Lydia Wietsma with Nexthome Elite Realty and I spent 15 minutes talking about mortgage forbearance, different options, what to plan for in the coming weeks and months.
Today’s Takeaways:
The goal of the banks today is different than it was 10 years ago. 10 years ago it was about enabling homeowners to complete short sales. Today it is about keeping struggling homeowners in their homes.
Total loans in forbearance have dropped for 15 straight weeks. It is now only 6.93% of all loans, which is about 3.5 million loans.
If 25% are current means that 875,000 are current of the 3.5M in forbearance. Just over 2.6 million are delinquent. About 1 million loans, or 21%, have left forbearance status since the peak in May.
Foreclosure filings are down 81% year over year. Filings are down because the courts are not moving forward with foreclosures in forbearance. Many courts across the country remain closed due to the pandemic. Foreclosure filings and processes are different across the country.
Delinquencies are still tracked but not turning into foreclosures due to forbearance protections making true numbers very difficult to track.
We do know that 30-day delinquencies are down while 60 and 90 day delinquencies are up. There are about 1.8 million more 90 day delinquencies now than there were in February.
In 2017, right after Hurricane Irma hit, there were the same number of delinquencies as today. There was not a housing crash in 2017.
Remember in 2008-2010 there were 8.8 million foreclosures nationwide. We are not on track to come close to this number based on what we are seeing now.
Sarah Perkins is an award winning account executive and has been in title sales since 2004. As the Director of Industry Research & Senior Account Executive, Sarah’s role is to bring real estate transactions to Navi Title. Sarah supports her clients by helping them navigate the ever-changing real estate space through thorough research and understanding of current trends impacting today’s home buyers and sellers.
Lydia Wietsma with Revelation Real Estate invited me to join her on her regular podcast to discuss housing affordability and what is going on with all of the incredible appreciation we are experiencing. Check out our 30 minute discussion.
Key Takeaways:
In order to understand affordability, we have to look at what is happening across the country and locally. Affordability is measured nationally but felt locally. Here in Arizona, we are in a very strong seller’s market.
AZ is a top destination
250-300 new residents a day moving to Phoenix metro area
Majority of people coming to greater Phoenix Metro area are leaving southern California, mostly Los Angeles County and San Diego County. People are leaving NYC, Chicago, Southern CA, Seattle for cheaper living and sunshine.
Over 50% of the people moving here are over 55
People moving here can afford more expensive homes
Arizona is running advertising campaigns inviting more and more people to leave the west coast for Arizona and it is working. Our job growth is nearly 2.5 times the rest of the country over the past 20 years.
The demand is pushing sales prices up. After the 15 year roller coaster we have been on, many homeowners are not sure about selling right away. The average homeowner stays in their house about 7-8 years. It has increased. As people stay, inventory is locked up. We have incredibly low inventory right now. We have the same amount of homes from sale today as we did in early 2005, when we had half the population and half the housing stock. For Phoenix to be a healthy market with inventory to supply the consumers needs we would need 3x the amount of listings that we have today. With inventory this low, it would not be outrageous to believe we will have a 10% appreciation in 2020. Places like Chandler and Gilbert have seen a 50% appreciation over the past 3 years. This is putting our affordability in the spot light. Not only do we have people moving here, we have a severe shortage of single family new home building. We have hardly surpassed where we were in the early 90s. Nationally we are being by 5 million new homes based on population growth and demand. This lack of building continues to push property values up, across the country and very much so here in Phoenix. The Arizona real estate market tends to run 8-12 months ahead of the rest of the country. Whatever is happening elsewhere already happened here.
When people cannot afford to buy homes or to move up when they need a bigger home, we run into some big problems. One of the coolest things about home ownership is the path to wealth. Nothing creates wealth the way home ownership does.
If our home ownership rates continue dropping as they have over the past 10 years, we have the potential of causing some massive changes to the US economy. The national homeownership rate is around 63%. It is a tough number to move because they are so many Americans. However, when you look at that number, a couple drops puts us close to the 50% mark. When we as a country hit 50% home ownership rates then it is likely that some of the extra perks of home ownership could go away. When you have a country that is made up of 50% renters, which means the voters will be 50% renters and likely many of the congressman will be renters. This could affect new policy and adjustments of current policy benefiting home ownership. As homeowners we love having our values rise but in order for real estate to continue to be 13% of GDP, we need to make it an option for renters to become home owners, and affordability is the biggest hurdle.
If a renter expects to stay in the same place for 3-5 years, it is in their best interest to buy. Even if they have to pay a little more than what they could spend on a renting, they will come out ahead. Using the example below, if a renter pays about $200 more per month to buy the median home today in Maricopa County, without any increase in value, after 5 years the owner will have $40,000 in equity, and that is based on 0 appreciation. If there is modest appreciation, like 2%, after 5 years that same home owner now has $70,000 in equity!
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.
