As millions of Americans continue to face hardship from the Covid-19 pandemic, there is a lot of speculation on how the current mortgage delinquency rate will affect the residential real estate market stability shortly. These speculations range from doomsday to halleluiah and everything in between.
Short Sales to Wealth has decided to compile some basic statistics that can provide guidance and assistance to homeowners, real estate investors, and real estate professions alike to better gauge present and future market conditions.
Here are some relevant facts;
– According to Mortgage Bankers Association data, 2.7 million homeowners are currently in Covid-19 forbearance as opposed to 4.3 million as of last May.
– The current administration has extended the foreclosure moratorium to June 20, 2021.
– Provision is made for up to 6 months of additional mortgage forbearance in 3-month increments for borrowers who entered forbearance on or before June 30, 2020.
Coordinated HUD efforts, FHA, VA, FHFA, and Dept of Agriculture are extending outreach assistance to borrowers. These agencies cover up to 70 percent of American single-family home mortgages.
– ARP21 plan provides a 10 billion dollar homeowner assistance fund to assist homeowners in catching up with mortgage payments and utility bills
– American homeowners have created approximately 1.5 trillion dollars of home equity wealth.
– There is a first-time buyers population ranging from 30 to 45 years old that will sustain homeownership demand.
– New home homes inventory is at its lowest level.
– A centralized resource for housing assistance was created-. Homeowners and tenants alike can visit consumerfinance.gov/housing for up-to-date information on relief options.
So, how does the current situation stack up against the last market collapse and the ensuing foreclosure crisis?
The last great recession was caused by excessive credit expansion, faulty mortgage securitization, and an unprepared financial system. Last year in the 2nd quarter of 2020, the delinquent mortgage rate spiked to 8.2 %, just 1 % shy of the 9.3 % during the 2008 -2010 subprime crisis. (Please note that the mentioned percentages are delinquency and not completed foreclosures)
With the facts mentioned above, the consumer is cautious, and the experienced operator is doubly careful.
Still, today, we have an entire generation of market players that consider standard interest rates to be 2 to 3 percent. Does anyone remember when standard interest rates were 9, 10, and 11 %? How about 18 1/2 % in 1981? The Feds had to bring inflation under control then. Higher interest rates diminish the purchasing power of potential buyers.