One of the more-accurate forecasters is predicting that home prices will start dropping:
Strong home purchase demand in the first quarter of 2020, coupled with tightening supply, has helped prop up home prices through the coronavirus (COVID-19) crisis. However, the anticipated impacts of the recession are beginning to appear across the housing market. Despite new contract signings rising year over year in May, home price growth is expected to stall in June and remain that way throughout the summer. CoreLogic HPI Forecast predicts a month-over-month price decrease of 0.1% in June and a year-over-year decline of 6.6% by May 2021.
Unlike the Great Recession, the current economic downturn is not driven by the housing market, which continues to post gains in many parts of the country. While activity up until now suggests the housing market will eventually bounce back, the forecasted decline in home prices will largely be due to elevated unemployment rates. This prediction is exacerbated by the recent spike in COVID-19 cases across the country.
https://www.corelogic.com/insights-download/home-price-index.aspx
Expecting prices to fall that quickly is flawed, however.
They are ignoring that for home prices to go down, we would need a load – probably a majority – of sellers who are willing to sell for less than the last guy got. In addition, it would take realtors who recognize what’s needed, and be able to properly advise their sellers on lower pricing.
It ain’t going to happen.
Listing agents only have one pitch – to berate the buyer agents into paying the seller’s price. If we ever get to the point where buyers object to the constantly-rising prices, and/or we run out of buyers altogether, then there will be a long stall before sellers and agents re-calibrate.
Recognizing that a shift in pricing is needed will be hampered by all the usual excuses.
The seller retorts of “I’m In No Rush”, “I Don’t Need to Sell”, and the classic, “I’m Not Going to Give It Away”, will be doused with coronavirus blame before any sellers – even the desperate ones – would consider selling for less than what they think they deserve.
Sales will slow first, so keep an eye on them – but it would take 1-2 years of stallout before sellers and agents start believing that they might not get their price.
What about the 4,500,000 people not paying their mortgage right now? At some point they have to start again but a lot won’t be able to. I hearing a wave of future foreclosures is starting to pile up.
a wave of future foreclosures is starting to pile up.
Everyone has equity now – wouldn’t those in default sell their home instead, and get some money, rather than nothing?
Real estate will get more localized. Wouldn’t want to be selling a high end apartment in NYC these days. At the other end I don’t need to tell you about quality coastal SFRs.
You would think so. There is a home in my neighborhood that was bought for $700k in 2010 as a short sale. Borrower owes $533k but hasn’t paid in over a year. House would $1.2mm Easy. Why wouldn’t he sell!
https://www.zillow.com/homedetails/181-Clydesdale-Dr-Danville-CA-94526/18428697_zpid/
People are nuts. They never want to leave their home even when it makes a ton of financial sense. Owner has a kush city job I see his New truck out front everyday with the city he works for’s name on the truck.
People ARE nuts or don’t feel any pressure from their lender?
But if/when the day comes that lenders do start foreclosing, this guy should be the first because of his equity position. Lenders would only foreclose if they didn’t lose money, which is a big change from previous times.
Excerpts from the U-T article which I just saw:
The Mortgage Bankers Association said about 8.47 percent of loans were in some sort of forbearance in mid-June compared to 0.25 percent in early March. The association started the forbearance survey in March as the pandemic began.
However, Marina Walsh, the association’s vice president of industry analysis, said the current numbers might actually look worse than they are. She said the association’s surveys found many borrowers who have requested forbearance during COVID-19 have done it as a form of insurance in case they lose their jobs — and have actually kept making payments.
“Fifty-five percent of those existing forbearance plans are those that have continued to pay their mortgages,” she said of recent developments.
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Chris Thornberg, economist and founding partner of Beacon Economics, argues a major foreclosure crash even several years from now is unlikely. He said risky home loans given to people that could not afford homes caused the last recession, as opposed to this time being a near complete stoppage of the economy because of a pandemic.
He said most jobs should be considered furloughs because people are still supposed to return to work. As numerous economic studies have pointed out, the majority of people who lost jobs in this recession have been largely low-skilled, low-paid workers, so Thornberg argues those are mostly renters — especially in high-priced areas like San Diego.
“I’m not diminishing the plight of these folks. This is why we have incredibly generous unemployment benefits and have all sorts of systems to keep them stabilized,” he said,” but those people don’t own homes.”
https://www.sandiegouniontribune.com/business/story/2020-07-03/will-san-diego-get-a-covid-related-surge-of-foreclosures
Jimmy is right. Most everyone has equity around here. The forbearance just tacks on a few months to the end of mortgage. Its gonna get refied at some point anyway or paid off at sale. For the over 90% of us still paying our mortgages there are 30 year rates to be found in the mid 2’s. If i could still paddle out Id be all over the tsunami