Real Estate News
By: Real Estate Hotline
Winter 2021 (Vol. 38, No. 4)
The Real Estate market continues to do well fueled by recordlow mortgage rates, under 3%. The National Association of Realtors (NAR) predicts rates will not drop lower this year but should rise only slightly through 2021.
However, high demand with low supply is causing prices to rise considerably in many regions and this may start to chip away at affordability. Market projections are harder this year because we have so many unknowns. However, NAR’s Chief Economist Lawrence Yun believes once the pandemic subsides and the economy recovers, we could see unleashed spending. Realtor.com’s Danielle Hale, says, “The 2021 housing market will be much more normal than the wild swings we saw in 2020, Buyers may finally have a better selection of homes to choose from later in the year but will face a renewed challenge of affordability as prices stay high and mortgage rates rise.”
NAR forecasts prices could reach new highs in the first quarter of 2021, climbing by 5.7 percent, as growth continues but at a slower pace. The number of homes for sale will slowly rebound, offering buyers some relief. Realtor.com expects existing-home sales to rise 7 percent and single-family housing starts, which are new residential construction projects that are just getting underway, to grow by 9 percent.
Recent statistics showed 5.2 percent of mortgages, or 2.7 million, are in forbearance. That represents $547 billion in unpaid principal and many are concerned about what happens when this backlog hits the market. But Yun predicts foreclosures won’t have a sizable impact on the 2021 market. When pandemic-related foreclosure moratoriums and mortgage forbearance programs come to an end, that could lead to a spike in foreclosures. “But from a marketplace point of view, it will be completely unlike the subprime bust” more than a decade ago, Yun said. Back then, there was a 10-month supply of housing inventory compared to this market, which is under a 3-month supply. “We are lacking inventory,” he said. “Any foreclosure increases will likely be quickly absorbed by the market. It will not lead to any price declines.”
ATTOM Data Solutions, licensor of the nation’s most comprehensive foreclosure data released its Year-End 2020 U.S. Foreclosure Market Report. The report shows that foreclosure filings were reported on 214,323 U.S. properties in 2020, down 57 percent from 2019 and down 93 percent from a peak of nearly 2.9 million in 2010, to the lowest level since tracking began in 2005. Bank repossessions also decreased 95 percent since their peak in 2010. Lenders repossessed 50,238 properties through foreclosure (REO) in 2020, down 65 percent from 2019 and down 95 percent from a peak of 1,050,500 in 2010, to the lowest level as far back as data is available — 2006.
Work from-home trends are currently one of the biggest influences on housing preferences, and are also fueling widespread office vacancies in many cities. Vacation home sales are also escalating. People working from home are opting for more scenic locations when they don’t have to worry about commute time. Quite a few businesses have made the work at home option a permanent solution, so we don’t expect this to be a temporary fad.
Many renters have transitioned into homeownership during the pandemic, and rental demand and prices are dropping in major cities like New York and San Francisco. Rental prices are expected to flatten for the first half of the year reflecting the still-high number of Americans who have lost work due to business shutdowns because of the pandemic. Overall, the multifamily market has maintained their occupancy levels as more people are just staying put and renewing their leases. As a result, resiliency, rent prices are expected to rebound in the second half of 2021. Rental prices likely will be weakest in dense urban areas, while suburban sunbelt areas likely will see small increases in rents.
The commercial real estate market continues to recover, but sales, leasing, and construction activity remain below year-ago levels. The recovery also remains uneven, with stronger investor interest for land, multifamily, and industrial properties than for hotels, retail, and office properties.
According to a new report by Zillow, the hottest markets for 2021 are:
- Austin, Texas
- Phoenix, Arizona
- Nashville, Tennessee
- Tampa, Florida
- Denver, Colorado
While these markets are expected to see the strongest value gains, other former hot spots have fallen far out of favor. The three markets most likely to underperform, according to Zillow’s survey, are New York, San Francisco and Los Angeles.
HELP IS ON THE WAY FOR LANDLORDS AND TENANTS
Eviction moratoriums have been a huge relief for tenants, but in many cases, devastating to landlords. A new law, signed December 27, 2020, may help the most vulnerable in both situations. The Emergency Rental Assistance Program provides for $25 billion in emergency funds The exact details and where to apply are still being updated but you can keep checking for more info at www.home.treasury.gov. Just type “rental assistance” in the search bar. The National Landlord Association has put together a list of city and state websites that will potentially be running the programs.
An “eligible household” is defined as a renter household in which at least one or more individuals meets the following criteria:
- Qualifies for unemployment or has experienced a reduction in household income, incurred significant costs, or experienced a financial hardship due to COVID-19;
- Demonstrates a risk of experiencing homelessness or housing instability; and
- Has a household income at or below 80 percent of the area median.
Household income is determined as either the household’s total income for calendar year 2020 or the household’s monthly income at the time of application.
Eligible households may receive up to 12 months of assistance, plus an additional 3 months if the grantee determines the extra months are needed to ensure housing stability and grantee funds are available. The payment of existing housing-related arrears that could result in eviction of an eligible household is prioritized. Assistance must be provided to reduce an eligible household’s rental arrears before the household may receive assistance for future rent payments. Once a household’s rental arrears are reduced, grantees may only commit to providing future assistance for up to three months at a time. Households may reapply for additional assistance at the end of the three-month period if needed and the overall time limit for assistance is not exceeded.
In general, funds will be paid directly to landlords and utility service providers. If a landlord does not wish to participate, funds may be paid directly to the eligible household. These funds must be used for direct financial assistance, including rent, rent that is past due, utilities and home energy costs, utilities and home energy costs that are past due, and other expenses related to housing.
Where do I apply? The first step is the Department of Treasury is working with state and local governments to get the funds to them. Next, the state or local government will establish the programs for you to apply through. So stay tuned. In the meantime, there may also be state or local rental assistance programs available, depending on where you live. Two places you can start are: www.LegalFAQ.org and www.Benefits.gov The CARES ACT provides aid for homeowners as well. Go to www.consumerfinance.gov for more info on mortgage and homeowner assistance.