As is often the case with the media, the headlines they provide do more to terrify than clarify. What is the truth about the eviction moratorium ending and people actually getting evicted? What is the certainty about forbearance ending and foreclosures flooding the market? What is the reality about the pricing bubble popping? Are we in a normal market? Is the market really slowing? For my thoughts and a quick market update, please continue reading.
Headline #1: The end of the eviction moratorium will result in millions becoming homeless. My response, not true. People are paying rent, and they will continue to do so. Currently, 86% of renters pay their rent on time, meaning only 14% are behind. Once faced with eviction, most of these people will start paying rent to avoid becoming homeless.
Additionally, there are government-sponsored programs – $46 Billion – available to tenants to ensure they can stay in their homes; only $5 Billion has been utilized so far. Many people have returned to work, so making payments will not be an issue for most. In my opinion, there will not be a wave of evictions as predicted by the media.
Headline #2: When the forbearance period ends, there will be a foreclosure tsunami. My response, this also is not true. There are currently 1.78 million people in forbearance. Nearly 25% of people in forbearance continue to make their payments. Just over 28% have done loan modifications, and almost 8% have refinanced or sold their homes/paid off their loans, so people are doing what they can to remain in their homes. What is worrisome is the 15% of people who do not have a plan going forward. This means 267,000 people are at risk of foreclosure. At the height of the Great Recession, there were 3.8 million foreclosures – that is a tsunami. Right now, the delinquency rate on mortgages is at the lowest level it has been since before the pandemic. Couple this with the housing prices rising nearly 14% over the last year and only 2.4% of mortgaged homes having negative equity puts people in a good position related to equity in their homes. In my opinion, people will sell and take the equity in their homes versus lose it.
Headline #3: We are in a housing bubble, and it is about to burst. My response, I’m afraid I have to disagree. Right now, our appreciation levels are below the national average – 11% versus 14%. Demand for houses remains strong, and inventory remains low, so the result is a basic economic formula of supply and demand equals rising prices. The escalating prices we saw earlier this year are tapering down, which was needed.
Additionally, if you compare us to the cities we compete with for jobs and corporate relocations, we are priced lower than them. These cities are Seattle, Boston, San Jose, San Francisco, and New York. Therefore, we are not in a housing bubble.
Here are the numbers that prove we are not slowing down, and in fact, we are in a robust housing market compared to “normal” years, and not the anomaly we experienced during the pandemic.
Inventory in NOVA:
2021 – 3,545
2019 – 4,283
2018 – 6,143
2017 – 6,759
Sales previous 30 day:
2021 – 3,304
2019 – 2,648
2018 – 2,448
2017 – 2,752
Month’s supply of houses:
2021 – 1.1
2019 – 1.7
2018 – 2.5
2017 – 2.5
As you can see, we are outperforming the recent “normal” years. If you are thinking about selling or buying a home, please call me to discuss your situation in more detail. Happy Fall!!