Category: Residential

MBA RIHA Study Reveals Progress, but 5 Million Renters and Homeowners Missed December Payments

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WASHINGTON, D.C. (February 8, 2021) – Five million households did not make their rent or mortgage payments in December, and 2.3 million renters and 1.2 million mortgagors said they feel they are at risk of eviction or foreclosure, or would be forced to move in the next 30 days. That is according to fourth-quarter 2020 research released today by the Mortgage Bankers Association’s (MBA) Research Institute for Housing America (RIHA).

The new fourth-quarter 2020 findings on housing and student loan payments come from RIHA’s study, Housing-Related Financial Distress During the Pandemic, which was previously released in September 2020 (second-quarter findings) and October 2020 ( third-quarter findings).

The percentage of homeowners and renters behind on their payments has decreased since last year’s second quarter. In December, 7.9% of renters (2.62 million households) missed, delayed, or made a reduced payment, while 5.0% (2.38 million homeowners) missed their mortgage payment. The proportion of student debt borrowers who missed a monthly payment climbed to approximately 43% of borrowers in December from the steady share of around 40% since May.

“Gradual improvements in the labor market and economy helped more renters and homeowners make their housing payments at the end of 2020. However, the COVID-19 pandemic continues to cause financial stress for millions of Americans, and particularly for those who rent and have student loan debt,” said Gary V. Engelhardt, Professor of Economics in the Maxwell School of Citizenship and Public Affairs at Syracuse University. “Despite 5 million renters and homeowners not making their December payment, fewer believe they are at risk of eviction, a foreclosure, or would be forced to move in the next 30 days. This confidence is perhaps an indication that direct checks and enhanced unemployment benefits, rental assistance, mortgage forbearance programs, and a federal eviction moratorium have so far been effective in keeping people in their homes.”

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    BLACK KNIGHT’S DECEMBER 2020 MORTGAGE MONITOR

    24% of Active Forbearance Plans Scheduled to End in March, When More than 600,000 Homeowners Face 12-Month Expirations

    JACKSONVILLE, Fla. – Feb. 1, 2021 – Today, the Data & Analytics division of Black Knight, Inc. (NYSE:BKI) released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage, real estate and public records datasets. As the final, 12-month expiration point for many forbearance plans quickly approaches, this month’s report looks at how the slowdown in improvement in recent months may present new challenges to recovery for seriously delinquent homeowners. According to Black Knight Data & Analytics President Ben Graboske, the end of March 2021 is shaping up to be an inflection point for the industry.

    “For the roughly 6.7 million Americans who have been in COVID-19 related mortgage forbearance at some point since the onset of the pandemic, the programs have represented an essential lifeline,” said Graboske. “The vast majority of plans have a 12-month cap on payment forbearance, though. And the various moratoriums which have kept foreclosure actions at bay over the past 10 months may be lulling us into a false sense of security about the scope of the post-forbearance problem we will need to confront come the end of March. Last year saw the largest number of homeowners – nearly 3.6 million – become 90 or more days past due since 2009, and as of the end of December, 2.1 million remained so.

    “When nearly a quarter of all forbearance plans come to an end on March 31, at the current rate of improvement there would still be approximately 1.5 million more such serious delinquencies than before the pandemic. With that rate of improvement slowing in recent weeks, current trends suggest more than 2.5 million homeowners would still in forbearance at that point. While early in the pandemic roughly half of homeowners in forbearance continued to make their monthly mortgage payments, that number has steadily declined. Today, it’s about 12%, which suggests the people who are taking the full forbearance period afforded to them may well be experiencing prolonged financial distress, and face extended challenges as they return to making payments.”

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      BLACK KNIGHT’S FIRST LOOK AT DECEMBER 2020 MORTGAGE DATA

      2020 Ends With 1.7 Million More Seriously Delinquent Homeowners Than at Start of Year; Foreclosures at Record Low

      • The year ended with 1.54 million more delinquent and 1.7 million more seriously delinquent mortgages than at the start of 2020, a looming reminder of the challenges facing the market in 2021
      • Despite the year-over-year increase, the national delinquency rate saw modest improvement in December, falling by 3.9% from November to 6.08%, the lowest level since April 2020
      • Serious delinquencies (loans 90 or more days past due) also improved, falling to 2.15 million from 2.19 million the month prior
      • Even after months of improvement, 90-day default activity rose by more than 250% (+2.6 million) overall in 2020
      • Foreclosure starts fell by 67% from the year prior and the year’s 40,000 foreclosure sales (completions) represented an annual decline of more than 70%
      • Starts and sales have hit record lows as moratoriums and forbearance plans protect distressed homeowners from facing foreclosure in the wake of the pandemic
      • Prepayment activity rose by 12% in December, ending the year 112% higher than the same month in 2019 and highlighting a still-strong refinance market entering 2021

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        Nearly 20% of renters in America are behind on their payments

        The typical delinquent renter now owes $5,600, being nearly four months behind on their monthly payment, according to a new analysis. This also includes utilities and late fees.

        About 18% renters in America, or around 10 million people, were behind in their rent payments as of the beginning of the month.

        It is far more than the approximately 7 million homeowners who lost their properties to foreclosure during the subprime mortgage crisis and the ensuing Great Recession. And that happened over a five-year period.

        In one of his first executive orders, President Joe Biden extended the Centers for Disease Control and Prevention’s current eviction moratorium through the end of March, but that is unlikely to be long enough.

        A new analysis from Mark Zandi, chief economist at Moody’s Analytics, and Jim Parrott, a fellow at the Urban Institute, shows the typical delinquent renter now owes $5,600, being nearly four months behind on their monthly payment. This also includes utilities and late fees. In total, an astounding $57.3 billion is owed. This includes all delinquent renters, not just those suffering financially due to the Covid pandemic.

        “Compared to renters that are making their rent payments on time, currently delinquent renters are more likely to be lower income, less educated, black and with children,” noted the authors of the analysis.

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          Home prices are rising faster in the middle of the U.S. as Covid drives people away from coasts

          Smaller metropolitan markets like Indianapolis, Kansas City, Boise, Austin, Cleveland, Cincinnati, Memphis and Pittsburgh are seeing some of the strongest price gains in the nation.

          Home prices are rising across the nation, but the Covid pandemic is turning the usual geographical trends on their heads.

          Home values have historically risen most sharply in large cities on the coasts, where supply is leaner and demand is stronger. That is no longer the case.

          Smaller metropolitan markets like Pittsburgh, Cleveland, Cincinnati, Indianapolis, Kansas City, Boise, Idaho, Austin, Texas, and Memphis. Tennessee are seeing some of the strongest price gains in the nation now, according to the Federal Housing Finance Agency. Prices in those cities are now at least 10% higher than with a year earlier.

          These have all been historically more affordable markets, and markets that generally have more inventory of homes available for sale. That makes the suddenly strong price growth in the middle of the country that much more striking.

          Much of it is likely to do with the new ability to work from anywhere due to the coronavirus. People are leaving larger more expensive metropolitan markets and heading to less expensive markets where they can get more space and land for their money.

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            Pensions Swamped in a Sea of Negative Real Rates: Brian Chappatta

            The 30-year U.S. real yield has been negative since mid-June after never falling below zero at any point since at least 2004.

            (Bloomberg Opinion)—Defined-benefit pension plans were already barely treading water heading into 2020. In the years ahead, the risk is as great as ever that a large swath of them will drown.

            As the name implies, defined-benefit pensions promise to pay a set amount to retirees. While corporate America has largely moved away from this structure in favor of 401(k) options (or “defined contribution” plans), virtually all state and local governments still offer these reliable retirement payouts. And they’ve been falling behind in a big way: In the 2019 fiscal year, states had $1.48 trillion in unfunded pension liabilities, while the 50 largest local governments faced $478 billion in adjusted net pension liabilities, according to calculations from Moody’s Investors Service. The 100 largest corporate defined-benefit plans had a deficit of $285 billion in November, according to Milliman data.

            That $2 trillion hole is only going to get deeper as the Federal Reserve pledges to keep interest rates near record-low levels for years to come as the U.S. emerges from the Covid-19 pandemic. Moody’s, unlike many states and cities, uses a market-based discount rate to determine the present value of a pension’s future liabilities. The lower the rate, the larger the current value. Analysts expect to apply a 2.7% rate to local governments’ fiscal 2021 reporting, down from 4.14% in fiscal 2018 and about the same as Milliman’s current discount rate for corporate pensions. It will likely cause pension shortfalls “to increase by double-digit percentages” in the next two years, Moody’s says.

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              BLACK KNIGHT’S FIRST LOOK AT NOVEMBER 2020 MORTGAGE DATA

              Delinquencies Improved Again in November 2020, But Nearly 2.2 Million Seriously Past-Due Mortgages Remain

              • Despite seasonal headwinds, mortgage delinquencies improved for the sixth consecutive month in November 2020, falling to 6.33% from 6.44% in the month prior
              • The national delinquency rate is now down 1.5 percentage points from its peak of 7.8% in May but remains a full three percentage points (+93%) above pre-pandemic levels
              • While early-stage delinquencies – borrowers one or two payments past due – have fallen back below pre-pandemic levels, seriously past-due (90+ days) mortgages remain 1.8 million above pre-pandemic levels
              • Foreclosure activity remains muted as widespread moratoriums remain in place
              • November’s 4,400 foreclosure starts and 176,000 loans in active foreclosure are both at their lowest levels on record since Black Knight began reporting the metrics in 2000
              • Prepayments fell 11% from October’s 16-year high; however, with interest rates at record lows and refinance incentive at an all-time high, prepay activity is likely to remain elevated in the coming months

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                Mortgage demand from homebuyers drops to lowest level in 6 months

                Mortgage applications to purchase a home fell 3% for the week and were 16% higher than a year ago.

                Another record low interest rate on the 30-year fixed mortgage last week did not help drag homebuyers out of their recent slump.

                Declining demand from buyers caused mortgage application volume to fall 0.5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

                Mortgage applications to purchase a home fell 3% for the week and were 16% higher than a year ago. The annual comparison is now shrinking steadily.

                “The purchase market continued its recent slump, with the index decreasing for the sixth time in seven weeks to its lowest level since May 2020,” said Joel Kan, an MBA economist. “Inadequate housing supply is putting upward pressure on home prices and is impacting affordability — especially for first-time buyers and lower-income buyers.”

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                  Pending home sales spike a record 44.3% in May, as homebuyers rush back into the market

                  Pending home sales spiked a stunning 44.3% in May compared with April, according to the National Association of Realtors.

                  That is the largest one-month jump in the history of the survey, which dates to 2001. It beat expectations of a 15% gain. Sales were still 5.1% lower compared with May 2019, however.

                  Pending sales measure signed contracts on existing homes, so it shows that buyers were out shopping during the month of May. Sales had fallen 22% for the month in April, as the economy shut down to slow the spread of the coronavirus.

                  “This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership,” said Lawrence Yun, NAR’s chief economist. “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”

                  The market, however, still needs more supply, Yun noted. “Still, more home construction is needed to counter the persistent underproduction of homes over the past decade.”

                  The supply of existing homes for sale at the end of May was nearly 19% lower annually, according to the NAR. Single-family housing starts in May were not as strong as expected, although building permits, a measure of future construction, did gain some steam.

                  The supply of homes is still extremely low, but is improving in some markets. Active listings were up by more than 10% for the month in San Francisco, Denver and Colorado Springs, as well as Honolulu.

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                    Housing market should ‘cool off’ later in year, Moody’s economist Zandi says

                    “The confluence of high unemployment and the end of the forbearance measures means that we’ll get more defaults and ultimately more foreclosures, more foreclosure sales, and that’ll put some weakness into the housing market,” economist Mark Zandi said on “Power Lunch.”

                    The housing sector has been one of the most resilient areas of the economy during the coronavirus downturn, but Mark Zandi, chief economist at Moody’s Analytics, said Tuesday that he expects the growth to moderate later in the year.

                    Sales of new homes last month rose nearly 13% year over year, according to the Census Bureau. But Zandi said the sector will weaken as some of the government aid and regulations used to prop up the economy expire.

                    “The confluence of high unemployment and the end of the forbearance measures means that we’ll get more defaults and ultimately more foreclosures, more foreclosure sales, and that’ll put some weakness into the housing market,” he said on CNBC’s “Power Lunch.”

                    Millions of homeowners have taken advantage of forbearance programs that allow borrowers to miss mortgage payments, helping to insulate the housing market from a historic rise in unemployment.

                    Meanwhile, concerns about the coronavirus have sparked increased interest for homes in suburban and rural areas, according to real estate firms, leading to demand outstripping supply. More construction, particularly in the lower and middle areas of the price distribution, is needed to help the supply issues, Zandi said.

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