This is an interesting take I hadn’t thought of on why the housing market is in trouble.
Synopsis below but the video is really good with supporting data included…
1.7 million homeowners are currently 90+ days past due. Foreclosure moratorium ends July 31st. This floods the market with foreclosure sales or home owners selling to get out of the loan. Almost all sellers will have equity due to the run up in the housing market so they will all stampede to the doors to sell first so they can cash out. The inventory increases, the prices will go down as these homeowners that need to sell now get desperate to unload their homes and avoid foreclosure. The bright side for them is that they will probably walk away with cash in their pocket as a reward for not paying their mortgage payments during the moratorium.
The US Housing Market is in a massive bubble in 2021 that could be set to CRASH soon. However, the US Government and its Foreclosure Moratorium are doing its best to keep the Housing Bubble going. In an era where home buyers and real estate investors are priced out of the market and inventory is low, the Government is trying to ensure it stays that way.
Homeowner Equity has reached a record $23 Trillion across the US in 2021. That means US Homeowners are the wealthiest they have ever been from the value of their homes. This record equity combined with the low housing inventory in 2021 means that middle-class, American renters are being locked out of the Housing Market.
What’s made the Housing Bubble worse? The FHFA Foreclosure Moratorium, which was enacted last year, has prevented foreclosures from taking place. This has exacerbated the inventory shortage going on across the country and pushed home prices. According to data from Black Knight, 1.7 million homeowners are 90+ days past due on their mortgage payments. Yet there are only 150k active foreclosures.
That means there’s a massive 1.5 million backlog of potential foreclosures that will hit the market when the Foreclosure Moratorium ends on July 31st. This could cause a big surge of inventory into the housing market over the next 6-12 months.
Not all areas will see an equal amount of foreclosures and short sales, though. Certain states – such as Mississippi and Louisiana – have the highest amount of defaulted loans. Other states with a number of defaults include Texas, New York, Florida, and Nevada.
Home buyers and real estate investors who are constructing a strategy around the potential increase in foreclosures will want to track this state by state data going forward.
h/t Bloody Peasant!