuilding. Vacancy rates are down to 4.1%, a year ago they were at 5.7%. Lack of supply has driven apartment prices up 18% year over year. Between the completed projects and forecasted ones, it is expected that Greater Phoenix will have an apartment increase of 17,563 units in 2021. That is more than the annual amount each of the past three years.

    New home sales are down 31% from May and 37% year over year. They are also down 15% from August 2019 to August 2021. Low inventory, high prices due to labor and material shortages are to blame. The median new home sales price is up 29% year over year in August to $440,000.

    The Federal Reserve:

    While the Fed has stated that it will likely begin tapering its bond and mortgage backed security purchases as early as this year, a few things have to happen first. 1.) inflation stabilization and decline 2.) low unemployment 3.) declining COVID rates. Once those happen and the Fed will announce the start of the tapering, expect rates to jump as much as half to one percent. Rates are being artificially held down by the MBS purchases.

    Prior to 2008, the Fed’s balance sheet was less than $1 trillion. With the quantitative easing during the Great Recession, the balance sheet jumped to $4.5 trillion. Now, after 18 months of bond and MBS purchasing the balance sheet is around $8.3 trillion.

    Real Estate News:

    • The Biden Administration plans to help non-profits and owner-occupied buyers purchase GSE backed foreclosures before corporate investors have the opportunity to come in and purchase the properties.
    • Opendoor is now offering a self-guided, virtual home inspection for sellers. Owners who sell to Opendoor will have the option to do a 30 minute virtual walk through with an Opendoor representative or have the more formal two to four hour home inspection. Opendoor will still do an in-person exterior inspection.
    • In 2019, 53% of Americans wanted a bigger home, today that number has risen to 60%. This is true regardless of age, race, and education.
    • According to a report Zillow released on Wednesday, the average 2021 homebuyer is 45 years old, has a significant other, graduated from college, and will likely purchase a home in the south. Some other fun facts from the report:
      • The biggest group of buyers at 26% are aged 30-39.
      • 40% of buyers have kids under 18 living with them.
      • 44% bought in the suburbs, 38% in cities, and 19% in rural areas.
      • 50% have at least one dog and 39% have at least one cat.
      • 37% were first time home buyers, down from 43% in 2020.

    Final Thoughts:

    There was not a lot of exciting news this week and that is ok. Slow and steady wins the race.

    Copyright 2021 Sarah Perkins

  • Greater Phoenix Real Estate Update 8/27/2021

    Residential real estate pulled our economy out of the shortest recession in history. As last year’s market frenzy cools, the severe imbalance of supply and demand lessens and prices continue to increase, just at a slower rate. According to the 2020 US Census, housing units increased by 6.7% while population grew by 7.4%; both were declines from previous decades, but it doesn’t change the fact that demand (population) outpaced supply (housing units). Over the past 10 years, Maricopa County’s population increased by 15.8% and housing units increased by 8.3%.

    Demand outpacing supply combined with 10 million job openings and only 5.7 million jobs left to recover; residential real estate has garnered significant attention from investors. When an asset class or sector underperforms, investments are redirected into performing asset classes/sectors. Investors do their homework and invest where money will likely grow the most. Year over year rental rates are up along with property appreciation. John Burns of John Burns Real Estate Consulting said, “Investors won’t be slowing down at all. They’re only accelerating.”

    And don’t worry about the coming year over year negative reports. 2020 was an anomaly and is not a good comparison for a normalizing market.

    Rentals & the Eviction Ban:

    Yesterday the Supreme Court lifted the CDC’s eviction ban, stating that the CDC did not have the authority to create the ban in the first place, ending it six weeks earlier than the planned October 3 end date. In June, the Supreme Court ruled that the only way to further extend the eviction ban was through an act of Congress, which did not happen. Through the end of July, only $5.1 billion of the $46.5 billion in rental relief funds had been distributed.

    According to a new report from Zillow, nationwide rent prices were up 9% in July, year over year. Greater Phoenix saw the largest year over year rent increase, at 23%.

    In 33 of the 50 largest American cities, the typical rent is higher than the typical monthly mortgage payment. This is true in Greater Phoenix.

    National Real Estate:

    On Monday, NAR released its existing home sales report for July. Some interesting data points:

    • Total inventory is up 7.3% from June to 2.6 months of supply but down 12% from July 2020 when it was 3.1 months.
    • Nearly 90% of total sales in July were listed for less than a month.
    • 23% of sales were all cash, up from 16% in July 2020.
    • 30% of July sales went to first time homebuyers, down from 31% in June and from 34% in July 2020.

    “We see inventory beginning to tick up, which will lessen the intensity of multiple offers. Much of the home sales growth is still occurring in the upper-end markets, while the mid- to lower-tier areas aren’t seeing as much growth because there are still too few starter homes available.”

    – Dr. Lawrence Yun, NAR’s chief economist

    Total inventory (including both new and existing) peaked in 2008 then started declining. The declines have been consistent since 2014. While inventory has been rising since February and the market started showing signs of seasonality, which is good, we do not want to see inventory drop again, as it usually does in the fourth quarter. If demand remains the same and inventory declines then we see a faster rate of appreciation, which at its current levels, is unsustainable and has only just started to slow.

    Available Inventory

    The AZ Market:

    In January the Greater Phoenix median sales price was $340,000; now it is $405,000. That is over a 19% appreciation rate in this year alone. Most of those gains took place at the beginning of the year with 15.5% of the gain occurring from January to May. The median sales prices from May to August increased by 3.15% and from June to August the increase was 1.25%. The appreciation rate is slowing, and this is good for the overall health of the market.

    There are 62% more active listings with an asking price over $400,000 than under.

    In July, iBuyers accounted for 8.1% of all home sales in Maricopa County.

    In Q2 2021, 17 houses sold for at least $1,000,000 over the initial list price, up from 8 in Q1 2021. Fifty houses sold for at least $500,000 over the initial list price in Q2 2021, up from 15 in Q1 2021.

    85224 in Chandler is the only Arizona zip code to make it in the top 50 in Realtor.com’s 2021 Hottest Zip Codes in America list.

    Greater Phoenix, through July, has recovered 99% of jobs lost due to the pandemic and only needs 2,500 more jobs to match February 2020’s employment rate. Arizona has recovered 93.7% of jobs lost.

    According to the 2020 Census, at an 11.2% increase, Phoenix grew faster than any other major city over the past 10 years and passed Philadelphia as the nation’s fifth largest city. Buckeye took the top spot for fastest growing city in the country, among cities with at least 50,000. It grew by 80%!

    For more on the Greater Phoenix market, click here for my update from last week which is exclusively about our local market.

    New Construction:

    Lumber prices are down from the peak in May at $1,515 per 1,000 board feet to $472 per 1,000 board feet in early August. Due to the backlogs, it is unlikely that new home buyers will feel the pricing relief anytime soon.

    Month over month builder confidence declined by 5 points in August to 75, the lowest reading in 13 months. The decline is attributed to high material costs and labor shortages. Any reading over 50 is considered a good market. In April 2020 the index dropped to 30.

    “There are now almost 690,000 single-family homes under construction – the largest number since 2007. This is clearly a positive sign given the remarkably low levels of inventory on the market.”

    – Mike Fratantoni, the MBA’s chief economist

    After three months of declines, new home sales in July increased by 1% from June, beating expectations. June’s sales numbers were revised up. New home inventory is up 5.5% to a three-month average of 5.9 months. Builders tend to pull back once they hit 6.5 months.

    Commercial Real Estate:

    Much of commercial real estate has recovered from the pandemic and is now beating out February 2020 prices. The Green Street Commercial Property Price Index, which is based on REIT net asset values, beat February 2020’s ranking by 1.3%. In July, prices were up 14% year over year and up 2.4% from June.

    With prices growing over 20%; mobile home parks, self-storage, and industrial grew the fastest. In Greater Phoenix, the industrial vacancy rate is down to 4.7%. However, some asset classes are still down. The year over year prices for retail and lodging are down 7%, office is down 8%, and mall values are down by 18%. In Greater Phoenix, the office vacancy rate has increased for five consecutive months and the vacancy rate is up to 19.7%.

    Real Estate News:

    • Offerpad is the first iBuyer to turn a profit. In Q2 2021 they brought in $9.2M in profit. Based on the overly inflated offers from Opendoor and Zillow, it is likely the only iBuyer that will be profitable for some time.

    Final Thoughts:

    Danielle Hale the chief economist for Realtor.com summed it up well when she said, “Continued economic recovery is key to maintaining (real estate) sales momentum, and anything that disrupts progress, such as rising COVID cases, could knock home sales off course. We’ve already seen a pullback in builder confidence and mixed construction data as builders balance buyer interest with supply challenges, rising costs, and concerns about the future of the economy and housing affordability. Still, with listing price growth beginning to recalibrate in response to shifting supply and demand dynamics, we should see a steady pace of home sales over the next few months, especially if mortgage rates remain low.”

    Copyright 2021 Sarah Perkins

  • AZ Forbearance Update 8/25/2021

    In this 13 minute video, Lydia Wietsma and I discuss the latest in forbearance, delinquencies, jobs, BPOs, and inspections. We have had a lot of positive news lately which helps both homeowners and buyers.

    Employment:

    In Greater Phoenix, through July, has recovered 99% of jobs lost due to the pandemic and only needs 2,500 more jobs to match February 2020’s employment rate. Arizona has recovered 93.7% of the jobs lost.

    Housing:

    Housing inventory is slowly increasing, giving more options to our exhausted buyers. With the inventory gains, appreciation has started to slow which is also good for the overall health of the market.

    Delinquencies:

    Delinquency rates continue to decline as more and more renters and borrowers are getting caught back up on their payments. The 30-day delinquency rate and 60-day delinquency rates are at the lowest levels in the history of the Mortgage Bankers Survey. The 90+ day delinquency rate remains elevated above pre-pandemic levels.

    Deadlines:

    Forbearance: If your loan is backed by HUD/FHA, USDA, or VA, the deadline for requesting an initial forbearance is September 30th, 2021.

    If your loan is backed by Fannie Mae or Freddie Mac, there is not currently a deadline for requesting an initial forbearance.

    Click here to find your servicer or to see who backs your loan.

    Foreclosures: The foreclosure ban has been lifted. The CFPB has specific criteria that a lender or servicer must abide by when going through the foreclosure process. This will delay many, but not all foreclosure proceedings until the end of the year. For more information click here.

    Evictions: The CDC extended the eviction ban which covers about 90% of renters through October 3. This is hotly debated with strong opinions on both sides. Despite calls that the ban is unconstitutional experts recommend against moving forward with any evictions until the ban is lifted. The FHFA has banned evictions on all of its foreclosed properties with renters living in them.

    Click here and here for renter advocacy information.

    Forbearance Numbers:

    Since our last video, the number of borrowers in forbearance declined by 100,000. We are now down to 3.26% of borrowers or 1.6 million borrowers are in a forbearance plan. Despite the low number in a plan, this was the slowest decline in over a year.

    Forbearance by Stage:

    • 10% of total loans in forbearance are in the initial stage.
    • 82.3% are on extension.
    • 7.7% are re-entries.

    Forbearance Exits from June 1, 2020 through August 15, 2021:

    42.7% of borrowers continued making their payments (22.6%), got caught up upon exiting (13.1%), or paid off the loan with a refinance or sale (7.4%).

    The percentage of exits for the group to be most concerned about, borrowers who exited their forbearance plan still behind and without a loss mitigation plan in place increased to 16.1% from 15.7% two weeks ago.

    Inspections & BPOs:

    Requests have slowed down and scaled back to normal levels. The tax lien notices have declined significantly.

    Most of her BPOs lately have been for fourplexes. They seem to all be investors who are needing to sell. We are seeing elevated investor transactions both for corporate buy and hold or iBuyers.

    Copyright 2021 Sarah Perkins

  • Greater Phoenix Real Estate Update 8/20/2021

    Today is all about the AZ market. Yesterday, Lawyers Title hosted a presentation with Tina Tamboer with the Cromford Report. She always shares pertinent and timely information. Below I have combined a lot of her information from her presentation, along with additional information from my research.

    Supply & Demand:

    Supply is all of the properties; demand is all of the humans.

    The relationship between supply and demand dictates pricing in all sectors. There are influences that solely impact supply or demand, but those influences do not directly change sales prices. Mortgage interest rates influence demand and buyer behavior, but it does not impact supply.

    The wild card currently impacting pricing comes from the corporate investors and iBuyers who are paying well over market value for many properties.

    When affordability declines demand usually declines. Greater Phoenix’s affordability is down in Q2 2021, yet demand is increasing.

    Pricing:

    For nearly 2.5 months the median sales price has been right around $400,000. As you can see below, monthly payments did not increase much as prices increased because of the declining interest rates. It wasn’t until this spring that we saw a spike in monthly payments. The monthly mortgage payment for the median house is $1,859. Up nearly 23% from November 2020 when it was $1,518.

    There is even less relief for renters. To rent the same median property, renters are now spending $2,195 a month.

    Affordability:

    As many suspected, affordability declined in Q2 2021 and the US as a whole and Greater Phoenix fell below the ideal affordable range of 60-75 for the first time since late 2018. Through Q2 2021 in Greater Phoenix a household earning the median income ($79,000 annually), can afford 56.4% of what is for sale. A year ago, it was 70%.

    The low interest rates have worked in our favor for a long time. When rates increased up to 5% at the end of 2018, we dipped below the ideal affordability range and demand declined. When affordability drops below 60, we begin to see demand resistance.

    iBuyers:

    The affordability trends will impact corporate investors and iBuyers. Demand declines when things are not affordable, and it can shift quickly. In 2005 affordability went from 75 to 27. If not enough people can afford what is on the market, properties will sit for longer, and price reductions increase.

    iBuyer acquisitions are up 573%, their inventory is up 544%, and their sales are up 93% year over year. Both Opendoor and Zillow had their largest acquisition month ever in July. Offerpad is not as aggressive as the others (which could be why Offerpad was profitable for the first time ever in Q2 2021 and both Opendoor and Zillow Homes lost money).

    iBuyer offers are excessively high, sometimes bidding against their own offers. According to a recent report from Mike DelPrete, Opendoor paid 7.7% above market value on its acquisitions in Q2 2021 nationally. Tina mentioned instances of offers over $75,000 above market value. Other people’s money is very easy to spend.

    A year ago, owner-occupants drove the housing market. People were buying houses to live in. Today much of the demand is led by iBuyers and investors, both large and small. Since June 23% of Opendoor’s sales, 19% of Zillow’s sales, and 11% of Offerpad’s sales have gone to corporate investors.

    Overinflating values and creating false demand is extremely unhealthy for a market. This is not what the market is supposed to do. The iBuyers will either have to wait for the market to catch up or sell for a loss. The 3.1% monthly appreciation rate from the spring has slowed and is expected to slow further, likely down to 0.5% or 1% a month by the end of the year.

    Forbearance:

    Forbearance numbers are only available on a national level and continue to improve. As of Monday, there are about 1.6 million borrowers in a forbearance plan, a huge decline from the over 8 million in a plan last May.

    The majority of borrowers exiting forbearance are staying in their home, with no flood of foreclosures coming. Estimates could go as high as about 20% of borrowers will need to sell at the end of their forbearance plan. 20% of 1.6 million is 320,000. If we divide that by the 50 states, then each state (if divided evenly) would see about 6,400 foreclosures.

    For a deeper dive into forbearance, foreclosures, and delinquencies check out my latest Forbearance Update here.

    Supply: 

    Shelter is a basic human need. Over the past 10 years our population grew by 20% and total inventory grew by 11%. We have more demand than we have houses.

    Single family permits are up 39.7%. And builders are struggling to keep up with the demand due to supply chain shortages and labor shortages. It is now taking 10-14 months to build a house.

    Supply stopped dropping in February. It is up 61% since February and up 44.3% since May. There was an initial shift in February and then a bigger shift in May as prices continued rising.

    Supply Increases by Price:

    • $300K – $400K up 62.4% since February and up 47.6% since May
    • $400K – $500K up 187% since February and up 99.7% since May
    • $500K – $600K up 171% since March and up 76.9% since May
    • $600K – $800K up 149% since February and up 64.5% since May
    • $800K – $1M up 100% since February and up 38.5% since June
    • $1M – $1.5M up 50.9% since February
    • $2M – $3M down 5.3% since March
    • $3M+ is up 2.1% since March

    Price Reductions:

    With the increase in supply, we are seeing an increase in price reductions. We often hear about sellers upset that they had to drop their price when their friend received multiple offers over asking only a few months ago. It was a different market in March and today’s sellers cannot expect the same.

    May 9 was the turning point and appreciation began moderating. In a normal market, you can expect to see about 400-500 reductions per week. In 2018 we hit 600. Now we are hitting about 200, still low but increasing. Not unusual, just unusual for the past year. Sellers can no longer push the market.

    A price drop of $5,000 used to be the norm. Two weeks ago it was $15,000 per reduction, a week ago it was $14,000, and now it is down to $10,000.

    In April the median days on market was 6. We are now up to 8 days.

    Demand:

    We have been hanging around normal demand for the past few months. Then last week demand increased. Where did that come from? Investors? iBuyers? The increased demand will keep us in a seller’s market longer. Increased supply decreases the strength of the seller’s market and increased demand increases the strength of a seller’s market.

    ibuyers have no effect on supply since they buy and sell. They impact demand. Show an extra transaction that can inflate demand metrics because they never have an occupant in the property.

    2019 had slightly above normal demand. Today there are 6.2% more listings under contract than in 2019 but 12.9% lower than in at this time last year.

    Typically demand decreases in Q3 and Q4. We should see inventory gains and fewer buyers. Many listings will likely be over-priced, and buyers will not pay over asking when they have a lot of options.

    We are still having a record year for luxury, amazingly high demand remains, usually this late in the year, luxury slows down as owners pull their unsold properties off the market by about June.

    Cromford Market Index (CMI):

    The best tool for predicting future price appreciation trends and is available on the main page of the Cromford Report: https://cromfordreport.com/ (without a subscription)

    • 100 is balanced and prices rise at the rate of inflation (currently 5.4%), below 100 is a buyer’s market, above 100 is a seller’s market, prices drop below 90, prices rise at 110. 2014 was a balanced market.
    • On 3/20/2020 we were at 241
    • On 5/15/2020 we were at 145.2
    • Yesterday we were at 349.7
    • We peaked on 3/14/2021 at 514.9
    • Prior to this run, the previous peak was 312.9 in the spring of 2005.
    • CMI is the predictor, it moves first and then appreciation follows. Cannot predict the CMI. It tells us where we are.

    When the CMI weakens we see other weakening follow, like sales prices, appreciation, over asking, etc. We are now averaging a decline of 29.3 points over 30 days. Previously it was dropping 50 points over 30 days. It is slowing due to the increased demand.

    While the CMI will probably not move in a straight line, we are moving towards a weaker seller’s market. Tina expects we may level out around 200-240. It will feel like a buyer’s market but it won’t be. Likely will get to the 2019 numbers.

    As the seller’s market weakens, people will get very nervous about a market crash and declining property values. Remember demand needs to be lower than supply for prices to drop. With supply 69% below normal and demand nearly 9% above normal, it will take a long time for demand to be lower than supply. Before the 2008 crash there were 57,000 active listings. Today there are fewer than 7,100 active listings.

    Using 4 week averages and tons of past data, we can draw a trendline from the CMI, illustrating when we might reach a balanced market. No reason to believe that this will stay in a basic trendline. It will adjust and probably stay in the 200-240 range. It is only what we know today. Since each city is so different, it is best to check each one weekly. To show the variation between cities, these are the timelines in which they could reach balance:

    • Phoenix 7.3 months
    • Chandler 3.6 months
    • Glendale 3.8 months
    • Mesa 5.8 months
    • Gilbert 5.6 months

    Appreciation:

    CMI moves first and then appreciation follows, usually about 3-6 months later. In a seller’s market, the rate of appreciation is higher than the rate of inflation. The luxury market is pushing appreciation rates up even higher.

    Appreciation rates are slowing. It has gone from a year over year increase of 39.3% in May to 28.4% in August.

    For over a year we had a monthly appreciation rate of 3.1% but in the past few months, it has slowed considerably. Today it is at a 1.4% increase and will likely continue to slow throughout the rest of the year.

    Contract Ratio

    The contract ratio compares how many listings are on the market to how many are in escrow. Has it cooled off? Yes. Cold? No. In April it reached 332.5 and today it is 161.2. We are in a hot seller’s market but not an extreme seller’s market. In 2019 was 76. 75-80 is normal for August.

    Before the pandemic, the market was in a frenzy. We didn’t have enough supply and still don’t. In March we had 10 levels of insanity illustrating the seller’s market. Today we have 5. It is cooling but is not cold. We have been in a weakening seller’s market since March. It is only now getting noticed.

    54% of listings are selling for over asking. Two months ago the median amount over asking was $25,000 it has since dropped to $15,000. Now sales are averaging about 1% over asking versus the 1.8% it reached in the spring. Expect this to come down throughout the rest of the year.

    Final Thoughts:

    Overall, the market is still very busy. We are on the cusp of weaker seller’s market. We are seeing fewer purchases from regular owners and more from investors and ibuyers. It is still a good time to buy. BUT we need to watch the affordability levels. It is not about whether the buyer can afford it now but about how many future buyers can afford to buy it from today’s buyer?

  • Greater Phoenix Real Estate Update 8/13/2021

    It’s earnings season so the headlines are dominated by big business quarterly revenue numbers. Wall Street and residential real estate have a bumpy history.

    In late 2008 when the Greater Phoenix real estate market’s heart stopped beating and everything went eerily quiet, I didn’t understand what happened. Like many, I wondered, how could everything stop seemingly overnight? I asked, “where did all of the money go?” And I was told, “it never existed in the first place.” I learned that money did not just evaporate on Wall Street and that housing could take down Wall Street, or was it the other way around?

    In 2011 the market bottomed with a median sales price of $107,000 in greater Phoenix. Since 2014 we have been in a seller’s market and the recovery was slow. For a time, real estate felt local again. But was it?

    Venture Capital Funding:

    In 2015, young company, Opendoor, entered its first market, Phoenix. The company pioneered the iBuying concept and was backed by Softbank’s Vision Fund, one of the biggest funds in the world, allowing Opendoor to remain after continued losses. Seven years later the company still has not turned a profit but has billions more to keep trying, especially since going public last year. Big venture capital money continues its quest to disrupt real estate. Opendoor’s situation is not unique, the industry is ripe with unprofitable giants backed by big money. The chart below illustrates the magnitude of venture capital money in real estate, not limited to Opendoor.

    Credit: Mike DelPrete’s 2021 Emerging Models Report

    Valuations:

    Establishing valuations is complicated and the businesses with the highest valuation does not mean that they are the most profitable. Click here for more info on establishing valuations. Earnings alone only tell most of the story. As accurate pricing is established by both supply and demand, profitability is established by dollars brought in and dollars spent. The only way to be profitable is for a company to spend less than it makes.

    For example, eXp’s year over year Q2 2021 $1 billion in revenue led to an earnings increase of a whopping 183%. That combined with an 87% increase in agent count illustrates future growth potential and explains why eXp’s valuation has skyrocketed. eXp’s profit was $37 million or 3.7%.

    Meanwhile, RE/MAX’s revenue grew by 48%, bringing in $76.05 million for a profit of $5.2 million or 6.8%. RE/MAX has consistently been profitable for years, yet its valuation has remained stable.

    Credit: Mike DelPrete’s The Impact of Compass’ Declining Stock Price on Agents

    Earnings:

    Q2 2021 year over year earnings look extremely impressive given that the post lockdown real estate recovery started in May 2020.

    The AZ Market:

    Join us next Thursday 8/19 as Tina Tamboer with the Cromford Report does a 1 hour deep dive into the greater Phoenix housing market. For details and registration click here.

    Q2 2021 was one of the biggest multifamily construction quarters on record, there were 623,500 units under construction in the 150 largest apartment markets nationwide. In greater Phoenix there were 28,600 multifamily units under construction, increasing our multifamily base by 7.6%.

    These numbers are high but warranted. Nationwide apartment rents are up 8.3% year over year and occupancy is at a record high at 96.9%. Greater Phoenix continues to top the charts in year over year rents growth at 21.6%.

    Policy:

    The CDC extended the eviction ban through October 3 with slightly different criteria, covering about 90% of renters. In May, the Supreme Court ruled that the only way to extend eviction protections is with Congress’ approval. President Biden officially made that request to Congress while it is in recess, the only way for it pass is through a unanimous call-in vote. Furthermore, when the Supreme Court made its ruling it stated that it agreed with the plaintiffs in that the Supreme Court did not believe that the CDC had the authority to extend the ban in the first place. Of the $46 billion allocated for emergency rental relief, only $3 billion has been disbursed.

    On July 31, the foreclosure moratorium expired. The CFPB implemented specific rules in which lenders must abide by when foreclosing which will further delay most foreclosures. Abandoned properties will be foreclosed on first. There will be some foreclosures but not a flood. For greater detail on this and forbearance, please check out my AZ Forbearance Update from Wednesday, here. One major factor at play is the historic levels of equity most homeowners have.

    New iBuyer:

    Rocket Homes, a subsidiary of Rocket Companies which owns Rocket Mortgage, the country’s largest lender, is hiring employee real estate agents and is planning a “soon to be released iBuyer program” that will be managed through a third-party partner company.

    Rocket Homes, a licensed brokerage, which is already licensed in all 50 states (has been licensed in AZ since 2018) said that beginning in the fourth quarter of 2021, employee agents working from downtown Detroit will provide services to sellers at a discounted commission rate of 1.5% (the co-broke offered is unclear). The remote employee agents will advise on listing price, handle photos, enter listings in the local MLS, negotiate offers, and handle paperwork. Sellers who would prefer to work with an agent in their market will be referred to the Rocket Homes Verified Partner Agent Network. Sellers who don’t want to work with an agent at all can use Rocket’s ForSaleByOwner.com platform for free.

    Real Estate News:

    • A new Connecticut law is now regulating what Realtor teams may call themselves. They can use “team” but not “group” or “LLC” and also requires a $565 initial registration with an annual fee of $375. This is an awfully complicated way to increase state revenue. Will it catch on?
    • Citigroup, JP Morgan Chase, and other banks are offering a new high risk, high reward bond product and investors want in. While they are a very small part of the market, banks are selling riskier products that packages mortgages, car loans, and corporate debt. Investors are responsible for the losses when borrowers default on the loans packaged in the bonds.

    Final Thoughts:

    Long before residential real estate pulled us out of the shortest recession in history, Wall Street and Silicon Valley were plotting ways to infiltrate housing. While big money and new technology provide powerful incentives, it is very difficult to replace a well-informed, well-connected, local real estate professional.

    Copyright 2021 Sarah Perkins

  • AZ Forbearance Update 8/11/2021

    In this 15 minute video, Lydia Wietsma and I discuss the latest in policy, forbearance, foreclosures, and inspections.

    Policy:

    There is a lot of confusion with all of the info coming out of Washington DC. There are proposals, bills, executive orders, extensions, approvals, and appointments announced every day. The Biden administration is proposing a lot of bills that impact housing.

    Here is a brief update on several of the policies coming out of DC:

    • The $1 trillion proposed infrastructure bill passed the Senate and is now in the House for negotiations.
    • A new $3.5 trillion social infrastructure bill has been proposed in the Senate which includes down payment assistance options along with other housing aid.
    • Eviction ban was extended through 10/3. This extension has created quite a buzz among the real estate industry. I expect many more lawsuits in the coming weeks.

    Lifted Foreclosure Ban:

    This did not create a foreclosure frenzy as the CFPB implemented a strict foreclosure process for lenders and servicers. It is likely that we will not see many foreclosures until later in the year after borrowers have exhausted their loss mitigation options.

    Keep in mind that in any year there are foreclosures. The ban that lasted nearly 18 months created a backlog that will have to be worked through. From 2017-2019 there was an average of just over 290,000 foreclosures nationwide which gives us a shortage of about 432,000 foreclosures.

    Given that nationally homes have appreciated about 17% year over year and here locally about 27% year over year, most borrowers in foreclosure will be able to do a normal sale rather than having to go through foreclosure.

    Nationwide, it is estimated that about 4% of borrowers are upside down on their homes by 25% or more. This number has decreased from 6% last year.

    The report went on to say, “Equity gains in Arizona were particularly extreme. In the first quarter of the year, 16 percent of mortgaged homes in this state were considered equity-rich by Attom’s definition. In the second quarter of 2021, that number rose to nearly 40 percent.”

    Forbearance Numbers:

    The total number of loans in forbearance continues to decline. We are down to 3.4% of loans which is about 1.7 million borrowers.

    Forbearance by Stage:

    • 9.7% of total loans in forbearance are in the initial forbearance plan stage.
    • 82.9% are in a forbearance plan extension.
    • 7.4% are forbearance re-entries.

    Forbearance Exits from June 1, 2020 through August 1, 2021

    43.7% of borrowers continued making their payments (22.9%), got caught up upon exiting (13.3%), or paid off the loan with a refinance or sale (7.5%).

    The percentage of exits for the group to be most concerned about, borrowers who exited their forbearance plan still behind and without a loss mitigation plan in place remained flat at 15.7%.

    Future Forbearance Exits:

    According to Black Knight data services, next month is anticipated to have the largest number of forbearance plan exits this year.

    Missed Payments:

    While mortgage delinquencies are easier to track, missed rental payments are not. Based on my research, I think the MBA’s recent update stating that Q2 2021 saw a big improvement in missed housing payments and the total number for both borrowers and renters is below 5 million nationwide is fairly accurate. The data shows that there are about 2.86 million rental households behind on their payments and 2.19 million borrowers behind on their mortgage payments.

    Servicers & Inspections:

    Inspections are way up. Many more for corporate buyers, not just iBuyers but also buy and rent companies also. The servicers have gone quiet on the future of foreclosures but continue to prepare for the coming months of uncertainty.

    Be mindful of the information out there. Be sure that it is current and from a reputable source. And remind borrowers and renters there are still options available. Discuss exit strategies.

    Options:

    Forbearance and foreclosure assistance: https://www.consumerfinance.gov/coronavirus/mortgage-and-housing-assistance/help-for-homeowners/avoid-foreclosure/

    AZ Eviction Help: https://azevictionhelp.org/

  • Greater Phoenix Real Estate Update 7/30/2021

    In the past, the Phoenix housing market tended to run about 8-12 months ahead of the rest of the country. Over the past 18 months, our market has pretty much been on pace with the rest of the country until very recently. I would say that our market is running about a month ahead of the rest of the country so be mindful of national headlines, it is old news in Phoenix.

    Economy:

    The economy is in growth mode and many economists expect huge employment growth in September when the additional $300 a week in pandemic unemployment benefits expire. There are two scenarios in which economists forecast a growth reversal and push us into recession. The first is if the increased COVID cases shuts down the economy again. The second is the Federal Reserve tapering its $120 billion in monthly bond and mortgage-backed security purchases too quickly because if they do, interest rates will spike. The Fed met this week and are keeping rates as is. They are also not planning on beginning to taper their purchases until late in 2022. Given that the Federal government is the nation’s largest borrower, the Fed is not in any hurry to raise rates.

    Hopefully, the consumer inflation truly is transitory and settles down by the end of the year. It is the asset inflation that is impacting the economy. We have seen exponential asset inflation over the past 10 years. Economists, Wall Street, and Washington DC call it inflation. We call it appreciation. Houses in Greater Phoenix have appreciated 274% since 2011 when our median sales price bottomed out at $107,000. Today the median sales price is $400,000 which gives us a year-over-year appreciation rate of 27%.

    The AZ Market:

    On Wednesday I pulled the top 5 zip codes for year over year appreciation and was surprised that despite our nearly non-existent sub $300,000 inventory, it was not the lower-priced zip codes with the greatest appreciation rates. Only one zip code has a median sales price even close to the overall median. Luxury took the top spot.

    The top 5 zip codes for year over year appreciation:

    1.) 85253 at 49.8% with a median sales price of $2,397,500 (Paradise Valley)

    2.) 85260 at 43.8% with a median sales price of $575,000 (Scottsdale)

    3.) 85297 at 41.9% with a median sales price of $518,750 (Gilbert)

    4.) 85022 at 41% with a median sales price of $375,000 (Phoenix)

    5.) 85262 at 40.3% with a median sales price of $1,175,000 (Scottsdale)

    This huge appreciation is not like the 2005 bubble. Today’s appreciation is based on low levels of supply. In 2005 it was the high levels of demand, and of course a bunch of other stuff. We did have pent up demand due to the lockdowns in Q2 2020 which caused the frenzied purchasing in Q3 and Q4 2020. Demand peaked in late November 2020 at 35.4% above balance and declined continuously until July 20 when it bottomed at 5.1% above balance. Demand today is 5.9% above balance. That is an 22% decline in demand since November. But it didn’t feel that way because inventory has been so extremely low. The market intensity peaked in March and inventory is up 42% since then.

    “What a frantically interesting and engaging industry.”

    Mike DelPrete, Real Estate Tech Strategist

    Monthly sales have decreased by about 12% in the past two months. This is seasonally normal and also to be expected due to the increased supply and decreased demand. The slowing intensity feels weird, but our market is actually moving in a healthier direction. If you have clients expecting a market crash or price decline, they will be disappointed. This moderation will only slow the appreciation.

    An easy way to show anyone expecting a crash why we won’t see one is by using the Cromford Market Index, which is an awesome leading indicator. The index is available to anyone, without a subscription, at www.CromfordReport.com. Anything over 100 is a seller’s market. More importantly, the demand index would have to move below the supply index.

    http://cromfordreport.com

    Today’s buyers are better educated than ever before and they are doing their homework and are not writing such high offers. From the low point in mid-February to now weekly price reductions are up 182%. The majority of the reductions are in the $400K to $800K price range as this is the range with the highest increase in new inventory.

    In Q2 2021, investor purchases were up 15% from Q1 2021, Phoenix topped the charts with an increase of 25% in Q2 2021 from Q1 2021. Phoenix was also the most popular destination for Redfin users when looking outside of their own city.

    National Real Estate:

    • Purchase mortgage applications declined by 2% last week and that was after a 6% decline the week before. Purchase mortgage applications have declined, on an annual basis, for the past three months, reaching their lowest level since May 2020. High prices and continued competition are blamed for the declines.
    • On Saturday the foreclosure moratorium will expire. The CFPB implemented specific rules in which lenders must abide by when foreclosing which will further delay most foreclosures. Abandoned properties will be foreclosed on first. There will be some foreclosures but not a flood. Experts predict maybe 300,000 foreclosures which would be about 6,000 per state if divided up evenly. For details on the CFPB’s foreclosure rules, forbearance, and delinquencies, check out my update from Wednesday, here.

    “Pending sales have seesawed since January, indicating a turning point for the market. Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat. The moderate slowdown in sales is largely due to the huge spike in home prices.”

    Dr. Lawrence Yun, NAR Chief Economist

    iBuyers:

    In order to compete in this fast-paced market, during the first half of 2021, the country’s biggest iBuyers (Opendoor, Offerpad, Redfin, Zillow) expanded their buy box by upwards of 40% and increased their offers to an average of 104.1% of market value. In 2020 the same iBuyers offered an average of 97.6% of market value.

    Simultaneously, iBuyers also dropped their fees to an average of 5.1% at the end of Q2 2021 from an average of 7.2% in 2020. Between the increase in offers and decrease in fees, consumer’s costs are down by 35% this year.

    And iBuyer purchase activity is way up. In the past three months, Opendoor has acquired more properties than it did in all of 2020.

    Final Thoughts:

    Throughout the rest of the year, expect a further weakening of the seller’s market. The declining affordability and buyer fatigue combined with increased inventory are leading us towards a more normal, balanced market. When housing is more balanced, it is not quite as exciting, but it is much healthier and allows for long-term growth. We finally are getting to the calm after the housing storm.

    Copyright 2021 Sarah Perkins

  • AZ Forbearance Update 7/28/2021

    In this 16 minute video, Lydia Wietsma and I discuss the latest in forbearance, delinquencies, foreclosures, and loan servicing.

    Forbearance Numbers:

    The forbearance numbers have improved a lot in the past month. We are down to 3.48% of borrowers or roughly 1.74 million borrowers are now in a forbearance plan. This is huge progress. Think about where we were in May of 2020 with nearly 4.76 million loans in forbearance which is over 9% of borrowers!

    The declines have been slowing. In April we had a 12% drop in homeowners in forbearance. In the past 30 days, we have had a 5% drop. Since there is a limit on how long an owner can be in forbearance, it is expected that about 900,000 borrowers will exit the program in Q3 and Q4 this year.

    About 7.25 million borrowers have been in a forbearance plan at one time or another throughout the pandemic, which is about 14% of all homeowners nationwide.

    I have been asked a lot for forbearance info by state and I came across this chart from Matthew Gardner, Windermere’s chief economist. It is older, the data is from March, so today’s numbers are much lower but it is a nice view to see the state differences. In March in Arizona, there were about 4.2% of borrowers were in forbearance.

    Forbearance by Stage:

    • 9.8% of total loans in forbearance are in the initial forbearance plan stage.
    • 83.2% are in a forbearance extension.
    • The remaining 7.0% are forbearance re-entries.

    Forbearance Exits from June 1, 2020 through July 18, 2021

    44% of borrowers continued making their payments, got caught up upon exit, or paid off the loan with a refinance or sale upon exit.

    15.7% of borrowers exited their forbearance plan still behind on their payments and without a loss mitigation plan in place.

    Delinquencies:

    Remember borrowers who are behind on their payments and in forbearance are also counted in the total delinquency numbers. Total delinquency rates in June dropped to 4.37%, the lowest since the start of the pandemic. There are about 2.32 million borrowers behind on at least one payment and about 1.5 million that are 90+ days behind on their payments. This number has been the slowest to move and remains much higher than pre-pandemic numbers.

    Foreclosures:

    In an effort to keep foreclosures down, HUD, USDA, and the VA now offer the option for borrowers to extend the length of their loan to reduce monthly payments.

    The foreclosure moratorium expires on Saturday but that doesn’t mean that lenders will start the foreclosure process immediately. The CFPB has put in place very specific rules and processes for lenders and servicers to adhere to which helps enable struggling borrowers to modify their current loans.

    The properties which can be foreclosed on immediately will be vacant, abandoned properties, and the owners are not reachable.

    Do not expect to see a flood of foreclosures as the moratorium is lifted. The median equity of a borrower in forbearance is $100,000! Another way to look at it is 96% of homeowners in forbearance have at least 10% equity in their houses. If they have to sell, they will be normal sales.

    Based on these numbers the total amount of homes that could go into foreclosure could be about 200,000-300,000 homes nationwide. For comparison, the 2008 crash led to about 10 million foreclosures nationwide. Big difference. And if we divide 300,000 by 50 states, each state could see about 6,000 foreclosures each. However, each state and each market is different so it will not be evenly distributed like this.

    Ivy Zelman said, “The likelihood of us having a foreclosure crisis again is about zero percent.” Dr. Lawrence Yun agrees and he expects that the homes will be absorbed quickly and will not lead to any price declines.

    Inspections:

    Three weeks ago, Lydia did not have any inspections. Then in the past two weeks she has had 15-20 inspections a day! The type of inspection varies. She has done many for iBuyers, tax liens, BPOs, and others.

    Servicers are requiring confirmation regarding occupancy. If the property is abandoned the lender is able to foreclose right away, per CFPB’s rules.

    For more information on CFPB’s foreclosure ruling visit https://www.consumerfinance.gov/rules-policy/final-rules/protections-for-borrowers-affected-by-covid-19-under-respa/