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Real Estate Big Data

People aren’t paying their mortgages, how can the market adjust?

(REAL ESTATE BIG DATA) COVID-19 has greatly impacted jobs which leads people to not be able to pay rent or mortgage, so how has the government responded, and what does that mean?

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Many people knew the spread of the coronavirus was going to be a big deal but it’s probably fair to guess that at the same time, it feels like it all elevated pretty quickly in the United States.

February feels like it was a lifetime ago and many may have been going about their day to day. Since early March, it has been a domino effect where people were pushed to work remotely (or let go), small businesses were forced to close their doors (or move to online sales), states put in shelter in place orders and mass events were cancelled. It’s no surprise that if you have to shut your business doors or you lose your job that without income, it’s hard to pay your bills.

The nationwide standard that we see is about 37% of one’s salary going to your housing (rent or mortgage – and of course, this varies across the nation). “The standard measure of housing affordability is 30% of pretax income.

Just last week, 4.4 million more Americans filed for unemployment (bringing the 5-week total to 26 million according to CNBC). Within those millions of people, there are a variety of stories – some have a spouse that is still working, some may have been good about their savings, some may be able to ask for help from friends or family, but many were living paycheck to paycheck and there’s nothing to fall back so this is a big blow.

The data told us last week that about 6% of Americans (3 million) have had to request to put their mortgage payment into forbearance. There are a lot of scary things going on right now, but you can imagine that it is really scary to not be able to pay for your housing. This is also very true for renters across the nation that were given notices from their landlords that they were still expected to pay – and pay on time.

How has the government responded?

The CARES (Coronavirus Aid, Relief, and Economic Security) Act included a $2 trillion COVID-19 economic relief package that passed on March 27, 2020 with bipartisan support. It included many areas:

  • Housing
  • Credit Report & Student Loans
  • Small Business Administration Provisions
  • Infrastructure
  • Tax
  • Unemployment Benefits for Self-Employed
  • Families First Coronavirus Response Act (FFCRA) Amendments

Just like many packages, some are feeling left out or that they don’t meet the requirements for the aid, but in regards to the housing market, this past week was that Fannie Mae and Freddie Mac (GSE’s, Government Sponsored Enterprise) are now allowed to buy mortgage loans that are in forbearance which was not the case before.

Per Market Watch,

…In a forbearance agreement, a borrower may skip or make reduced payments for the duration of the agreement.

Moving forward, Fannie Mae and Freddie Mac will be allowed to purchase loans in forbearance, the Federal Housing Finance Agency said this month.

“We are focused on keeping the mortgage market working for current and future homeowners during these challenging times,” FHFA Director Mark Calabria said in the statement. “Purchases of these previously ineligible loans will help provide liquidity to mortgage markets and allow originators to keep lending.”

“Typically, delinquent mortgages and loans in forbearance are ineligible for purchase by the two government-sponsored mortgage enterprises. The move to change the policy was made because some borrowers have sought forbearance shortly after closing, before the lender had the opportunity to sell the loans, the agency said.””

What does this even mean?

This announcement should loosen the market somewhat, although there are certain eligibility criteria and limits, according to FHFA:

  • The mortgage loan must have closed on or after Feb. 1, 2020, and on or before May 31, 2020.
  • The loan must be a mortgage purchase transaction or a no-cash-out refinance.
  • The loan cannot be more than 30 days delinquent.

In addition, eligible loans will be assessed an additional loan-level price adjustment — 5% for first-time homebuyers and 7% for non-first-time buyers.”

If you read that for a second, does this only apply to people that literally bought their home right before March shelter in place announcements were made? Many are turning to their personal neighborhood Facebook groups to ask what others might be doing or if anyone has recommendations on what they can do if they have lost their sources of income.

Wherever you may be in shuffling things around to pay for your housing, this previous article, NAR Chief Economist’s COVID-19 worrisome predictions does give you some ideas on home loans and mortgage rates and what is happening in attempts for a housing recovery, as well as resources that are worth repeating: SBA loan programs , Unemployment Assistance, and Mortgage and Personal Finance policy.

Erin Wike is a Career Coach & Lecturer at The University of Texas at Austin and owner of Cafe Con Resume. Erin is fueled by dark roast coffee with cream AND sugar, her loving husband, daughter, and two rescue dogs. She is the Co-Founder of Small Business Friends ATX to help fellow entrepreneurs + hosts events for people to live a Life of Yes with Mac & Cheese Productions.

Real Estate Big Data

Gen Z is far more open to homeownership than millennials [study]

(REAL ESTATE) After years of hearing how millennials delay homeownership, it’s refreshing to hear Gen Z has a totally different perspective.

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gen z vs. millennials

We’ve written for years about millennials and their reluctance to purchase homes, especially in the wake of the pandemic. Financial hesitancy is a trait long associated with millennials, but according to Hana Ben-Shabat, Gen Z is making a definitive push for homeownership where the prior generation has stagnated.

Hana Ben-Shabat is the author of Gen Z 360: Preparing for the Inevitable Change in Culture, Work, and Commerce, and she founded Gen Z Planet, a firm that “[helps] brands prepare and adjust to the changes that Generation Z is bringing to the workplace and the consumer market.”

Her insight is clearly valuable, making her assertion that Gen Z is more likely to buy homes less speculation and more prophecy.

“Considering their focus on securing their future, home ownership is a piece of the puzzle,” Ben-Shabat says. In a related survey, she notes that 87 percent of Gen Z participants expressed interest in owning a home sometime in the future; only 63 percent of millennials echoed that sentiment.

Gen Z participants also had a stronger inclination toward viewing homeownership as a financially smart decision rather than a burden.

Gen Z’s open-mindedness toward purchasing homes may seem surprising at first glance. Ben-Shabat acknowledges the financial hardships placed on this generation, and posits that, having seen millennials struggle with student debt and the recession of 2008, this generation has arguably more incentive to stay away from large investments.

But she also points out that Gen Z buyers are “determined to learn from the mistakes of others and secure their financial future as early as possible,” adding that they “benefited from a wave of consumer financial education that began after the housing crisis of 2008.

This makes for a generation that is both clear and educated regarding their financial goals and how to achieve them.

It’s also worth noting, as Ben-Shabat does, that millennials have a more tenuous grasp of DIY culture and the financial decisions that accompany it than their Generation Z counterparts. As “digital natives,” Gen Z buyers don’t object as strongly to purchasing starter homes and renovating; millennials, by contrast, find themselves purchasing more expensive properties that are “ready to move in” due to waiting an extended time before shifting toward homeownership.

Ben-Shabat’s observations foreshadow an increased market shift toward Generation Z ownership, especially in smaller, more affordable locations. As for the economic ramifications of the paradigm change, only time (and Ben-Shabat’s website) will tell.

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Real Estate Big Data

It’s actually really great news that home sales just dipped slightly

(REAL ESTATE) Home sales took a small dip in July, according to the National Association of Realtors – why is this GOOD news?

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In a different market, home sales slipping would be terrible news, but in this overheated housing market, it’s welcome news. Pending home sales (contracts signed) slipped in July by 1.8%, according to the National Association of Realtors (NAR).

Marking the second month of declines, all regions fell except the West which rose 1.9%. Compared to July of last year, sales fell 8.5%, so why is this good news?

“The market may be starting to cool slightly, but at the moment there is not enough supply to match the demand from would-be buyers,” said Dr. Lawrence Yun, NAR’s Chief Economist. “That said, inventory is slowly increasing and home shoppers should begin to see more options in the coming months.”

Inventory levels have been high for several years now, and housing starts are millions of units behind where they should be, so several markets are overheated.

“Homes listed for sale are still garnering great interest, but the multiple, frenzied offers – sometimes double-digit bids on one property – have dissipated in most regions,” Dr. Yun said. “Even in a somewhat calmer market, a number of potential buyers are still choosing to waive appraisals and inspections.”

NAR reports that 27% of buyers bypassed appraisal and inspection contingencies to speed up the homebuying process.

Pending home sales slid 6.6% in the Northeast, 0.9% in the South, and 3.3% in the Midwest. While a slowing of sales doesn’t fix the inventory crisis, it sure does slightly loosen conditions. It won’t have a strong impact on housing prices, and a 1.8% dip may feel more like stagnant activity, but it truly is a sign of hope.

NAR is pressing lawmakers to take immediate action, from local to federal; they’re pressing for changes to stop the proverbial bleeding, like permitting law adjustments to allow commercial real estate be transformed to residential units in response to the shortage of housing, and builders unable to keep up.

We’ll still see comedic sketches online about the housing market as a reflection of a dip in homebuyer morale, but hopefully we’ll see those slow as well. Fingers crossed.

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Real Estate Big Data

Housing affordability and food insecurity are linked – a crisis is unfolding

(REAL ESTATE NEWS) You wouldn’t think housing affordability and people’s ability to buy food are linked, but they are and a finance problem is emerging.

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housing affordability and food insecurity

A report out today from the National Association of REALTORS® (NAR) substantiates the relationship between housing affordability and food security. Although this shouldn’t be news to anyone, in the wake of the pandemic, hints of a housing bubble, and with inflation on the rise, many more households are being forced to choose between housing or food.

According to the NAR, “the cost of housing have a critical impact on their ability to have enough food on the table.”

Using the U.S. Census Bureau Household Pulse Survey, NAR analyzed the number of households that found it difficult to pay their expenses. About 7% of all households, or 35.1 million, found it difficult to meet their expenses.

Breaking it down even farther, about 23.3 million homeowners were having difficulty. This is about 38% of all homeowners across the U.S.

Renters only comprised about 11.8 million households with difficulty, but this is about 66% of all renter households. As eviction moratoriums and forbearance periods are expiring, these figures should be worrisome.

The NAR also reports about 8.1 million households are without enough food. About 10% of Americans experience food insecurity.

Renters experience food insecurity at higher rates than homeowners.

Although there are many programs that give out free groceries and that supplement food budgets, renters still find it difficult to meet expenses.

Rents are increasing, faster than wages, which is one reason families are on “the edge of affordability.” For example, although Texas housing rates have risen just 6.7% over the past year, the family income has not. This puts pressure on the family to pay for a roof over their head or to buy food. Affordable housing is an issue that directly relates to food insecurity.

NAR reports that their members care about their community. Among the 67% of REALTORS® who volunteer, a little more than 1/3 of them gave to food banks. Another 20% gave to food delivery for elderly and housebound individuals. REALTORS® donated to frontline workers and for school meals for children.

Despite the help, more can be done. Look into food banks and volunteer opportunities in your neighborhood.

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