Hi, I’m Warren Oberholser. I’m a realtor in the East Bay Tri-Valley area in Northern California. My goal is to help both buyers and sellers get maximum results for one of their biggest investments, their home.
In this BLOG, I’m going to discuss what you can expect for the housing forecast for the remaining 2021. Before I go into that, let’s go back a couple of months so you can see where we’ve been. According to Redfin, in June 2021, home prices across the United States surged 24.8% year-over-year to a median sales price of $386,888.
During the same period, the number of homes sold increased 20.6% and the number of homes for sale tumbled to 39.6%. “The real estate market in the first half of 2021 bore surging demands for a millennial reshuffling,” said Greg Toschi, CEO of Poplar Homes, a California-based real estate technology and service company. “Millions of older millennials are creating families and were planning to buy a home in 2022 to 2025.” However, he said a lot of people decided to make their move earlier, instead of following their original homebuying timeline. “We saw this in the rental market with 100% increase in the number of people moving to buy a home or change jobs.” He said, “All the demand was pulled forward and unleashed like a slingshot, alas, prices skyrocketed.”
Where are we today? In an article by Lance Lambert from Fortune Magazine, he states, “Since bottoming out this spring, the number of homes for sale is up 30%. Sure, some of this can be attributed to the seasonality, but the bigger reason is buyers are finally balking at the insane prices, which have risen up 18% over the past 12 months.” Here’s an important point. Another factor, according to Lance Lambert, “Edgy sellers who don’t want to miss out on profits may be rushing to put their home on the market, and may feel a bit more comfortable moving now than they did when the pandemic was raging unchecked.“
But the softening isn’t over, there is more inventory looming. Now, speaking of inventory, let’s address mortgage forbearance. Mortgage forbearance programs, which allows borrowers to pause their payments is set to begin winding down on September 30th. There are still 1.7 million borrowers enrolled in the program. Not all of these struggling borrowers are going to be able to afford those payments. Some of them will simply sell rather than restart paying. That, of course, means more inventory.
If we look at the chart provided by Black Knight, you can see the projected number of homeowners set to leave forbearance status. According to Frank Nothaft, the Chief Economist from CoreLogic, “While job and income growth has helped to push delinquency rates down, there are still many families that remain in financial distress. More than 1 million borrowers have missed six or more payments as of June, triple the number of borrowers pre pandemic. CoreLogic analysis found that as of June 2021, borrowers in forbearance and behind on mortgage payments had missed an average of 10 monthly payments.”
The big question is, what will the homeowners do when they leave forbearance? An option that is available to homeowners is a loan modification, or some kind of a silent second mortgage. What is a silent second mortgage? This is when a lender takes the amount not paid in forbearance and tacks it on the end of the loan. This was a closing statement from a homeowner who refinanced their loan with a different lender. You can see the second mortgage noted here. What’s interesting is the homeowner didn’t even know the lender did this. They just found it in the closing statement. Let’s look at the national loan performance. CoreLogic states where the serious delinquency rate increased, there were 290 metropolitan areas where the series delinquency rate remained the same or decreased. The share for mortgages 60 to 89 days past due was 0.3%, down from 1.8% in June 2020. The serious delinquency rate defined as 90 days or more past due, including loans in foreclosure was 3%, down from 3.4% in June 2020. While still high, this is the 10th consecutive month of declines and the lowest serious delinquency rate since May 2020.
As of June, 2021, the foreclosure inventory rate was 0.2% down from 0.3% from last year.
Okay, let’s go a little further and let’s look at the mortgages that are now considered to be in a serious delinquency state. Serious delinquency is defined as 90 days or more past due, including loans in foreclosure. When this happens, the bank usually will issue a notice of default, commonly known as an NOD. This is the first phase of the foreclosure process.
Back in 2008, when we had the mortgage crisis, the average time period for banks actually foreclosing on a property after an NOD was sent was a minimum of two years. I imagine with today’s eager to help bank attitude, this period will be much longer.
What to take from this?
As I’ve noted in previous videos, this can be an opportunity for the fall buyer to take advantage of more inventory, and prices have started to stabilize and settle down. For the sellers, they will have to navigate carefully to make sure that their property doesn’t season too long on the active real estate market. This means price and prepare accordingly. I will continue to monitor and update you as things progress in our housing market.
I hope you enjoyed this article. Please let me know if you have any questions. Warren
Hello…I work with both buyers and sellers in the Tri-Valley area of Northern California. The Tri-Valley is comprised of 6 cities: Pleasanton, Livermore, Dublin, San Ramon, Danville, and Alamo. To better understand what each city has to offer, I have created a Pros and Cons video and BLOG for each – (Pros & Cons for Pleasanton, Pros & Cons for Livermore, Pros & Cons for Dublin, Pros & Cons for San Ramon, Pros & Cons for Danville and Pros & Cons for Alamo). If you are thinking about purchasing or selling a home, please reach out to me by text, phone, or email. If it is convenient, I can schedule a Zoom chat so we can discuss your home goals. Wishing you all the best on your home journey. Cheers!
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