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What Record-Low Housing Inventory Means for You

January 28, 2021 By Tami Savage

What Record-Low Housing Inventory Means for You

The real estate market is expected to do very well in 2021, with mortgage rates that are hovering at historic lows and forecasted by experts to remain favorable throughout the year. One challenge to the housing industry, however, is the lack of homes available for sale today. Last week, the National Association of Realtors (NAR) released their Existing Home Sales Report, which shows that the inventory of homes for sale is currently at an all-time low. The report explains:

“Total housing inventory at the end of December totaled 1.07 million units, down 16.4% from November and down 23% from one year ago (1.39 million). Unsold inventory sits at an all-time low 1.9-month supply at the current sales pace, down from 2.3 months in November and down from the 3.0-month figure recorded in December 2019. NAR first began tracking the single-family home supply in 1982.”

(See graph below):

Months inventory of homes for sell 2011 to today.  Really high in 2011 and the inventory has gradually degraded over the last 10 years to now at the lowest point.  Source: NAR

What Does This Mean for You?

If You’re a Buyer:

Be patient during your home search. It may take time to find a home you love. Once you do, however, be ready to move forward quickly. Get pre-approved for a mortgage, be prepared to make a competitive offer from the start, and know that a shortage in inventory could mean you’ll enter a bidding war. Calculate just how far you’re willing to go to secure a home and lean on your real estate professional as an expert guide along the way. The good news is, more inventory is likely headed to the market soon, Lawrence Yun, Chief Economist at NAR, notes:

“To their credit, homebuilders and construction companies have increased efforts to build, with housing starts hitting an annual rate of near 1.7 million in December, with more focus on single-family homes…However, it will take vigorous new home construction in 2021 and in 2022 to adequately furnish the market to properly meet the demand.”

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 the best possible terms. Whether it’s the price, moving date, possible repairs, or anything else, you’ll be able to request more from a potential purchaser at a time like this – especially if you have multiple interested buyers. Don’t be unreasonable, but understand you probably have the upper hand.

Bottom Line

The housing market will remain strong throughout 2021. Know what that means for you, whether you’re buying, selling, or doing both.

Tagged With: For Buyers, For Sellers, Housing Market Updates, Interest Rates

What Happens When Homeowners Leave Their Forbearance Plans?

January 27, 2021 By Tami Savage

What Happens When Homeowners Leave Their Forbearance Plans?

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.

Tagged With: Distressed Properties, For Buyers, For Sellers, Foreclosures, Housing Market Updates

What Experts Are Saying about the 2021 Job Market

January 21, 2021 By Tami Savage

What Experts Are Saying about the 2021 Job 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.

Tagged With: Distressed Properties, For Buyers, For Sellers, Foreclosures, Housing Market Updates

Why Right Now May Be the Time to Sell Your House

January 14, 2021 By Tami Savage

Why Right Now May Be the Time to Sell Your House

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:

Buyer Traffic Index: Florida is strong! Seller Traffic Index: Florida is Weak

As 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.

Tagged With: For Buyers, For Sellers, Housing Market Updates, Interest Rates

Will Forbearance Plans Lead to a Tsunami of Foreclosures?

January 13, 2021 By Tami Savage

Will Forbearance Plans Lead to a Tsunami of Foreclosures?

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.

Tagged With: Distressed Properties, For Buyers, For Sellers, Foreclosures, Housing Market Updates, Pricing, Short Sales

Is This the Year to Sell My House?

January 7, 2021 By Tami Savage

Is This the Year to Sell My House?

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.

Tagged With: For Sellers, Housing Market Updates, Move-Up Buyers, Selling Myths

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DISCLAIMER: The information contained, and the opinions expressed, on this site are NOT intended to be construed as investment advice. Tami Savage LLC does NOT guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should ALWAYS conduct your own research and due diligence and obtain professional advice before making any investment decision. Tami Savage LLC will NOT be liable for any loss or damage caused by your reliance on the information or opinions contained herein.