Will Forbearance Plans Lead to a Tsunami of Foreclosures?

How can a future wave of foreclosures be avoided?

Woman sitting on sofa with question marks on wall.

At the onset of the economic disruptions caused by the COVID pandemic, the government quickly put into place forbearance plans to allow homeowners to remain in their homes without making their monthly mortgage payments. Today, almost three million households are actively in a forbearance plan. Though 29.4% of those in forbearance have continued to stay current on their payments, many have not.

Yanling Mayer, Principal Economist at CoreLogic, recently revealed:

“A distributional analysis of forborne loans’ payment status reveals that more than one third (39.1%) of all forborne loans are now 150+ days behind payment, while as many as 1-in-4 (25.5%) are 180+ days past due.”

These homeowners have been given permission to not make their payments, but the question now is: how many of them will be able to catch up after their forbearance plan ends? There’s speculation that a forthcoming wave of foreclosures could be the result, and that could lead to another crash in home values like we saw a decade ago.

However, today’s situation is different than the 2006-2008 housing crisis as many homeowners have tremendous amounts of equity in their homes.

What are the experts saying?

Over the last 30 days, several industry experts have weighed in on this subject.

Michael Sklarz, President at Collateral Analytics:

“We may very well see a meaningful increase in the number of homes listed for sale as these borrowers choose to sell at what is arguably an intermediate top in the market and downsize to more affordable homes rather than face foreclosure.”

Odeta Kushi, Deputy Chief Economist at First American:

“The foreclosure process is based on two steps. First, the homeowner suffers an adverse economic shock…leading to the homeowner becoming delinquent on their mortgage. However, delinquency by itself is not enough to send a mortgage into foreclosure. With enough equity, a homeowner has the option of selling their home, or tapping into their equity through a refinance, to help weather the economic shock. It is a lack of sufficient equity, the second component of the dual trigger, that causes a serious delinquency to become a foreclosure.”

Don Layton, Senior Industry Fellow at the Joint Center for Housing Studies of Harvard University:

“With a greater cushion of equity, troubled homeowners have dramatically improved options: a greater ability to access funding (e.g. home equity lines) to keep paying monthly expenses until family finances might recover, improved ability to qualify for and support a loan modification, and, if push comes to shove, the ability to sell the home and monetize their increased net worth while reducing monthly payment obligations. So, what should lenders and servicers expect: a large number of foreclosures or only a modest increase? I believe the latter.”

With today’s positive equity situation, many homeowners will be able to use a loan modification or refinance to stay in their homes. If not, some will go to foreclosure, but most will be able to sell and walk away with their equity.

Won’t the additional homes on the market impact prices?

Distressed properties (foreclosures and short sales) sell at a significant discount. If homeowners sell instead of going into foreclosure, the impact on the housing market will be much less severe.

We must also realize there is currently an unprecedented lack of inventory on the market. Just last week, realtor.com explained:

“Nationally, the number of homes for sale was down 39.6%, amounting to 449,000 fewer homes for sale than last December.”

It’s important to remember that there weren’t enough homes for sale even then, and inventory has only continued to decline.

The market has the potential to absorb half a million homes this year without it causing home values to depreciate.

Bottom Line

The pandemic has led to both personal and economic hardships for many American households. The overall residential real estate market, however, has weathered the storm and will continue to do so in 2021.

Traditional old timber houses in Bryggen, Bergen, Norway

What Does 2021 Have in Store for Home Values?

Home Values in 2021 will be determined by supply and demand

According to the latest CoreLogic Home Price Insights Report, nationwide home values increased by 8.2% over the last twelve months. The dramatic rise was brought about as the inventory of homes for sale reached historic lows at the same time buyer demand was buoyed by record-low mortgage rates. As CoreLogic explained:

“Home price growth remained consistently elevated throughout 2020. Home sales for the year are expected to register above 2019 levels. Meanwhile, the availability of for-sale homes has dwindled as demand increased and coronavirus (COVID-19) outbreaks continued across the country, which delayed some sellers from putting their homes on the market.

While the pandemic left many in positions of financial insecurity, those who maintained employment and income stability are also incentivized to buy given the record-low mortgage rates available; this is increasing buyer demand while for-sale inventory is in short supply.”

Where will home values go in 2021?

Home price appreciation in 2021 will continue to be determined by this imbalance of supply and demand. If supply remains low and demand is high, prices will continue to increase.

Housing Supply

According to the National Association of Realtors (NAR), the current number of single-family homes for sale is 1,080,000. At the same time last year, that number stood at 1,450,000. We are entering 2021 with approximately 370,000 fewer homes for sale than there were one year ago.

However, there is some speculation that the inventory crush will ease somewhat as we move through the new year for two reasons:

1. As the health crisis eases, more homeowners will be comfortable putting their houses on the market.

2. Some households impacted financially by the pandemic will be forced to sell.

Housing Demand

Low mortgage rates have driven buyer demand over the last twelve months. According to Freddie Mac, rates stood at 3.72% at the beginning of 2020. Today, we’re starting 2021 with rates one full percentage point lower than that. Low rates create a great opportunity for homebuyers, which is one reason why demand is expected to remain high throughout the new year.

Taking into consideration these projections on housing supply and demand, real estate analysts forecast homes will continue to appreciate in 2021, but that appreciation may be at a steadier pace than last year. Here are their forecasts:What Does 2021 Have in Store for Home Values? | MyKCM

Bottom Line

There’s still a very limited number of homes for sale for the great number of purchasers looking to buy them. As a result, the concept of “supply and demand” mandates that home values in the country will continue to appreciate.

Couple holding keys to their new house

Florida’s Housing Market: Sales, Median Prices, New Listings Up

Florida Realtor’s data: Single-family home sales are up 22.9% year-over-year, median sales price up 14.1%; condo sales up 30.2%, median price up 16.9%. Chief Economist O’Connor: All of Florida’s metros saw gains in closed sales – but inventory remains far below normal levels.

According to a recently published article from Floridarealtors.org, Florida’s housing market reported more closed sales, more new pending sales, higher median prices, and more new listings in November compared to a year ago. This is despite the ongoing pandemic, according to Florida Realtors ® latest housing data. Single-family existing home sales rose 22.9% compared to a year ago.

“Our homes are more important that ever, becoming the hub of our daily lives as we continue to take steps to safeguard our health, our families, and our communities in the face of the ongoing pandemic,” says Florida Realtor’s President Barry Grooms. “With high demand, Florida’s housing market continues to gain momentum and provide support for the state’s economy.”

Realtors are available in every community to help assist buyers navigate the challenging market conditions of high demand and an inventory shortage of homes for sale.

In November, closed sales of single-family homes statewide totaled 26,406, up 22.9% year-over-year, while existing condo-townhouse sales totaled 11,003, up 30.2% over November 2019. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

The statewide median sales prices for both single-family homes and condo-townhouse properties rose year-over-year in November for 107 consecutive months. The statewide median sales price for single-family existing homes was $305,000, up 14.1% from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Last month’s statewide median price for condo-townhouse units was $228,000, up 16.9% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.

Florida Realtors Chief Economist Dr. Brad O’Connor noted that November’s closed sales registered the highest percent year-over-year increase of any month this year, except for October’s 26.9% year-over-year rise.

“This growth in sales remained very broad-based in November, with all 22 of Florida’s metro areas seeing positive year-over-year gains,” he said. “The question remains, though, how long can we keep up this pace? Mortgage rates remain at all-time lows and demand will likely remain strong in the coming months, but inventory levels – particularly for single-family homes – remain far below normal levels. As of the end of November, our statewide inventory of single-family homes was down 41.3% compared to a year ago. Even listings of properties north of a million dollars, where we’ve had more inventory, are down by almost 25%.”

This lack of supply continues to keep home prices elevated because of strong competition for the properties that are on the market, O’Connor explained.

“In November, the median price among closed sales of single-family homes was $305,000, which matches October’s figure but still represents a 14.1% year-over-year increase,” he said. “Some of this figure represents a shift in the mix of the types of homes that are selling – we’ve seen a greater share of luxury home sales this year because the inventory shortage hasn’t hit this segment of the market as hard. However, a substantial amount of this increase is entirely due to the lack of supply in the face of strong demand resulting in greater competition among prospective home buyers.”

Meanwhile, inventory hasn’t been quite as much of an issue in the condo/townhouse category, O’Connor said. Still, statewide, that category was down 14.5% year-over-year at the end of November.

New listings statewide increased year-over-year in both property type categories in November, by just 0.3% for single-family existing homes and by 4.2% for condo and townhouse units.

On the supply side of the market, inventory (active listings) remains constrained, particularly in the single-family existing home category, which was at a very limited 2-months’ supply in November. Condo-townhouse inventory was at a 4.7-months’ supply.

According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 2.77% in November 2020, significantly lower than the 3.70% averaged during the same month a year earlier.

If you are considering to sell your home, now is the time. With inventory low and sales prices up, it is a seller’s market. Contact our St. Petersburg office today at (727) 343-8600 and let’s connect to discuss how we can utilize our tools and expertise to maximize the sale of your home and get you best return on your investment.

Mortgage Delinquencies Level Off, According to CoreLogic Report

According to a  CoreLogic Insights Blog report just posted, loan performance insights highlights for September 2020 include:

  • The nation’s overall delinquency rate was 6.3% in September.
  • All states experienced annual increases in both overall and serious delinquency rates in September.
Source: CoreLogic
Source: CoreLogic

In September 2020, 6.3% of home mortgages were in some stage of delinquency (30 days or more past due, including those in foreclosure), which was a small decline from August 2020, but a 2.5% increase from September 2019.

Mortgages in early-stage delinquencies (30-59 days past due) was 1.5% in September 2020, down sharply from 4.2% in April 2020 and also below the rate from one year ago, which was 1.9%. Mortgages that were 60-89 days past due was 0.7% in September 2020, up from 0.6% in September 2019, but down from 2.8% in May 2020.

The serious delinquency rate, which is identified as 90 days or more past due, including loans in foreclosure, was 4.2% in September, up from 1.3% a year earlier, but down a bit from 4.3% in August 2020. August represented the highest rate since February 2014. The spike in delinquency that began in April has worked its way through the stages of delinquency and is sitting in the 180-days past-due stage, which increased to 1.6% in September, the highest rate since 2014 and more than five times the year ago rate.

The CARES Act provides relief to mortgage holders and prevented the seriously delinquent mortgages from progressing into foreclosure. The foreclosure inventory rate – the share of mortgages in some stage of the foreclosure process remained low at 0.3% in September 2020, down from 0.4% in September 2019.

Source: CoreLogic
Source: CoreLogic

States with the highest and lowest share of mortgages that are 30 days or more delinquent are shown in the above graph. All states posted annual gains in their overall delinquency rate in September 2020. The states that logged the largest annual increases were Nevada (+4.9 percentage points), Hawaii (+4.7 percentage points), Florida (+4 percentage points) and New Jersey (+3.9 percentage points).

Source: CoreLogic
Source: CoreLogic

The graph above shows the 30-plus-day past-due rate for September 2020 for 10 large metropolitan areas. Miami is in the lead with the highest rate of 11%, San Francisco has the lowest rate at 3.9%, Miami experienced an increase of 6 percentage points from the year prior. Outside of the largest 10, all but two metros recorded an increase in overall delinquency rate. Metro areas that were also hit hard included Lake Charles, Louisiana with the largest spike of 10.7 percentage points, followed by Odessa, Texas (up 10.3 percentage points) and Kahului, Hawaii (up 7.5 percentage points).

 

 

 

How Remote Work Can Power Your Vacation Home Sale

Remote Work is Fueling Demand for Vacation Homes

How Remote Work Can Power Your Vacation Home Sale | MyKCM

This year, the opportunity to work remotely has increased the demand for vacation homes. Gay Cororaton, Senior Economist and Director of Housing and Commercial Research at the National Association of Realtors (NAR), notes:

“Working from home is a positive factor in demand for vacation homes.”

Buyers are taking advantage of the fact that working from home might be someplace other than their primary residence – at the beach, in the mountains, or somewhere in between. NAR explains:

Sales in vacation-home counties increased 48% on average year over year in the third quarter; overall, 81% of vacation-home counties saw a year-over-year sales increase.”

Is it Time to Sell Your Vacation Home?

If you’ve been thinking about selling your vacation home, putting it on the market now while demand is high might be your best move. Here are two reasons why.

1. Vacation Homes Are Selling Quickly

These homes are not staying in the market for very long. NAR also notes:

In September, 68% of vacation homes sold in less than a month. Historically, about 30% sell that quickly…It’s a pretty amazing uptick compared to past years.”

2. Home Prices Are Rising

With an increase in demand, prices go up. NAR continues:

“In the third quarter, prices in vacation-home counties rose by about 32% year over year. Seventy-nine percent of these counties experienced year-over-year price gains. NAR defines a vacation-home county as one in which seasonal housing accounts for at least 20% of stock.”

If your vacation home is sitting idle, maybe not attracting as many renters as you usually see, or if you simply want to sell it so you can trade up or take it off your worry list, now may be the time. Demand is high, so you’re in the ideal spot to get a stronger return on your investment today.

Bottom Line

Demand is on the rise, so let’s discuss your next steps when it comes to selling your vacation home.

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Tis the Season to Be Fraud Aware

Well, it’s that time of year again, the holiday season is now in full swing. COVID-19 is something we are all aware of and practicing safety protocols to avoid. However, we also must remember that this is the time of year where credit card fraud, scams, counterfeit bills, and identity theft are also on the uptick. It’s definitely time for individuals and businesses to increase their fraud awareness and be extra vigilant.

“The holiday season has always been the peak time for fraud as holiday spending provides a tempting opportunity for fraudsters,” according to a Liz Lasher, vice president of fraud and financial crimes at FICO, as mentioned in this report from cnbc.com.

Lasher went on to state that because consumers are so busy with shopping, preparations, and festivities, they don’t take the extra time to scrutinize email links that pose as being from a store or delivery service. Or, they will fail to notice a few fraudulent charges among the higher volume of transactions on their bank or credit card statements.

Still, while the potential for fraud is higher during the holiday season, using a credit card is still the best way to shop. Card issuers provide zero liability protection, which means you won’t be held responsible for fraudulent charges. What steps can you take to protect yourself from credit card fraud this holiday season?

  • Monitor your credit card accounts. While you should be doing this on a regular basis, is especially important during the holidays. Make sure all charges posted to your account were made by you or an authorized user on your account.
  • Be wary of advertisements. You may be tempted to click on social media ads on Instagram or Facebook, but you should do so sparingly. Clicking on these ads may lead you to a site that isn’t reliable.
  • Secure your information. Don’t leave any personal information clearly visible when out in public, where someone might be able to peer over your shoulder and access your data. Use a mobile wallet, such as Apple Pay to avoid exposing your credit card information. Use cellular data to access the internet when you’re out and about, rather than public Wi-Fi, which isn’t secure and leaves you vulnerable to hackers.
  • Watch out for spam phone calls. Spam calls will increase in frequency during this time of year as well, with fraudsters calling and trying to obtain personal and financial information from you. If you get a call from someone who claims to be a representative from your bank, don’t believe it. Your bank will never ask you for your password or social security number – especially if you didn’t initiate the call. It is important to prepare the elderly people in our lives of these types of scams as well, as the elderly are the most preyed upon and vulnerable to these criminals.

2020 has been very challenging for everyone. It’s been a tough year and we all deserve to celebrate with a little holiday cheer. Just remember to stay safe and to protect yourself and your loved ones by being aware this holiday season. Happy Holidays!

 

 

 

Will Mortgage Rates Remain Low Next Year?

Mortgage Rates Continually Hitting Record Lows in  2020 – How Long Will it Last?

Will Mortgage Rates Remain Low Next Year? | MyKCM

In 2020, buyers got a big boost in the housing market as mortgage rates dropped throughout the year. According to Freddie Mac, rates hit all-time lows 12 times this year, dipping below 3% for the first time ever while making buying a home more and more attractive as the year progressed (See graph below):Will Mortgage Rates Remain Low Next Year? | MyKCMWhen you continually hear how rates are hitting record lows, you may be wondering: Are they going to keep falling? Should I wait until they get even lower?

The Challenge with Waiting

The challenge with waiting is that you can easily miss this optimal window of time and then end up paying more in the long run. Last week, mortgage rates ticked up slightly. Sam Khater, Chief Economist at Freddie Mac, explains:

Mortgage rates jumped this week as a result of positive news about a COVID-19 vaccine. Despite this rise, mortgage rates remain about a percentage point below a year ago.”

While rates are still lower today than they were one year ago, as the economy continues to get stronger and the pandemic is resolved, there’s a very good chance interest rates will rise again. Several top institutions in the real estate industry are projecting an increase in mortgage rates over the next four quarters (See chart below): Will Mortgage Rates Remain Low Next Year? | MyKCMIf you’re planning to wait until next year or later, Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), forecasts mortgage rates will begin to steadily rise:Will Mortgage Rates Remain Low Next Year? | MyKCMAs a buyer, you need to decide if waiting makes financial sense for you.

Bottom Line

If you’re planning to buy a home and want to take advantage of today’s low rates, now is the time to do so. Don’t assume they’re going to stay this low forever.

Homes for Sale are Rapidly Disappearing

Low Mortgage Rates, High Demand, and Lack of Homes for Sale Means No Slowing Down this Winter

Homes for Sale Are Rapidly Disappearing | MyKCM

Through all the challenges of 2020, the real estate market has done very well, and purchasers are continuing to take advantage of historically low mortgage rates. Realtor Magazine just explained:

“While winter may be typically a slow season in real estate, economists predict it isn’t likely to happen this year…Low inventories combined with high demand due to record-low mortgage rates is sending buyers to the market in a flurry.”

However, one challenge for the housing industry heading into this winter is the dwindling number of homes available for sale. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), recently said:

“There is no shortage of hopeful, potential buyers, but inventory is historically low.”

In addition, Danielle Hale, Chief Economist for realtor.com, notes:

“Fewer new sellers coming to market while a greater than usual number of buyers continue to search for a home causes inventory to continue to evaporate.”

One major indicator the industry uses to measure housing supply is the months’ supply of inventory. According to NAR:

“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace.”

Historically, six months of supply is considered a normal real estate market. Going into the pandemic, inventory was already well below this mark. As the year progressed, the supply has was reduced even further. Here is a graph showing this measurement over the last year:Homes for Sale Are Rapidly Disappearing | MyKCM

What does this mean if you’re a buyer?

Be patient during your home search. It may take time to find a home you love. Once you do, be ready to move forward quickly. Get pre-approved for a mortgage, be prepared to make a competitive offer from the start, and understand how the shortage in inventory has led to more bidding wars. Calculate just how far you’re willing to go to secure a home if you truly love it.

What does this mean if you’re a seller?

Realize that, in some ways, you’re in the driver’s seat. When there’s a shortage of an item at the same time there’s a strong demand for it, the seller is in a good position to negotiate. Whether it’s the price, moving date, possible repairs, or anything else, you’ll be able to ask for more from a potential purchaser at a time like this – especially if you have multiple interested buyers. Do not be unreasonable, but understand you probably have the upper hand.

Bottom Line

The housing market will remain strong throughout the winter and heading into the spring. Know what that means for you, whether you’re buying, selling, or doing both.

Why Working from Home May Spark Your Next Move

A Large Part of the Workforce Expects to Work Remotely for the Foreseeable Future

Why Working from Home May Spark Your Next Move | MyKCM

If you’ve been working from home this year, chances are you’ve been at it a little longer than you initially expected. Businesses all over the country have figured out how to operate remotely to keep their employees healthy, safe, and productive. For many, it may be carrying into next year, and possibly beyond.

While the pandemic continues, Americans are re-evaluating their homes, floorplans, locations, needs, and more. Some need more space, while others need less. Whether you’re renting or own your home, if remote work is part of your future, you may be thinking about moving, especially while today’s mortgage rates are so low.

A recent study from Upwork notes:

“Anywhere from 14 to 23 million Americans are planning to move as a result of remote work.”

To put this into perspective, last year, 6 million homes were sold in the U.S. This means roughly 2 – 4X as many people are considering moving now, and there’s a direct connection to their ability to work from home.

The same study also notes while 45.3% of people are planning to stay within a 2-hour drive from their current location, 41.5% of the people who are citing working from home as their primary reason for making a move are willing to look for a home more than 4 hours away from where they live now (See graph below):Why Working from Home May Spark Your Next Move | MyKCMIn some cases, moving a little further away from your current location might mean you can get more home for your money. If you have the opportunity to work remotely, you may have more options available by expanding your search. Upwork also indicates, of those surveyed:

“People are seeking less expensive housing: Altogether, more than half (52.5%) are planning to move to a house that is significantly more affordable than their current home.”

Whether you can eliminate your daily commute to the office, or you simply need more space to work from home, your plans may be changing. If that’s the case, it’s time to connect with a local real estate professional to assess your evolving needs and determine your path together.

Bottom Line

This has been a year of change, and what you need in a home is no exception. Let’s connect today to make sure you have expert guidance on your side to help you find a home that fits your remote work needs.

Tips to Sell Your House Safely Right Now

When you think about how you can sell your house safely, just remember:

Your agent now has over 6 months of experience selling houses during the pandemic and can make the process easier and safer for you today.

COVID-19 protocols and technology usage recommendations from the National Association of Realtors (NAR) are making it possible to sell houses right now, while agents continue to abide first and foremost by state and local regulations.

Today, with a full suite of tools, real estate professionals can literally do all of the paperwork remotely without missing a beat. Contactless closings are taking place with ease. This is when the buyer, seller, title agent, etc. do not have to meet in person and instead can conduct the entire closing electronically. Measures to conduct contactless closings were established prior to the pandemic. These measures included the necessary technological advances and changes to laws in many states to facilitate them.

Tips to Sell Your House Safely Right Now [INFOGRAPHIC] | MyKCM

Let’s connect to discuss how to sell your house safely in today’s housing market.