Despite having an exceptional year of feverish activity in the market, the real estate market could receive a dose of reality in 2022. A return to normalcy after the pandemic is likely to be accentuated with its share of ups and downs as increases prices slow, mortgage rates rise, and the impacts of government intervention diminish.
Based on recent reports from ATTOM solutions, the market hasn't had to wait long to see a rebound in foreclosure activity since the moratorium was lifted in July. According to the report, notices of default, scheduled auctions or bank repossessions increased 34% in the third quarter of this year.
Experts say the rally will likely continue well into the new year after nearly a year and a half of a foreclosure moratorium.
“It's very likely that foreclosure starts will increase in the next six months to a year, with an increase ranging from a tick to a torrent,” says Todd Teta, director of product at ATTOM Solutions.
Lender influence
The jury is still out on the extent of the looming foreclosure spike, but it will largely depend on how lenders choose to approach distressed borrowers who are behind on their payments.
In previous interviews we have conducted, financial institutions told RISMedia they would try to work with borrowers after the moratorium ended, and that appears to be the case, according to a recent Wells Fargo statement.
"Wells Fargo is here to help homeowners when their stop payments are coming to an end, and we are communicating with our customers through emails, letters and over the phone," says a Wells Fargo spokesperson, and It adds that the bank has stopped all foreclosure-related activity on occupied properties until the end of 2021, except in particular cases.
"In most cases, customers who were current on their monthly mortgage or home equity payments when the default began, and are ready to resume those payments, can move late payments to the end of the term. of the existing loan, "the spokesperson said. keep going. "Clients should call us to discuss the possibility of moving payments to the end of the term or to review other program options to recover late payments."
Additional safeguards were also put in place by the Consumer Financial Protection Bureau (CFPB) to ease the transition for borrowers to make payments again. The new rules essentially guide lenders on how they should approach and work with borrowers to avoid foreclosure.
The CFPB rules went into effect on August 31 and will last until the end of 2021.
Lenders who take action against borrowers can also depend on how behind homeowners are, according to Mary Ellen Graziano, senior vice president at William Raveis Mortgage.
"I think the first properties they are going to see are the ones that are abandoned," he says. "The others will probably work with the borrowers and see if they can come up with a repayment plan and maybe even adjust the terms of the loans."
Despite measures taken to prevent foreclosures, increased foreclosure activity will inevitably result from current circumstances.
According to recent reports from Black Knight Inc., leniency volumes continue to decline, with the number of active plans related to COVID-19 falling below 1.6 million in September.
While mortgage delinquency rates showed signs of improvement in August, Black Knight also noted that severe delinquencies - borrowers more than 90 days past due - are still roughly triple their pre-pandemic levels.
However, according to Black Knight, a silver lining is that delinquencies are on track to return to their pre-COVID levels in early 2022.
Remembering 2008
A sustained increase in foreclosures is a heartbreaking forecast, especially for history buffs who remember the last recession.
According to Teta, foreclosures are likely to appear first in poorer areas, where homeowners are more likely to be in financial trouble and least likely to have the money to settle with lenders.
"That will likely lead to an increase in zombie properties, which can lead to deterioration and damage the attractiveness of the neighborhoods where they arise," he says, noting that these types of foreclosures can serve as a primary indicator of the strength of the housing market.
"Few measures of force have stood out more in recent years than zombie properties, or the lack of them," Teta continues.
Zombie properties account for one in 13,100 homes in the United States, according to recent reports from ATTOM Solutions. That's a considerable improvement over 10,300 just two years ago, Teta says, adding that stocks were more prominent after the Great Recession.
"This is a far cry from what happened when home values fell after the last recession, and many homeowners abandoned mortgages that they could not pay or no longer wanted to pay," says Teta.
According to Danielle Hale, chief economist at realtor.com®, the looming rise in foreclosures is not shaping up to be the fatal blow to the industry that economists predicted in 2020.
"When people hear that, they rightly remember the last time we had a ton of foreclosures, it had an impact on the housing market," says Hale. "I don't think we're going to see something like that."
Eric Spotswood, regional mortgage manager for Prosperity Home Mortgage, echoed similar sentiments and pointed out the differences between the two eras.
Looking back to 2008, Spotswood sees a combination of overbuilding and undercapitalization that contributed to the downturn in the market as borrowers ended up backwards on their mortgages.
While the COVID-19 pandemic caused a recession in 2020 and a temporary hiatus in the market, circumstances are essentially reversed in today's market, according to Spotswood.
"Even if someone has to make an emergency sale to get out of their house, people have more value in homes than at any other time in history, and they could," says Spotswood. "The flexibility of borrowers who are in households that may be in a position where they cannot pay them puts them in a strong position."
Runners weigh
Brokers agree that an increase in foreclosed properties hitting the market, which is still desperately in need of new inventory across the country, could provide a needed injection of affordable housing inventory.
Rei Mesa, CEO of Berkshire Hathaway HomeServices Florida Properties, does not find the forecasts alarming for his market, which still needs an inventory injection.
"I don't see that as a problem, and in fact, I would see it as an opportunity for buyers to buy properties because there is a lot of competition for very few listings," says Mesa.
According to third-quarter data reported by ATTOM, Florida was among the list of states with the highest rate of foreclosure, with more than one in 2,000 properties in foreclosure.
The state also had a high rate of completed foreclosures during the same period.
With the amount of demand, Mesa believes any new supply will be absorbed quickly.
According to Candace Adams, CEO and President of Berkshire Hathaway HomeServices New England, Westchester & New York Properties, the same is true for the Northeast markets.
"You have nine or ten offers per property, and our current inventory is about 23% down from last year," says Adams. "We know that in the state of Connecticut, we have a supply of less than two months, so hopefully we will have some foreclosures because they will be eaten up in about two seconds because the buyers are still there."
Yuri Blanco, broker / owner of RE / MAX Executives, echoed similar sentiments for the Boise, Idaho market. According to Blanco, the market continues to see an inbound migration of buyers driving demand.
"They are still interested in buying, but they have not yet been able to block anything," says Blanco. "I think once they go on the market, there will be buyers who will take advantage of those prices, which are usually a fairly fair market value."
However, the opportunity doesn't just rest with the buyers. Mesa also notes that agents can improve their business prospects in the months and years to come if they are prepared.
Part of that preparation includes reviewing the training and certifications that stand out for lenders and banks.
“Once the banks take over the properties, they are going to use those REALTORS® that lenders are used to working with or have already vetted to handle listings,” says Mesa.
He notes that courses to improve understanding of how to work with the bank, the borrower and the potential buyer could be of great help to agents who want to capitalize on the influx of foreclosed properties.
Demand for continuing education on short sales and foreclosures is already showing signs of increasing, according to Tina Lapp, director of Local Brands at Colibri Group and former president of Hondros de Colibri University.
"We regularly survey our students on topics that interest them, and we are seeing these topics becoming more in demand than they have been in recent years," says Lapp, adding that Colibri offers courses on a combination of "hot topics. that impact the current real estate market ".
“Our demand for courses follows the market, which is great to see that real estate professionals are highly motivated to learn the skills that support their buyers and sellers,” continues Lapp. "We are starting to see a slight pickup in demand for short selling and foreclosure issues, but certainly not to the extent of what we were experiencing in 2007-09."
Contact Bill Cullin so you can be ready to face the changes in the market!
Bill cullin
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