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How Has the U.S. Managed to Avoid Another Foreclosure Crisis?

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As the COVID-19 pandemic began to spread across the United States last spring and states announced shut downs, many Americans found themselves unemployed or underemployed.  As a result, the federal government took swift action to provide mortgage payment relief by allowing homeowners to enter forbearance.  A year later, as of March 2021, 2.5 million homeowners were still in forbearance, according to the Mortgage Bankers of America.

Realtor.com published an article, noting the opinions of experts who explain that, despite this alarming number of U.S. homeowners behind on payments, a potential foreclosure crisis is unlikely.  In the article, reporter Sharon Lurye explains, the current housing market conditions are likely to provide a safety net for many of homeowners.  Houses, in many parts of the United States, continue to be in high demand and the inventory remains low.  Coupled with low interest rates, homeowners behind on payments, possible nearing the end of their forbearance, could still decide to sell the home for a profit. Additionally, as Americans getting their footing and learn to adjust to the current conditions, forbearance rates dropping nationwide.

Nevertheless, there are still areas of the country where homeowners are not only seriously behind on payments, but the housing market is not as strong due to weak economies and lack of employment.  These homeowners will continue to need assistance by reaching out to their lender with the hopes of renegotiating the terms of their loan in a way that makes it feasible to make the payments.  Still, some may decide to just sell and move to a rental property, assuming they can find a property to rend. 

The good news, it seems that the U.S. isn’t headed toward a wide-spread foreclosure crisis, however there are Americans that continue to struggle and may for months and years to come.

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Will America’s Home Values Continue to Rise or Take a Sharp Downward Turn?

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For the past several months, the housing market in many parts of the United States has seen phenomenal growth in the price of houses.  Of course, high demand and low interest rates along with low inventory are to thank for the current climate in real estate.  Nevertheless, it still leaves some Americans wondering, “is this a bubble that will burst soon?”  Remember, it wasn’t so long ago that Americans saw home values increase rapidly, only to crash as a result of issues created by the sub-prime lending practices about 15 years ago.    

Experts do agree that the rapid gains in housing prices are something to pay attention to.  Experts estimate that about 5.5% of American home prices are overvalued.  Additionally, unemployment  levels have still not recovered from pandemic related layoffs and business closures.  According to Suzanne Mistretta, senior director at Fitch Ratings, “Slowing employment recovery and still-high unemployment levels are not supportive of long-term sustainable price growth.”

In an article published by MarketWatch.com, journalist Jacob Passy is careful to point out that real estate and economy experts do not expect there to be a housing market crash, but predict that the housing market will cool off.  The reason it won’t sustain the current rate is explained by Robert Dietz, chief economist at the National Association of Home Builders, “When home prices are growing faster than incomes, ultimately that is an unsustainable trend.”

As the reset of 2021 plays out, Americans may see interest rates increase modestly, which may slow the rise of housing prices. Some homeowners who requested forbearance on their mortgage, may not be able to resume the payments due to unemployment and decide to sell their homes instead of risk foreclosure. These additional homes going up for sale may also provide a relief in the demand and help prices remain steady.

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The 2021 Housing Market Continues to Look Good for Sellers

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A look back at the first few weeks of 2021 and the national real estate market shows that home sales and the number of buyers increased in comparison to the last few weeks of 2020.  Nevertheless, a low inventory of homes continues to create difficulty buying conditions for these would-be homeowners.

In an article published by CNBC.com, reported by Diana Olick, the housing market is compared to the beginning of 2020 where January 2021 is reported to have seen sales 23.7% higher than January of last year.  According to the article, ‘“Home sales are continuing to play a part in propping up the economy,” said Lawrence Yun, chief economist for the NAR. “With additional stimulus likely to pass and several vaccines now available, the housing outlook looks solid for this year.”’

However, the availability of homes, in comparison to January 2020, was down 26%.  This reported 1.9-month supply, compared to a January 2020 3- month supply, is the lowest ever reported. Of course, the low housing inventory coupled with the continued demand has allowed the median home price to increase a little over 14% since last January.

The article goes on to report new home sales and how builders have benefited from the shortages but also face supply and labor issues.  Read the entire article.

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Tips for Selling a Home During the Winter of 2021

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The next few winter months are looking to be a pretty optimal time to sell a home.  The mortgage rates continue to remain very low, demand for homes is high and there continues to be a drop in inventory compared to inventory a year ago.  Chief economist at the National Association of Realtors®, Lawrence Yun proclaimed, “It will be one of the best winter sales years ever.”

Nevertheless, selling a home during a world-wide pandemic can offer challenges and sellers are still looking for ways to sell safely and for top dollar.  An article published by Realtor.com, reported Erica Sweeney, has detailed some tips for homeowners selling homes over the next few months.

From a safety perspective, it is important to have a virtual tour available on the listing.  This will allow shoppers to view the home online to get a better sense of the home layout and features.  Doing this will help to keep the number of in-person showings to a minimum.  When in-person showings are scheduled, masks and social distancing should be encouraged and larger time gaps between showings will help ensure the safety of all visitors.  Once the prospective home buyers and agents have left the house, sanitizing all high touch surfaces will keep the home clean for the residents of the home.

Sweeney also gave tips of preparing and pricing a home.  She reports, ‘According to a realtor.com report, the national median home listing price jumped 13.4% in December compared with last year, reaching $340,000, and price per square foot rose 15.9%.’  Sellers and their agents should ensure that they are pricing the house to align with the current market pricing.  To add, highlighting upgrades and updates that buyers won’t have to worry about upon moving in during the winter months as well as features that accommodate work from home and e-learning from home will appeal to buyers that are in the midst of spending more time than normal at home.

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Photo Credit: Nathan Walker

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What Do Experts Predict for the 2021 Housing Market?

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As the new year rolled in, many have reflected on a year of unexpected and historic events and how they impacted many aspects of the lives of Americans.  The real estate market had its share of ups and downs as Americans adjusted to new realities of shutdowns, spending more time at home, and mortgage rates that continue to remain exceptionally low.  It leaves many real estate professionals and American homeowners and would-be home owners trying to predict what 2021 could possibly have in store for them.

In a piece published by Norada Real Estate Investments, written by Marco Santarelli, many questions for the future of the market in 2021 are posed and explanations and predictions are provided.  The article addresses questions Americans might have about a potential affordability crisis, if the value of homes will continue to rise, what the trends in new home construction might be and whether or not a housing market crash is predicted in 2021.

Santarelli indicates, “While we still face economic and health challenges ahead, it is no doubt that the nation will continue to recover from this pandemic and an improving economy will continue to prop up the housing market competition. Industry experts believe the housing market will remain strong and is set to break more records in 2021.”  He describes how it continues to be a seller’s market and a continued rise in home prices could lead to affordability issues.

To add, some experts, such as Zillow Economic Research, predict that home values will, in fact, continue to increase.  Some predictions call for a 3.6% increase over the next three months and appreciate of home value by up to 10% through the end of 2021. 

As the demands for houses continues to outpace the availability, new home construction attempts to fill the gap.  However, according to the article, “Land and material availability and a persistent skilled labor shortage will continue to place upward pressure on construction costs resulting in limited housing supply.”

Read the entire article for more predictions for 2021.

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Is Now the Time to Lock in a Low Mortgage Rate?

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2020 is wrapping up and it has been quite a year, to say the least.  With just a few weeks left in this year, Americans anticipate many upcoming changes from political to medical.  However, some may wonder what to expect from the mortgage and real estate markets.

According to an article published by Realtor Magazine, “Mortgage rates have hit new record lows 13 times this year, the latest in November”.  Its predicted that the rates will hover near a record low of 2.9% throughout December.  Further, some economy experts expect these low rates to continue into 2021, perhaps with slight increases, with a possible 3.10% 30 year mortgage by the end of the first quarter of 2021. 

However, not all agree with those 2021 predictions.  The article details other predictions, “Fannie Mae predicts the 30-year fixed-rate mortgage will average about 2.8% through the end of next year. The Mortgage Bankers Association predicts a 2.9% average in December and a 3.3% average for 2021. Freddie Mac predicts an average of 3% over the next 13 months.”

Nevertheless, the available mortgage rates have, throughout 2020, and will continue to boost the real estate activity.  The low rates are opening opportunities of home buying to many more, with a much more affordable monthly payment.  Additionally, homeowners are able to refinance into these lower rates and save money on their existing monthly payments.

Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, advises home buyers should lock in the low mortgage rates now if they can.”

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How Might Biden’s Presidency Impact the Mortgage Industry?

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Now that the 2020 election has seemingly come to a close, many Americans are anticipating what the housing and mortgage industry may look like with Biden as president.  Throughout his presidential campaign, Biden pledged to make some changes so that Americans will have “access to housing that is affordable, stable, safe and healthy, accessible, energy efficient and resilient,” according to his campaign website.   In a Housing Wire article reporters James Kleinmann and Tim Glaze detail some of the possible changes that may be proposed by Biden.

To begin, Biden is looking to introduce a tax credit of close to $15,000 for first time home buyers.  The purpose of the tax credit would be to help first time home buyers, specifically younger Americans as well as Black and Hispanic Americans. Although, according to the article, “Industry observers … weren’t optimistic that Biden would have the legislative muscle to get the full initiative through, unless Democrats also take the Senate.”

Biden also promised to put more regulation in place for agencies such as Consumer Financial Protection Bureau, where it is anticipated he will select a new leader of the agency.  Its expected he would also look to continue the conservatorship of GSEs.  According to Tim Rood, head of government & industry relations for Situs AMC, “If Biden wins, he is going to look to use Fannie and Freddie as instruments of public policy to help close the homeownership gap, the wealth gap, cap people’s payments on both rental and occupied housing, support the construction of 1.5 million to 2 million affordable housing units.”

Nevertheless, the results of the 2020 general election seem to point toward a split government, with a Republic-led Senate and Biden, a Democrat, as President.  This balance is predicted to work in favor of the mortgage and real estate industry. The Republican led Senate may be able to push back on some of the tax policies, which could impact the investment and cost of owning a home, Biden has promised to introduce.

The undisputed belief among industry experts is that rates will continue to remain at the historically low rates for the next few years as the economy continues to stabilize.

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Photo Credit: Jon Tyson

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The Fed’s Policy Change May Keep Rates Lower for Longer than Expected

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The Federal Reserve is changing its policy with regards to how it quickly it responds to inflation.  Historically, once inflation reached increased by about 2%, the Feds would raise interest rates.  Now, in an effort to support the economy, the central bank is pushing the threshold of inflation beyond the 2% target.

This change, according to an article published by CNBC.com, is a way for the Fed to encourage spending by allowing Americans to continue to borrow money at low rates.  According to professor of Finance and Economics, Laura Veldkamp, “This is meant as a stimulus, as a way of getting people to spend more.”   

By allowing rates to stay lower for a longer period of time, many lenders can pass the low rates on to their consumers.  For example, credit card rates have fallen to 16% on average, personal loans are reporting rates as low as 12.07% and HELOCs have rates below 5%.

As reported in the article, the downside to the change in policy is the effect increased inflation will have on long term bond prices.  The chief financial advisor for Bank Rate, Greg McBride states that these longer term bonds will be more prone to large price declines.  Yet, ““With low inflation the Fed’s focus now, that’s a concern for another day…”

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Amid the Pandemic, Mortgage Rates Set Records

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As residents of the U.S. sort through the many updates on the progress of containing the outbreak of COVID-19 cases, anxiously await news for a vaccine and patiently waiting to find out when life will return to some sense of normal, the U.S. economy fluctuates with the positive and not so encouraging updates.  Most recently, the news of the economic uncertainty due to the pandemic has impacted mortgage rates, yet again.

According to an article published by CNN, mortgage rates recently dropped below 3% for a 30 year mortgage.  This drop marked a 50 year record low for mortgage rates.  As a result, many home buyers, and those that were sitting on the fence debating purchasing a home, have decided that there’s no time like the present to make the move.  The demand for homes has increased, especially since the lower rates has allowed more prospective home buyers to afford homes that might have been just beyond their reach just a few short weeks ago.

However, just as the daily news cycle is filled with promise coupled with concerning medical and economic updates, the good news about rates is wrapped with a warning of what may be on the horizon.  Since the rise in coronavirus cases seems to be surging again, more job layoffs and even job losses could be inevitable.  Obviously, as unemployment rises, home buyers can be hesitant, if not unable, to purchase a home.

As the article quotes Danielle Hale, chief economist for Realtor.com, things could look up soon, “On the upside, signs of progress toward a coronavirus vaccine give hope that there’s a path to a new normal where health concerns don’t dominate decision making.”  We all hope that comes sooner rather than later.

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Is the Real Estate Market on Track for a Comeback?

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At first glance, reported home sale prices that only increased .5% year over year in May 2020 might appear to be disappointing news for real estate professionals and their customers.  However, according to an article published by Redfin.com, the slight gain was mostly impacted by the small number of homes selling in expensive U.S. cities.  Further, Redfin’s lead economist Taylor Marr sees some positive news based on other spring sales numbers, stating, “Although the housing market was still mostly stalled in May, it’s worth noting that homes under contract to be sold jumped 33% between April and May after two consecutive months of decline.  This is a key leading indicator for home sales in June and July. New listings of homes for sale have also likely passed their bottom…”

Nevertheless, the market still has a ways to go before it is back on track to performance during the pre-COVID-19 shut down.  Although all large metro areas in the U.S. have seen significant declines in home sales as compared to last spring, areas such as Michigan and Pennsylvania saw decreases of over 60%.  These are examples of a couple of states that were the most restrictive for staying at home during the pandemic’s initial outbreak.

Yet, good news appears to be on the horizon.  New listings, according to the article, increased almost 36% from April.  Additionally, days on the market and number of homes selling above list price remain positive, signs of a strong buyers’ market continued throughout the state wide shut downs, due to continued low inventory of homes and low mortgage rates.   

Read the entire article for more details and highlights across the nation’s metro areas.

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