Few foreclosures are expected in the wake of COVID, real estate experts predict – Orange County Register
Foreclosures will increase in the coming months as government-mandated support for distressed homeowners declines, housing experts said last week. But not like they did during the Great Recession when nearly 7.8 million Americans lost their homes.
Meanwhile, economists speaking online at the National Association of Real Estate Editors conference predicted that this year’s surprise rebound in the housing market will continue through 2021, with increased sales and prices. Request, they said, is strongest for large homes in the suburbs and in second home markets as renters and homebuyers respond to the coronavirus pandemic.
“There is definitely an increase in demand for larger homes with more rooms,” said Michael Lane, president of ShowTime, a Chicago-based company that automates home visit appointments for agents. “People are looking to move to bigger and better houses. “
The number of struggling homeowners with at least three months late payments for their homes has tripled since February, according to figures from real estate data company CoreLogic. But government-mandated forbearance, which gives homeowners more time to repay their loans, is a financial crutch, said Frank Nothaft, chief economist at CoreLogic.
Nevertheless, the number of owners in difficulty is far below expectations, thanks to low mortgage rates, strong consumer savings and rising house prices, said Rick Sharga, executive vice president of foreclosure data firm RealtyTrac. For example, only 5% of US borrowers were in abstention in November, compared to forecasts that at least a quarter of all borrowers would request a deferral of payment.
At the height of the 2008-12 foreclosure crisis, mortgages in the foreclosure process peaked at 4% of all home loans, Sharga added. The next peak probably won’t go above 1.5%, 2%.
“You can’t lose 20 million jobs and not have an increase in foreclosure activity,” Sharga said. “But there’s a whole host of reasons why we don’t think the fallout this time around will be close to what we saw in the Great Recession.”
One reason is that the vast majority of American homeowners currently have equity in their homes. Almost three-quarters of all homes are worth at least 20% more than what they are owed on their mortgages, Sharga said. If homeowners lose their income due to the pandemic, they have more options this time around. And with listings of around 300,000 to 400,000 homes below normal for eight years, the likelihood of foreclosures flooding the market is “infinitely small.”
“The majority of these properties will be sold rather than foreclosed,” he said.
The real questions are, he said, how big the next wave of foreclosures will be, when it hits and which housing sectors will be hit hardest.
Others likewise were optimistic about the housing outlook. A trio of housing economists gave optimistic forecasts for 2021, for example, saying the rapid recovery from the early days of the pandemic is expected to last until next year.
“I didn’t expect the housing market to skyrocket once we reopen (the economy). It was a surprise, ”said Lawrence Yun, chief economist for the National Association of Realtors.
Yun predicted that home prices will rise 3% next year and sales will rise 9%.
Danielle Hale, chief economist at online real estate listing site Realtor.com, had a similar outlook: Prices rose 5.7% and sales rose 7%.
“We expect the economy to continue to grow in 2021,” Hale said. “The economic outlook is for strong growth from a recovering economy.”
CoreLogic’s Nothaft said sales next year will be strong, predicting that the number of homes for sale – currently the lowest in at least seven years – will increase in the second half of the year once the vaccine is released. the coronavirus will be widely distributed. He expects home prices to rise 4.1% next year.
Economists say low mortgage rates, which are attracting more home buyers to the market, will remain just above 3% through 2022, up slightly from last week’s all-time low of 2, 71%. Nothaft expects rates to stay even lower next year, at just 2.9% on average.
“This will be great news for anyone looking to buy a home,” he said.
Nothaft has created a “think tank” showing that mortgage payments are going down even though house prices are going up. A home that sold for $ 400,000 a year ago had a mortgage payment of $ 1,657, according to its figures. That same house would sell for $ 29,200 more today, but the monthly payment would be $ 76 less.
The housing outlook for economists was picked up by a NAR survey of economists and housing experts released Thursday. Housing experts told NAR that the housing market will remain strong until 2022.
David Hicks, CEO of Dallas-based HomeVestors, speaking at the NAREE conference, said his company’s “We Buy Ugly Homes” franchisees are expected to purchase more than 10,000 properties this year and generate sales of approximately $ 1.7 billion.
“We don’t expect the market to slow down,” Hicks said.
Demand is also high for luxury homes, said David Parnes, star of “Million Dollar Listing,” director of The Agency, a Los Angeles brokerage house.
“Things are strong,” Parnes said. “It has been one of our busiest years.