Another Housing Market Crash Looming?

[ShootsManyBullets]

All the areas where oil money was flowing into housing are going to get hit hard. I also think we'll see more growth of the medium sized markets with reliable internet grow as people get out of the big cities and work remotely. Already happening but it'll accelerate.

Expect the banks and servicers to try to keep prices up by limiting the supply of foreclosures even though there's going to be millions of zombie homes out there where the owners are hopelessly behind and unable to pay due to unemployment. Instead of letting the market clean itself out and have prices reset to where they should be, they'll keep the bubble inflated as much as they can. Same game the Fed plays with stocks and bonds.

Forbearance is no deal for the homeowners who are going to have to make the payments eventually plus they're going to be disqualified from all sorts of other credit. Anyone who needs help needs to get the terms in writing and not accept any kind of vague terms about what will happen in a few months. If you need longer term help, look at modifying as it should not hurt your credit or access to credit.

 

[44hunter45]

My real estate predictions: housing in the suburbs and more rural areas will see an uptick in interest. This quarantine has opened peoples eyes and some self examination has taken place. Folks will see that they don’t really “need” all those amenities the big city offers, and they really don’t want to be packed in like sardines anymore.
You thought the California exodus was bad before!?! As a Californian and a millennial (it cause more pain for me to say that than for you to hear it- but hey, I’m not a vegan), I have never desired a simpler life and a slower pace more than now. Time will tell.... carry on with the more sophisticated talk

Until they learn how bad the internet service is out here.

 

[Irrelevant]

Interesting perspective.

Did the Fed Just Accidentally Trigger a Housing Market Crash? | CCN.com

www.ccn.com

Well maybe it's still coming, but 11 months later that's a HARD NO

 

[AlaskaHunter]

The supply of homes is at a record low, the cost of construction at a record high,
mortgage interest rates are near as low as they ever will be.

The administration seems to kick the can down the road extending the moratorium on foreclosures.
There are over 2 million mortgages now past 90 days overdue,
and looks like the federal moratorium on mortgage foreclosures will be extended to 2022.
Even after the moratorium expires, there will be a lag in processing and foreclosed homes entering the market.

My guess is the bubble will burst after the mid-term elections.

 

[SAJ-99]

The supply of homes is at a record low, the cost of construction at a record high,
mortgage interest rates are near as low as they ever will be.

The administration seems to kick the can down the road extending the moratorium on foreclosures.
There are over 2 million mortgages now past 90 days overdue,
and looks like the federal moratorium on mortgage foreclosures will be extended to 2022.
Even after the moratorium expires, there will be a lag in processing and foreclosed homes entering the market.

My guess is the bubble will burst after the mid-term elections.

"2 million mortgages now past 90 days overdue" sounds impressive, but this is what the data looks like visually. Not sure why the mid-terms are some magical date, but I would say if you are awaiting a housing market crash, you might be dead before it happens. Demographics are supportive, so only rates and inflation can cause a problem.

 

[AlaskaHunter]

"2 million mortgages now past 90 days overdue" sounds impressive, but this is what the data looks like visually. Not sure why the mid-terms are some magical date, but I would say if you are awaiting a housing market crash, you might be dead before it happens. Demographics are supportive, so only rates and inflation can cause a problem.

View attachment 181288

Due to the moratorium, Real Estate Foreclosures in U.S. Hit 16-Year Low in 2020...

The Federal Housing Administration (FHA) which insures nearly 8 million high-risk mortgages, reported that the delinquency rate of its mortgages rose to 17.5% in February 2021, up from 17.0% in January, matching the all-time record high.
8 million mortgages is substantial....if 1 in 8 ultimately default...
With only 1 million homes on the market, the supply of homes could increase after the moratorium of federally backed mortgages expires and foreclosures make their way through the courts and on to the market.

 

[VikingsGuy]

Due to the moratorium, Real Estate Foreclosures in U.S. Hit 16-Year Low in 2020...

The Federal Housing Administration (FHA) which insures nearly 8 million high-risk mortgages, reported that the delinquency rate of its mortgages rose to 17.5% in February 2021, up from 17.0% in January, matching the all-time record high.
8 million mortgages is substantial....if 1 in 8 ultimately default...
With only 1 million homes on the market, the supply of homes could increase after the moratorium of federally backed mortgages expires and foreclosures make their way through the courts and on to the market.

A few million homes hitting a hot market with tons of cheap credit flooding the system actually turns the heat down on the market reducing the chance of total melt down. I think stock bubble will pop before mortgage bubble.

 

[SAJ-99]

Due to the moratorium, Real Estate Foreclosures in U.S. Hit 16-Year Low in 2020...

The Federal Housing Administration (FHA) which insures nearly 8 million high-risk mortgages, reported that the delinquency rate of its mortgages rose to 17.5% in February 2021, up from 17.0% in January, matching the all-time record high.
8 million mortgages is substantial....if 1 in 8 ultimately default...
With only 1 million homes on the market, the supply of homes could increase after the moratorium of federally backed mortgages expires and foreclosures make their way through the courts and on to the market.

I agree that there is housing supply on the sidelines, but it doesn't look very extreme and we can't assume that it hits the market at the same time and drives down prices. We also know that the supply of existing homes is extremely low and there are plenty of buyers (demographics). Government actions on forbearance and foreclosures have contributed to the increase in prices, but it also bought people time for their local economies to recover and cash flow to resume. The question is if that worked. Analyzing mortgage data is hard because not all forbearance is delinquent and not all delinquencies are in forbearance. The picture is murky at best and none the numbers even come close to the extremes we saw in 2008. In short, there is no "bubble". Housing prices tend to be sticky because of the frictions involved in transacting. To even get anything close to a significant decline we would need a serious recession and then the Fed and Congress will throw money at it prop up the economy again. Rinse and repeat, as they say. Any problem that can be fixed by printing more money isn't a problem. The next problem will be different.

 

[Nick87]

What happens when the interest rates go up with the current price of building supplies? We are pretty good with our money or so I think, theres no way I can justify buying right now. Feels like committing financial suicide.

 

[SAJ-99]

Due to the moratorium, Real Estate Foreclosures in U.S. Hit 16-Year Low in 2020...

The Federal Housing Administration (FHA) which insures nearly 8 million high-risk mortgages, reported that the delinquency rate of its mortgages rose to 17.5% in February 2021, up from 17.0% in January, matching the all-time record high.
8 million mortgages is substantial....if 1 in 8 ultimately default...
With only 1 million homes on the market, the supply of homes could increase after the moratorium of federally backed mortgages expires and foreclosures make their way through the courts and on to the market.

Here is a chart that supports your view. Interesting to wonder what people are doing with that money.

 

[ignorethefringes]

With all assets seemingly headed towards bubble-mania I'd be very leery of getting into REITs or similar instruments. Anybody have any experience with commercial properties?

I underwrite commercial mortgages every day. There are several property types I'd be leery about right now.

 

[Gerald Martin]

I underwrite commercial mortgages every day. There are several property types I'd be leery about right now.

But not second homes in Bozeman in a market rising 30% a year, right?

 

[ignorethefringes]

But not second homes in Bozeman in a market rising 30% a year, right?

Those who can afford second homes typically don't walk away from them and destroy their credit. Especially if they put down 10-20%.

That being said, I just bought a house in April, but am moving my family rather buying a second home. And that experience leaves me feeling like some people are going to regret paying as much as they did for a couple years. There was/is definitely some FOMO going on with the good rates and others buying up time whole supply. Some probably jumped into a bigger mortgage than needed, maybe even for less house than they wanted.

So to tie it up to my previous post, I definitely wouldn't be buying a second home in Bozeman, or a commercial office building in Orlando, as an investment property right now. Too much uncertainty for my blood.

 

[SAJ-99]

Interesting cost breakdown for a builder in Boise


https://www.bloomberg.com/graphics/2021-us-housing-construction-costs/?srnd=premium&sref=rYMkp3wV

 

[Sytes]

Thats... crazy!

 

[Mtnhunter1]

Unbelievable, the cost of materials changes daily. I think that we are in for a very rough ride.....soon.

 

[Nick87]

I understand it's a demand thing. But I dont understand the how, just because demand is up doesnt mean your budget changes?

 

[BigHornRam]

I understand it's a demand thing. But I dont understand the how, just because demand is up doesnt mean your budget changes?

Budgets are for responsible people. Lot of reckless behavior going on right now. Both from consumers and the the government. Going to be a big mess when the wheels come off this wagon.

 

[Nick87]

Budgets are for responsible people. Lot of reckless behavior going on right now. Both from consumers and the the government. Going to be a big mess when the wheels come off this wagon.

I know just hard to believe theres that many people out there who think that way...just thought about what I said there. Your right.

 

[Carnage2011]

I understand it's a demand thing. But I dont understand the how, just because demand is up doesnt mean your budget changes?

One thing that I think we are seeing in ruralish areas like Boise and Bozeman is the money from tech industries. A lot of these businesses allow their employees to work from home and many of them are moving during the pandemic. The Facebook and Google’s of the world have thrived during this and are hiring non stop right now. I had one call from a guy at google that was moving from Portland and wanted to rent an apartment from me in Townsend…2bd/1ba that I rent for $850 and he was willing to pay $2000/month. I told him I could never charge that much and he insisted that is still cheaper than what he would have paid in Portland.
I got another call from a guy with Facebook that was very similar. Wants to move to MT and be close to Bozeman but not too close. He was also willing to pay way too much money.
I think a correction is coming at some point, but I don’t know if we will see a huge change in Montana.