What Happens When Homeowners Leave Their Forbearance Plans?

What Happens When Homeowners Leave Their Forbearance Plans? | Simplifying The Market

According to the latest report from Black Knight, Inc., a well-respected provider of data and analytics for mortgage companies, 6.48 million households have entered a forbearance plan as a result of financial concerns brought on by the COVID-19 pandemic. Here’s where these homeowners stand right now:

  • 2,543,000 (39%) are current on their payments and have left the program
  • 625,000 (9%) have paid off their mortgages
  • 434,000 (7%) have negotiated a repayment plan and have left the program
  • 2,254,000 (35%) have extended their original forbearance plan
  • 512,000 (8%) are still in their original forbearance plan
  • 116,000 (2%) have left the program and are still behind on payments

This shows that of the almost 3.72 million homeowners who have left the program, only 116,000 (2%) exited while they were still behind on their payments. There are still 2.77 million borrowers in a forbearance program. No one knows for sure how many of those will become foreclosures. There are, however, three major reasons why most experts believe there will not be a tsunami of foreclosures as we saw during the housing crash over a decade ago:

  1. Almost 30% of borrowers in forbearance are still current on their mortgage payments.
  2. Banks likely don’t want to repeat the mistakes of 2008-2012 when they put large numbers of foreclosures on their books. This time, many will instead negotiate a modification plan with the borrower, which will enable households to maintain ownership of the home.
  3. With the significant equity homeowners have today, many will be able to sell instead of going into foreclosure.

Will there be foreclosures coming to the market? Yes. There are hundreds of thousands of foreclosures in this country each year. People experience economic hardships, and in some cases, are not able to meet their mortgage obligations.

Here’s the breakdown of new foreclosures over the last three years, prior to the pandemic:

  • 2017: 314,220
  • 2018: 279,040
  • 2019: 277,520

Through the first three quarters of 2020 (the latest data available), there were only 114,780 new foreclosures. If 10% of those currently in forbearance go to foreclosure, 275,000 foreclosures would be added to the market in 2021. That would be an average year as the numbers above show.

What happens if the number is more than 10%?

If we do experience a higher foreclosure rate from those in forbearance, most experts believe the current housing market will easily absorb the excess inventory. We entered 2020 with 1,210,000 single-family homes available for purchase. At the time, that was low and problematic. The market was experiencing high buyer demand, and we needed more houses to meet that demand. We’re now entering 2021 with 320,000 fewer homes for sale, while buyer demand remains extremely strong. This means the housing market has the capacity to soak up a lot of inventory.

Bottom Line

There will be more foreclosures entering the market later this year, especially compared to the record-low numbers in 2020. However, the market will be able to handle the increase as buyer demand remains strong.

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What Experts Are Saying about the 2021 Job Market

What Experts Are Saying about the 2021 Job Market | Simplifying The Market

Earlier this month, the Bureau of Labor Statistics (BLS) released their most recent Jobs Report. The report revealed that the economy lost 140,000 jobs in December. That’s a devastating number and dramatically impacts those households that lost a source of income. However, we need to give it some context. Greg Ip, Chief Economics Commentator at the Wall Street Journal (WSJ), explains:

“The economy is probably not slipping back into recession. The drop was induced by new restrictions on activity as the pandemic raged out of control. Leisure and hospitality, which includes restaurants, hotels, and amusement parks, tumbled 498,000.”

In the same report, Michael Pearce, Senior U.S. Economist of Capital Economics, agreed:

“The 140,000 drop in non-farm payrolls was entirely due to a massive plunge in leisure and hospitality employment, as bars and restaurants across the country have been forced to close in response to the surge in coronavirus infections. With employment in most other sectors rising strongly, the economy appears to be carrying more momentum into 2021 than we had thought.”

Once the vaccine is distributed throughout the country and the pandemic is successfully under control, the vast majority of those 480,000 jobs will come back.

Here are two additional comments from other experts, also reported by the WSJ that day:

Nick Bunker, Head of Research in North America for Indeed:

“These numbers are distressing, but they are reflective of the time when coronavirus vaccines were not rolled out and federal fiscal policy was still deadlocked. Hopefully, the recent legislation can help build a bridge to a time when vaccines are fully rolled out and the labor market can sustainably heal.”

Michael Feroli, Chief U.S. Economist for JPMorgan Chase:

“The good news in today’s report is that outside the hopefully temporary hit to the food service industry, the rest of the labor market appears to be holding in despite the latest public health challenges.”

What impact will this have on the real estate market in 2021?

Some are concerned that with millions of Americans unemployed, we may see distressed properties (foreclosures and short sales) dominate the housing market once again. Rick Sharga, Executive Vice President at RealtyTrac, along with most other experts, doesn’t believe that will be the case:

“There are reasons to be cautiously optimistic despite massive unemployment levels and uncertainty about government policies under the new Administration. But while anything is possible, it’s highly unlikely that we’ll see another foreclosure tsunami or housing market crash.”

Bottom Line

For the households that lost a wage earner, these are extremely difficult times. Hopefully, the new stimulus package will lessen some of their pain. The health crisis, however, should vastly improve by mid-year with expectations that the jobs market will also progress significantly.

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Why Right Now May Be the Time to Sell Your House

Why Right Now May Be the Time to Sell Your House | Simplifying The Market

The housing market made an incredible recovery in 2020 and is now positioned for an even stronger year in 2021. Record-low mortgage interest rates are a driving factor in this continued momentum, with average rates hovering at historic all-time lows.

According to the latest Realtors Confidence Index Survey from the National Association of Realtors (NAR), buyer demand across the country is incredibly strong. That’s not the case, however, on the supply side. Seller traffic is simply not keeping up. Here’s a breakdown by state:Why Right Now May Be the Time to Sell Your House | Simplifying The MarketAs the maps show, buyer traffic is high, but seller traffic is low. With so few homes for sale right now, record-low inventory is creating a mismatch between supply and demand.

NAR also just reported that the actual number of homes currently for sale stands at 1.28 million, down 22% from one year ago (1.64 million). Additionally, inventory is at an all-time low with 2.3 months supply available at the current sales pace. In a normal market, that number would be 6.0 months of inventory – significantly higher than it is today.

What does this mean for buyers and sellers?

Buyers need to remain patient in the search process. At the same time, they must be ready to act immediately once they find the right home since bidding wars are more common when so few houses are available for sale.

Sellers may not want to wait until spring to put their houses on the market, though. With such high buyer demand and such a low supply, now is the perfect time to sell a house on optimal terms.

Bottom Line

The real estate market is entering the year like a lion. There’s no indication it will lose that roar, assuming inventory continues to come to market.

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Will Forbearance Plans Lead to a Tsunami of Foreclosures?

Will Forbearance Plans Lead to a Tsunami of Foreclosures? | Simplifying The Market

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 program 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.

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Is This the Year to Sell My House?

Is This the Year to Sell My House? | Simplifying The Market

If one of the questions you’re asking yourself is, “Should I sell my house this year?” consumer sentiment about selling today should boost your confidence in the right direction. Even with the current health crisis that continues to challenge our nation, Americans still feel good about selling a house. Here’s why.

According to the latest Home Purchase Sentiment Index from Fannie Mae, 57% of consumer respondents to their survey indicate now is a good time to buy a home, while 59% feel it’s a good time to sell one:

“The percentage of respondents who say it is a good time to sell a home remained the same at 59%, while the percentage who say it’s a bad time to sell decreased from 35% to 33%. As a result, the net share of those who say it is a good time to sell increased 2 percentage points month over month.”

As you can see, many still believe that, despite everything going on in the world, it is still a good time to sell a house.

Why is now a good time to sell?

There simply are not enough homes available to meet today’s buyer demand, and they’re selling just as quickly as they’re coming to the market. According to the National Association of Realtors (NAR), unsold inventory available today sits at a 2.3-month supply at the current sales pace, which is down from a 2.5-month supply from the previous month. This record-low inventory is not even half of what we need for a normal or neutral housing market, which should have a 6.0-month supply of unsold inventory to balance out.

With so few homes available for buyers to choose from, we’re in a true sellers’ market. Homeowners ready to make a move right now have the opportunity to negotiate the best possible contracts with buyers who are feeling the pull of intense competition when it comes to finding their dream home. Lawrence Yun, Chief Economist for NAR, notes how quickly homes are selling right now, further confirming the benefits to sellers this season:

“The market is incredibly swift this winter with the listed homes going under contract on average at less than a month due to a backlog of buyers wanting to take advantage of record-low mortgage rates.”

However, this sweet spot for sellers won’t last forever. As more homes are listed this year, this tip toward sellers may start to wane. According to Danielle Hale, Chief Economist at realtor.com, more choices for buyers are on the not-too-distant horizon:

“The bright spot for buyers is that more homes are likely to become available in the last six months of 2021. That should give folks more options to choose from and take away some of their urgency. With a larger selection, buyers may not be forced to make a decision in mere hours and will have more time to make up their minds.”

Bottom Line

If you’re ready to make a move, you can feel good about the current sentiment in the market and the advantageous conditions for today’s sellers. Let’s connect today to determine the best next step when it comes to selling your house this year.

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Why Not to Wait Until Spring to Make a Move

Why Not to Wait Until Spring to Make a Move | Simplifying The Market

The housing market recovery coming into the new year has been nothing short of remarkable. Many experts agree the turnaround from the nation’s economic pause is playing out extremely well for real estate, and the current market conditions are truly making this winter an ideal time to make a move. Here’s a dive into some of the biggest wins for homebuyers this season.

1. Mortgage Rates Are Historically Low

In 2020, mortgage rates hit all-time lows 16 times. Continued low rates have set buyers up for significant long-term gains. In fact, realtor.com notes:

“Given this means homes could cost potentially tens of thousands less over the lifetime of the loan.”

Essentially, it’s less expensive to borrow money for a home loan today than it has been in years past. Although mortgage rates are expected to remain relatively low in 2021, even the slightest increase can make a big difference in your payments over the lifetime of a home loan. So, this is a huge opportunity to capitalize on right now before mortgage rates start to rise.

2. Equity Is Growing

According to John Burns Consulting, 58.7% of homes in the U.S. have at least 60% equity, and 42.1% of all homes in this country are mortgage-free, meaning they’re owned free and clear.

In addition, CoreLogic notes the average equity homeowners gained since last year is $17,000. That’s a tremendous amount of forced savings for homeowners, and an opportunity to use this increasing equity to make a move into a home that fits your changing needs this season.

3. Home Prices Are Appreciating

According to leading experts, home prices are forecasted to continue appreciating. Today, many experts are projecting more moderate home price growth than last year, but still moving in an upward direction through 2021.

Knowing home values are increasing while mortgage rates are so low should help you feel confident that buying a home before prices rise even higher is a strong long-term investment.

4. There Are Not Enough Homes for Sale

With today’s low inventory of homes on the market, which is contributing to this home price appreciation, sellers are in the driver’s seat. The competition is high among buyers, so homes are selling quickly.

Making a move while so many buyers are looking for homes to purchase may mean your house rises to the top of the buyer pool. Selling your house before more listings come to the market in the traditionally busy spring market might be your best chance to shine.

Bottom Line

If you’re considering making a move, this may be your moment, especially with today’s low mortgage rates and limited inventory. Let’s connect to get you set up for homebuying success in the new year.

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Four Expert Views on the 2021 Housing Market

Four Expert Views on the 2021 Housing Market | Simplifying The Market

The housing market was a shining star in 2020, fueling the economic turnaround throughout the country. As we look forward to 2021, can we expect real estate to continue showing such promise? Here’s what four experts have to say about the year ahead.

Lawrence Yun, Chief Economist, National Association of Realtors (NAR)

“In 2021, I think rates will be similar or modestly higher, maybe 3%…So, mortgage rates will continue to be historically favorable.”

Danielle Hale, Chief Economist, realtor.com

“We expect sales to grow 7 percent and prices to rise another 5.7 percent on top of 2020’s already high levels.”

Robert Dietz, Senior Vice President and Chief Economist, National Association of Home Builders (NAHB)

“With home builder confidence near record highs, we expect continued gains for single-family construction, albeit at a lower growth rate than in 2019. Some slowing of new home sales growth will occur due to the fact that a growing share of sales has come from homes that have not started construction. Nonetheless, buyer traffic will remain strong given favorable demographics, a shifting geography of housing demand to lower-density markets and historically low interest rates.”

Mark Fleming, Chief Economist, First American

“Mortgage rates are expected to remain low for the foreseeable future and millennials will continue forming households, keeping demand robust, even if income growth moderates. Despite the best intentions of home builders to provide more housing supply, the big short in housing supply will continue into 2021 and likely keep house price appreciation flying high.”

Bottom Line

Whether you’re ready to buy or sell a home in 2021, if you’re planning to take advantage of the market this winter, let’s connect to talk about the opportunities available in our local market.

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Did You Outgrow Your Home in 2020?

Did You Outgrow Your Home in 2020? | Simplifying The Market

It may seem hard to imagine that the home you’re in today – whether it’s your starter home or just one you’ve fallen in love with along the way – might not be your forever home.

Many needs have changed in 2020, and it’s okay to admit if your house no longer fits your lifestyle. If you’re now working remotely, facilitating virtual school, trying to exercise at home, or simply just spending more time in your own four walls, you may be bursting at the seams in your current house.

According to the latest Home Price Insights from CoreLogic, prices have appreciated 7.3% year-over-year. At the same time, the National Association of Realtors (NAR) reports that inventory has dropped 22% from one year ago.Did You Outgrow Your Home in 2020? | Simplifying The MarketThese two statistics are directly related to one another. As inventory has decreased and demand has increased, prices have been driven up.

This is great news if you own a home and you’re thinking about selling. The equity in your house has likely risen as prices have increased. Even better is the fact that there’s a large pool of buyers out there searching for the American dream, and your home may be high on their wish list.

Bottom Line

If you think you’ve outgrown your current home, let’s connect to discuss local market conditions and determine if now is the best time for you to sell.

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The Difference a Year Makes for Homeownership

The Difference a Year Makes for Homeownership | Simplifying The Market

Over the past year, mortgage rates have fallen more than a full percentage point, hitting a new historic low 15 times. This is a great driver for homeownership, as today’s low rates provide consumers with some significant benefits. Here’s a look at three of them.

1. Move-up or Downsize: One option is to consider moving into a new home, putting the equity you’ve likely gained in your current house toward a down payment on a new one that better meets your needs – something that’s truly a perfect fit, especially if your lifestyle has changed this year.

2. Become a First-Time Homebuyer: There are many financial and non-financial benefits to owning a home, and the most important thing is to first decide when the time is right for you. You have to determine that on your own, but know that now is a great time to buy if you’re considering it. Just take a look at the cost of renting vs. buying.

3. Refinance: If you already own a home, you may decide you’re going to refinance. It’s one way to lock in a lower monthly payment and save more over time. However, it also means paying upfront closing costs, too. If you want to take this route, you have to answer the question: Should I refinance my home?

Why 2020 Was a Great Year for Homeownership

Last year, the average mortgage rate was 3.93% (substantially higher than it is today). If you waited for a better time to make a move, market conditions have improved significantly. Today’s low mortgage rates are a huge perk for buyers, so it’s a great time to get more for your money and consider a new home.

The chart below shows how much you would save per month based on today’s rates compared to what you would have paid if you purchased a home exactly one year ago, depending on how much you finance:The Difference a Year Makes for Homeownership | Simplifying The Market

Bottom Line

If you’ve been waiting since last year to make your move into homeownership or to find a house that better meets your needs, today’s low mortgage rates may be just what you need to get the process going. Let’s connect today to discuss how you may benefit from the current rates.

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2021 Housing Forecast [INFOGRAPHIC]

2021 Housing Forecast [INFOGRAPHIC] | Simplifying The Market

2021 Housing Forecast [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • Experts project an optimistic year for the 2021 housing market.
  • With mortgage rates forecasted to remain low, high buyer demand is expected to fuel more home sales and continue to increase home prices.
  • Let’s connect today to determine how to make your best move in the new year.
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