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2020 ends with 2.8 million in forbearance
January may see a big drop as an estimated 367,000 forbearance plans are set to expire
The number of mortgages in active forbearance rose by 20,000 last week, according to a Friday report from Black Knight. Though the raw number increased, the number of mortgages in active forbearance remained at 5.3%, unchanged from the week prior.
Heading in to the last week of the year, Black Knight estimates 2.8 million homeowners are in some form of forbearance – accounting for $565 billion in unpaid principle. (Housing Wire)
Last week’s uptick was largely driven by the share of loans in forbearance rising from 5.2% to 5.3% (17,000 overall) in private label securities or banks’ portfolios.
The share of Federal Housing Administration and Veterans Administration‘s loans in forbearance as a share of portfolio also rose some 10,000 last week from 9.4% to 9.5%.
Though the week prior saw a 5,000 forbearance plan uptick in the raw number of GSE loans, those backed by Fannie Mae and Freddie Mac fell by 7,000 week-over-week while maintaining their 3.5% portfolio share from the week prior.
According to Black Knight, a small increase in forbearance toward the middle and end of the month is not uncommon as the strongest declines typically take place toward the beginning of the month as forbearance plans are removed.
January in particular may experience some rather steep drops as 367,000 forbearance plans are set to expire the first month of the year. How many of those plans will be extended is still unknown.
On a bright note, after seeing both new plan starts as well as re-start activity rise in early December, forbearance starts across the board have declined in each of the past two weeks.
“This improving trend can undoubtedly be seen as a positive development, as rising starts alongside unfavorable employment numbers early in the month have been threatening the broader trend of improvement of recent months,” Black Knight said.
Though forbearance numbers are nearly 2 million below May’s peak, Black Knight’s delinquency numbers are showing the national delinquency rate is nearly three percentage points above pre-pandemic levels.
Michael Sklarz, who leads Black Knight Data and Analytics’ Collateral Analytics team, predicts that rather than face foreclosure, many homeowners nearing the expiration of their forbearance plans under the CARES Act might put their properties up for sale.
“There are millions of homeowners currently in forbearance across the country who will lose those protections throughout next year and – depending upon their ability to return to performing status – who may find themselves facing foreclosure,” Sklarz said. “This is of course assuming a Biden administration doesn’t extend the moratoriums currently in place.”
If this rapid increase in inventory does come to fruition from increasing forbearance exits, Sklarz said it could put downward pressure on home prices.
If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.
5 Things to Do with Your Christmas Tree After the Holidays—and 4 Things to Skip
After Christmas, or maybe New Year’s, or maybe even after half of the month of January has passed, those who purchase real trees find themselves with their once beautifully decorated, now half-dead Christmas decor wondering: now what?
Some people drag them to the curb at first chance, hoping the garbage collectors are feeling friendly that day, and others leave them in wooded property to decay. Still others try to set them on fire (spoiler: don’t!) and others try to chop them into firewood. Turns out, there are specific dos and don’ts from the experts when it comes to getting rid of a tree after the official end to the Christmas season. Here are your options, and some things to avoid.
Turn it into mulch, with a little help
If you’re starting out your new year with a resolution to recycle whenever possible, you can start with your tree. Check with recycling centers and hardware stores to see if one near you accepts Christmas trees to use for mulch and other landscaping purposes. For example, The Home Depot’s site advertises: “Many Home Depot stores recycle trees by partnering with a tree company to chip the trees into mulch. Just drop off your tree beginning the day after Christmas and look for more information in mid-January for chipping events.”
The Environmental Protection Agency (EPA) spokesperson Molly Block recommends contacting your local recycling authority and searching for community programs that keep Christmas trees out of landfills. “Often, local public works departments will take your tree and turn it into wood chips for gardens and parks. Wherever you take it, remember to remove all ornaments and light strings, which can jam recycling equipment and take whole systems offline,” she says.
You can also rent a chipper and make your own mulch, but note that you have to age the mulch a year before using it—so don’t expect instant gratification and results.
Take it to the curb, after checking for details
Most waste removal companies are happy to take your tree for you, but you may need to check on the rules. Craig Gjelsten, VP of Operations at Rainbow International Restoration, a Neighborly company, has seen his fair share of disasters such as “unnecessary fires and mishaps” in his time working with his home restoration company. To handle the tree disposal, he says:
Start by removing all the lights and ornaments from the tree and dump water left behind outside in the yard.
Sweep up needles that have dropped on the floor with a broom.
Once you’re ready to move your tree, look up your city’s yard waste pickup date and place it on the curb that morning. Some cities want your tree to be bagged; others would rather have it unwrapped. Make sure you follow your area’s protocol.
Also be sure your tree also meets the size requirements. If yours is too big, consider cutting it down to smaller pieces. You can use a chain saw or a simple hand saw.
Make a decorative bird feeder or bird shelter
To extend the life of your tree and repurpose it into another project, think beyond the curb on trash pick-up day. Melinda Myers is a horticulturist, columnist, author of over 20 gardening books and host of The Great Courses “How to Grow Anything” DVD series, and recommends turning it into a food and shelter tree for birds. “Set it in a snow bank, anchor it to the ground where the soil is not frozen, and decorate for the birds. Use orange slices, strands of cranberries, and bird seed ornaments you can make or buy,” she says. “I have always found ways to reuse my tree even when living on a small city lot.”
Use your old tree as a protector for young landscaping
Myers has also set up her tree on the windward side of new tender evergreens and new plants as a way to protect them from wind, and to shade them from the winter sun. She calls it an “attractive windbreaker.”
An old tree can also support other plants if you wait until summer and use its skeleton as a trellis, allowing pole beans and other climbing plants to grow up and cover the bare branches and trunk. “This is a valuable resource that can continue contributing to your landscape and your gardening efforts,” Myers says.
Some areas might recommend against leaving the tree in the yard, as it can attract pests and weeds, but it depends on your location. Check your local ordinances if you’re unsure.
Chop it up for firewood, with some precautions
You can use your tree for firewood, but only outside. Inside, the sap can create a fire hazard in the chimney or venting. That’s because Christmas trees release creosote, which can solidify and stick to the liner of your chimney; the flammable material can lead to dangerous chimney fires.
If you are burning the wood outside, be sure to follow your local laws for outside bonfires as well. As with any type of wood, ensure it’s dry for best burning, and don’t forget to remove your favorite heirloom ornament before throwing a bonfire.
4 things not to try (at least without a little research)
Don’t repurpose trees that aren’t native to your area. Only repurpose locally grown trees, as you could accidentally introduce some invasive species to your community otherwise
Don’t dispose of your tree in a body of water without research. Some lakeside communities “sink” their Christmas trees to liven up fish habitats, but in other areas it’s illegal. Contact your municipality first before trying this one on your own.
Don’t leave your tree in the way of a sidewalk, driveway, or road as you wait for trash removal services.
Don’t assume your local recycling pick-up will take the tree. Verify with your local waste pickup before proceeding.
If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.
How to Hire a Contractor in the Middle of a Pandemic
Looking to have work done on your house? A look at how to do it safely, and how COVID has changed the industry.
This year has brought about a lot of introspection, and it’s put one big aspect of our lives under the microscope in myriad ways: our homes. When you live, work, teach, exercise and exist 24/7 within the same four walls, you start to notice everything. You start to realize just how much your kitchen could use a facelift, the backyard that could be so much more with just a little effort, and the living room layout that could benefit from being just a tad more open.
Because of this, many homeowners have started to invest significantly in their homes with renovations, remodels and upgrades, resulting in an increased demand for contractors. Online home remodeling platform Houzz has seen a 58% annual increase in project leads for home professionals, and Porch.com reported a 275% increase in interest for new decks. Jess Kennedy, co-founder and COO for home loan start-up Beeline says the contracting industry has been able to maintain stability despite COVID rocking many industries. In multiple states, home construction, including remodeling, has been classified as an essential service, even under stay-at-home orders, so in most cases, business is proceeding as usual. But of course for those of us doing the hiring, this doesn’t mean things like finding the right person for the job and scheduling that person have gotten any easier… If anything, the demand has made it more difficult. And of course with COVID, people are much more cautious about who they bring into their homes.
So how can you mitigate complications and find the right contractor for your particular job? Take a look at these words of wisdom from the experts.
HAVE SOME PATIENCE
Kennedy says anyone hiring a contractor should expect and plan for plenty of hiccups along the way. Part of this is due to the uptick in current demand, but a lot of it is due to many contractors still playing catch-up from the spring. “When industries first ground to a halt, many current projects for contractors were put on hold. Now those projects will be back up and running, so your contractor could be booked up for some time,” she explains.
Also, because contracting requires a supply chain from multiple vendors to complete a project, you may also run into delivery delays in materials. To prepare for this likely scenario, Kennedy suggests making decisions early on with regard to finishes, appliances and other goods that must be ordered. This allows your contractor to set expectations accordingly or recommend alternatives to speed up the process.
ASK FOR REFERENCES AND PAST WORK SAMPLES
When you start the process of selecting a contractor, it’s vital to think of it as a hiring process. You’re not going to find someone overnight. You’re onboarding someone to take on a major project in your home, so ask to see examples of their work, from start to finish. You’ll also need to confirm they have liability protection and only use licensed subcontractors and provide warranties for their work.Don’t be afraid to ask for this information right from the beginning of your conversations, says Carson Wright, the executive director of Manorly Concierge Home Management. “Hiring a professional company will be more advantageous in the long run. The cost to complete the project right the first time will always be a better deal than having to bring in another contractor to remediate shoddy work,” he stresses.
COME PREPARED WITH QUESTIONS
Negotiation is always part of the process of hiring a contractor, and in any negotiation, you’ve got to do your homework before you start discussions. By gaining an understanding of the market, the scope of work and the average cost in your zip code, it’s less likely you’ll be quoted an outrageous amount or otherwise be taken advantage of. Morgan recommends having a list of specific questions to demonstrate your confidence and knowledge, so you aren’t sold on things you don’t need.
Not sure what to ask? No worries. Principal, architect, contractor and designer at Cadiz Design-Build, Lorraine Francis provides these basic suggestions to begin:
Can you share reviews from past clients?
How long have you known your subcontractors?
How many projects did you complete in 2019?
What issues have you run into in the past, and how did you resolve them?
STAY SAFE: STAY DIGITAL AS LONG AS POSSIBLE
With the continued threat of COVID, you and your contractor should keep all communication and meetings digital for as long as you can. Obviously, you can’t redo a kitchen or build a back deck via Zoom (yet, anyway), but plenty of prep work can be completed virtually. Kennedy suggests sharing site plans over video so your contractor can get a good idea of the area, and you can point out specific changes and details. You can also send photos back and forth, discuss how much time will be spent at your home during the project, and so on. The less time you have to spend in close contact with one another, the better.
Once you’ve reached the stage in the process where a contractor needs to visit your home to take measurements and start construction, take time to read the recommendations from The Centers for Disease Control and Prevention regarding having outside workers inside of your space. This detailed guide provides ways both the homeowner and the contractor can stay healthy and protected throughout the project.
Kennedy says you should also feel empowered to ask your contractor about the screening precautions they’re exercising with workers and subcontractors. “Ensure temperature checks are happening before workers enter the home and clarify if there’s contact tracing being undertaken for all contractors on their previous site visits,” she continues. “Mask-wearing by both contractors and homeowners is highly recommended. Having extra face masks on hand in the home in case contractor’s masks become dirty or wet is a great idea to keep up safe work, too.”
WITH COVID, HAVE A PLAN B… AND C, AND D…
Because of the unpredictable nature of, well, everything right now, there’s a high chance that a worker could test positive during your home improvement. In this case, you’ll need to know what steps your contractor is taking to isolate to prevent further spread. If the worst happens, find out if they plan to bring in additional workers, so that your work isn’t wholly derailed with a two-week quarantine. “Clarifying if there will be delays or alternative teams to step in is crucial to avoiding any mid-project stalls,” Francis says.
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If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.
The good, the bad, and the likely for housing in 2021
Hopes are high for a stronger 2021
Despite the pandemic, incredibly, the housing market has surpassed all expectations in 2020. Applications to purchase a home hit a low point in the spring due to stay-at-home orders and mandated business closures, but have rebounded swiftly.
As of the week ending December 4, purchase loan applications have exceeded year-ago levels for 29-straight weeks, and cumulative purchase applications have surpassed 2019 levels. The pace of existing- and new-home sales mirrors the strength in purchase loan applications. New- and existing-home sales are at a post-Great Recession high. While the speed and magnitude of the housing recovery was surprising, the strong underlying fundamentals serving as tailwinds for the housing market’s recovery were not, and these tailwinds are expected to remain strong in 2021. (Housing Wire)
2021 housing market tailwinds: Rates, demographics and supply
Low Mortgage Rates: According to our Potential Home Sales Model, the increase in house-buying power driven by historically low mortgage rates was a significant driver of the housing rebound from April through October. In 2021, consensus forecasts estimate the 30-year, fixed mortgage rate will likely be 3% – with forecasts ranging from 2.8% to 3.3%. Low mortgage rates will boost house-buying power and keep purchase demand robust.
Pent-Up Demographics: Millennials are the largest and most educated generational group in history – approximately 72 million strong in 2019. The bulk of this generation turned 30 this year and are beginning to enter their prime home-buying years. More than half of all the purchase mortgages originated by Fannie Mae and Freddie Mac went to first-time home buyers in data available for 2020, and this trend shows no signs of abating in 2021.
Our analysis shows that Millennials may account for at least 15 million home sales in the next 10 years. This is a conservative estimate that does not take into consideration the higher educational attainment and household income of this generation relative to their predecessors. Adding fuel to the housing demand fire is the increase in the personal savings rate, which climbed to an all-time high in April and remains above the historical average as pandemic-driven restrictions are limiting discretionary spending.
For young people that are still employed, increased savings can be used as a down payment, which is typically the biggest hurdle for first-time home buyers. In 2021, older Millennials will continue to form households, recession or not, which will put upward pressure on demand for homeownership.
Limited Supply: Next year, the supply-demand imbalance in the housing market is expected to remain, even as builders are working hard to bridge the gap. Average tenure length for an existing homeowner is a historically high 10.5 years, which means fewer homes are on the market. What will it take for more existing homeowner buyers to re-enter the market? Ironically, more supply.
Housing is not like most goods. Homeowners typically only list their home for sale when they feel confident that they can find a home “better” than their current one. When housing supply dwindles, it becomes harder to find an upgrade and easier to refinance and renovate instead. This fear of not finding a better home, compounded by sale and moving costs, against the backdrop of historically low rates, leaves existing homeowners with little reason to move.
The big short in housing supply is most prevalent at entry-level price points, making it difficult for first-time home buyers, who can’t buy what’s not for sale. Strong demand and a dearth of supply is Econ 101 for rapid house price appreciation, which will benefit existing homeowners in 2021.
2021 housing market headwinds: The labor market and the threat of “involuntary selling”
Recent foot traffic data indicates a slowdown in economic activity correlated to the rise in COVID-19 cases. The data includes visits to retail establishments, restaurants, shopping malls, hotels, movie theaters and other places of commerce. As consumers voluntarily restrict consumption of in-person services, there will be downward pressure on business activity.
So far, the labor market decline has disproportionately hurt lower wage renters, leaving potential home buyers largely unscathed. However, while higher wage industries capable of allowing employees to work-from-home have reported the fewest job losses, they have also hardly recovered any of the jobs lost since April. These industries, including tech, finance and professional services, are usually comprised of higher wage, more educated employees, characteristics more closely linked with potential homeowners.
And, while forbearance rates are declining, the homeowners who may otherwise be forced to sell are holding on due to the current forbearance policy. Fortunately, homeowners have significantly lower mortgage debt payment burden compared to the 2008 recession, and approximately $20 trillion of equity collectively, which provides them with a buffer against foreclosure. If distressed homeowners are required to resolve delinquency, given their equity buffers, involuntary sales are much more likely than foreclosure.
The outlook for 2021
The housing sector has the wind at its back, despite downside risks from the rise in COVID-19 cases and the potential decline in consumption demand for in-person services. The economic outlook this winter is uncertain, but this is the time that the housing market typically hibernates.
By the time spring arrives, there will likely be more economic certainty driven by the dissemination of a vaccine and the housing market “constants” – low rates, Millennial demand and limited supply – will keep home-buying demand robust. The big short in housing supply will remain and keep the pressure on house price appreciation. As we enter 2021, hopes are high that a vaccine will finally contain the virus and the housing market is poised for another strong year.
If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.
