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It Is Not Just Talk Or Fears, It Is Happening

A report from the Wall Street Journal. “Fannie Mae and Freddie Mac said they would impose a new fee to insulate themselves from losses on refinanced mortgages they guarantee, a sign of potential turbulence in the housing market. ‘For the GSEs to add a 50 basis-point surcharge on refinances when the nation is struggling with the greatest economic downturn since the Great Depression is outrageous,’ said Bob Broeksmit, chief executive of the Mortgage Bankers Association.”

From Bloomberg. “An FHFA spokeswoman said Fannie and Freddie requested the changes based on their projected pandemic-related losses. MBA President Bob Broeksmit said in a statement that the announcement ‘flies in the face of the administration’s recent executive actions urging federal agencies to take all measures within their authorities to support struggling homeowners.'”

From Mansion Global on New York. “Manhattan sellers added more than 2,700 homes to the market in July, a record number of new listings. The number of new listings in the pricey New York City borough was 86% higher than July of last year. Brooklyn also logged a record jump in new listings last month. Sellers there put 1,724 homes on the market in July, 50% more than a year ago. The median seller in off-market negotiations had to chop 10%, or $117,000, off their initial asking price to secure a deal, the biggest average price cut since StreetEasy began keeping track in 2010.”

“‘Once this reality sets in, asking prices will inevitably begin to mirror what we’re already seeing in off-market negotiations,’ said StreetEasy economist Nancy Wu. ‘If the sellers that have returned to the market are serious about making a sale, they will need to come to terms with the effects that Covid-19 has had on buyer demand in New York City.'”

The Augusta Chronicle in Georgia. “Late home payments increased in the Augusta-Aiken metro area in May along with the rest of the nation. CoreLogic’s report shows 8% of mortgages in the seven-county metro area were 30 days or more overdue in May. That exceeds the national average of 7.3% and is three percentage points higher than the metro area’s 5% delinquency rate in May 2019. Holly Lott, a past president of the Augusta Mortgage Brokers Association, said any homeowner having trouble making his or her mortgage payments because of pandemic-related income loss needs to contact their lenders immediately to enroll in a forbearance program.”

“‘This is the one time you have a free shot,’ she said.”

The Review Journal in Nevada. “Las Vegas’ mortgage delinquency rate rose again in May after the coronavirus pandemic shut down much of the economy, a new report shows. Payments were at least 30 days late on 10.5 percent of home loans in the Las Vegas area in May, compared with 7.3 percent nationally, according to CoreLogic. In April, payments were at least a month behind on 8.5 percent of Southern Nevada home loans, up more than double from 3.4 percent in March.”

“Without further government programs and support, CoreLogic said, the company expects America’s ‘serious’ delinquency rate to quadruple by the end of 2021, meaning some 3 million homeowners would be at least 90 days behind on their mortgage payments by then.”

The Orange County Register in California. “The data cruncher found 3.43% of the first mortgages it tracks in Los Angeles and Orange Counties were 60 days delinquent and 3.59% in Riverside and San Bernardino counties. A year ago, the two markets respectively had 0.55% and 0.83% of loans two months tardy. Both May delinquency levels were the high mark for this yardstick of bill-paying stress in a history provided to the Southern California News Group that dates to 1999.”

“On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … FOUR BUBBLES!”

“I’m not buying the thinking of numerous market watchers that late payments aren’t something to worry about. Even CoreLogic forecasts loan delinquencies won’t likely fix themselves soon.”

“‘Government and industry relief programs have helped to cushion the initial financial blow of the pandemic for millions of U.S. homeowners,’ said CEO Frank Martell. ‘COVID-19 and the resulting pressures continue to influence the economic activity of many households. Barring additional intervention from the federal and state governments, we are likely to see meaningful spikes in delinquencies over the short to medium term.'”

From Action News Now in California. “Action News Now Morning Anchor Julia Yarbough recently spent time with a Los Molinos father who says he is struggling to make ends meet. John Schneider says even when he is spending relaxing time with his three children, harvesting fruit and vegetables from their garden, he is worried. ‘For those who live paycheck to paycheck this is your worst nightmare,’ explains Schneider. ‘We’re waiting for the next check to pay the bills; we don’t have savings.'”

“He says he has worked in the construction field but with three children to care for, work options are limited. He says his choice is to work and leave his children without supervision or put the well-being of his children first. Schneider told Yarbough that he has full custody of his children and they don’t have anywhere to go.”

“He says he has been paying what he can on existing mortgage and tax debts for his Los Molinos home. Schneider says a job-layoff well before the Coronavirus pandemic had made money-matters tight. Then stay-at-home orders made matters even more severe. Schneider’s plight may be indicative of situations emerging around the country. A recently published memo by a group of housing experts, indicates that based on Covid-19 unemployment states and U.S. Census Bureau data, roughly 30-40 million people in the U.S. are at risk of being evicted or facing foreclosure by the end of the year.”

“‘It’s happening, it is not just talk or fears that people can be thrown out of their homes, it is happening to me,’ says Schneider. ‘There seems to be a big division among those two types of people; those who have good bank accounts and those who don’t. They don’t seem to understand what the rest of us could be going through.'”

“Schneider says he has been on a payment plan with his lender but time is running out. He owes more than 10-thousand dollars before the end of the month. He says he is fearful of what comes next. ‘I’m fearful of losing my home and being homeless,’ says Schneider. He told Yarbough that with his house in foreclosure, like his children, he would have nowhere to go.”

The San Francisco Chronicle in California. “As buyers become pickier and shelter in place orders exacerbate the need for private outdoor space, the San Francisco condo market has been beset by rising inventory and declining prices, according to Compass. The young people who would have been shopping for condos may be more likely to be impacted by layoffs, according to the report. There’s also increasing demand outside of the city, with those staying showing a vast preference for single-family homes, which have not seen the same level of declining demand.”

“‘Within San Francisco itself, supply and demand conditions have diverged dramatically between house and condo markets, with the latter being far weaker and rapidly climbing into ‘buyer’s market’ territory,” according to the report. Condos were also significantly more likely to fall out of escrow.”

“Price reductions typically take place at the end of the spring and fall sales seasons, as owners race to sell a home before summer slowdowns and the mid-winter near halt to the market. But this year, discounts began in earnest in May and have quickly jumped higher. There were nearly 400 price reductions in July, with condos making up over two-thirds of those reductions.”

“COVID-19 seems to have brought an end to the overbidding that used to signify the San Francisco market. This may be due to the fact that stricter shelter in place rules have changed how realtors show and market properties. But, it’s also the result of a significant shift in supply and demand. “In an environment of increased inventory, buyers see a reduced necessity to c’ompete with each other,’ according to the report.”

This Post Has 40 Comments
  1. ‘An FHFA spokeswoman said Fannie and Freddie requested the changes based on their projected pandemic-related losses’

    This is a credit event.

    1. ‘For the GSEs to add a 50 basis-point surcharge on refinances when the nation is struggling with the greatest economic downturn since the Great Depression is outrageous’

      This is a mortgage guy, and he is outraged credit gets pulled back in ‘the greatest economic downturn since the Great Depression’? Did it ever occur to Bob that in such an environment a refi may not be the best idea?

      What part of black swan do you not understand Bob?

        1. That crime syndicate sold tens of millions of a product that is defective.

          I’d be worried too.

      1. Making it much harder to qualify for a refi would be better. Borrowers will just roll the fee into the loan.

  2. So we’ve seen two California reports on a specific foreclosure in a week now. Both from TV stations. There’s something to note: with millions suddenly in default, could the media be looking into this more, or more closely. There’s a lack of coverage on these individuals. What were their loans like, how much did they put down, debt to income, all the stuff that would tell us what is coming down. We got that last decade and we ain’t getting it now. It’s probably much worse than we’re being lead to believe.

    ‘I’m not buying the thinking of numerous market watchers that late payments aren’t something to worry about’

    Why are “numerous market watchers” doing this?

    1. How much did this guy pay? Isn’t that kinda important?

      Los Molinos is a city in California. There are 23 homes for sale, ranging from $45K to $1.2M.

      $298K Median Listing Home Price
      $191K Median Listing Home Price/Sq Ft
      $270K Median Sold Home Price

      https://www.realtor.com/realestateandhomes-search/Los-Molinos_CA/overview

      ‘Los Molinos is a census-designated place (CDP) in Tehama County, California, United States. The population was 2,037 at the 2010 census, up from 1,952 at the 2000 census. Los Molinos (“the mills” in Spanish) traces its history back to a railroad station which opened at the site in 1905.’

      https://en.wikipedia.org/wiki/Los_Molinos,_California

      ‘In 2017, Los Molinos, CA had a population of 1.93k people with a median age of 41.6 and a median household income of $43,790. Between 2016 and 2017 the population of Los Molinos, CA declined from 2,069 to 1,928.’

      https://livability.com/ca/los-molinos

  3. The title to the last link:

    SF condo inventory spikes, with price reductions skyrocketing

    Eat yer crowz Thornberg.

  4. Another day and the crater is off the chart still. If I have time there will be a CRE post later and an international post. Commercial is well and truly crashing.

  5. ‘Both May delinquency levels were the high mark for this yardstick of bill-paying stress in a history provided to the Southern California News Group that dates to 1999’

    So the highest ever.

    ‘Schneider says he has been on a payment plan with his lender but time is running out. He owes more than 10-thousand dollars before the end of the month’

    We read about these balloon payments months ago. Numerous market watchers told us it wouldn’t happen, but here it is. This is where real journalism could benefit the public greatly. 99.9% of news is selling people FOMO. If this blows up on people, I’ll remind the media of this phase.

    Speaking of FOMO horse-hockey, the SFC runs this dry, no color quotes thing about their condo crater. We already knew about it because of Socket Site. But they slip in that days on market is about the same, a sellers market!

    We all know this DOM statistic is manipulated constantly.

  6. ‘The median seller in off-market negotiations had to chop 10%, or $117,000, off their initial asking price to secure a deal, the biggest average price cut since StreetEasy began keeping track in 2010’

    ‘Once this reality sets in, asking prices will inevitably begin to mirror what we’re already seeing in off-market negotiations’

    The two most expensive residential markets in country cracked, still no bubble?

    ‘the biggest average price cut since StreetEasy began keeping track in 2010’

    NYC has been falling for 4 years, and it’s getting worser. That is consistent with a mania collapsing.

  7. ‘For the GSEs to add a 50 basis-point surcharge on refinances when the nation is struggling with the greatest economic downturn since the Great Depression is outrageous’…the announcement ‘flies in the face of the administration’s recent executive actions urging federal agencies to take all measures within their authorities to support struggling homeowners’

    Stamp yer little feet Bob. FHFA is independent, you know like we’re lectured about how independent the central banks are? The MBA didn’t say much when Mel Watt was pushing the “pedal to the metal”.

  8. Crater, crater, crater …

    Bankruptcies, abatements cost mall landlords hundreds of millions of dollars in Q2 | Retail Dive
    https://www.retaildive.com/news/bankruptcies-abatements-cost-mall-landlords-hundreds-of-millions-of-dollar/583294/

    (here is a snip)

    Dive Brief:
    Mall operators have put numbers to the stresses of COVID-19 on the second quarter, with the ensuing mass closures, negotiations over rent and accelerating retail bankruptcies.
    Simon Property Group CEO David Simon said his company took a $215 million hit during the quarter from rent abatements and write-offs on bankrupt retailers, according to a Seeking Alpha transcript.
    For Q2 Taubman Centers logged $32.6 million in uncollectible rent it attributed to tenant bankruptcies and nonpayment during mall closures. Another mall landlord, Washington Prime Group, said that it collected just 44% of owed rent during the quarter while more than 25% of Q2 rent it deemed uncollectible because of bankruptcies or pandemic-related lease modifications.

      1. It’s $billions just in Brooklyn.

        “Brooklyn also logged a record jump in new listings last month. Sellers there put 1,724 homes on the market in July, 50% more than a year ago.”

        Brooklyn has 2.7 million people. That isn’t much.

        “The median seller in off-market negotiations had to chop 10%, or $117,000, off their initial asking price to secure a deal, the biggest average price cut since StreetEasy began keeping track in 2010.”

        Compared with the prior level of increase, that is nothing. I expect NYC real estate prices to remain high. Trouble is, “high” is down 50 percent or more from the peak, which was insane.

        https://www.youtube.com/watch?v=uCGsqBn9pog

        1. I just got this in an email:

          ‘Major retail chains are abandoning New York and business owners are all facing the same question: What’s the reason to do business in New York? What was once a hub for tourism, has now seen record drops in sales, loss of business, and no sight forward for reopening amid the pandemic. The future of these chains in Manhattan is grim, so much so that they’re shutting their doors for good. In the past few months alone we’ve seen the permanent closings of iconic storefronts including JC Penny, Kate Spade, Le Pain Quotidien, Bryant Part Grill & Cafe, and more.’

          1. Too bad they pushed out all the independent local retailers by paying unsustainably high rents.

            https://www.newyorker.com/business/currency/why-are-there-so-many-shuttered-storefronts-in-the-west-village

            “Abandoned storefronts have long been a hallmark of economic depression and high crime rates, but the West Village doesn’t have either of those. Instead, what it has are extremely high commercial rents, which cause an effect that is not dissimilar. High-rent blight happens when rising property values, usually understood as a sign of prosperity, start to inflict damage on the city economics that Jane Jacobs wrote about.”

            Five years ago.

        1. From 2006.

          https://gothamist.com/news/real-estate-bubble-reaches-1m-crackhouse-phase

          “A couple of years from now, after the American real estate market has utterly collapsed, we may well look back at this day as a kind of high-water mark, the spot where the insanity peaked and then rolled back. Curbed broke the story yesterday– a crackhouse in South Williamsburg that has been flipped twice in the last six months, and is now being sold for about a million dollars.”

          From 2016

          https://gothamist.com/news/the-brooklyn-real-estate-bubble-will-never-pop

          “There’s no end in sight,” says Jesse Keenan, the research director at Columbia University’s Center for Urban Real Estate, referring to Brooklyn’s obscene housing market.”

          “Currently, the monthly payments on a median-priced home in Brooklyn eat up 98 percent of the borough’s median income of $46,000. The median sales price in the nation’s “most unaffordable city,” just passed $600,000 for the first time. The 70 percent of Brooklyn residents who rent aren’t faring any better—average rent in the borough rose by 77 percent between 2000 and 2012. According to a March report by StreetEasy, “the typical new renter will spend 60 percent of their income on rent in 2015,” the highest rent-to-income ratio in all of New York.”

          Our problem is not enough crater.

    1. That the stock markets can not only collectively ignore this data but rocket to record highs is delusional.

      1. Trickle.down.e.CONomic$:

        Neo.American $ocialist $tephan Munchin’$ x9 Trillion$ 💰💲💰💲💰💲💰💲💰💲💰💲💰💲💰💲💰 liquiditie$, i$ leaking/flooding down from the Federal.Re$erve’$ “UNLIMITED!” plu$h floor$ into the ceiling of Wall.$treet’$ Gold.gilded Waterford.Cry$tal chandelier’$ twinkling gleaming illuminated trading floor$.

        = Lot$.of.$mile$
        🎬⛽💉📈📈📈📈📈📈📈🐂🆙↗ ⤴ ⬆🎆🎇🎉🎉🎉 … 🍺

      2. i$n’t Black a favorite financial color? … Black.$wan, as p$haw!

        In One Chart:

        The $tock market$ hasn’t seen a 100-day gain this strong $ince 1933

        Bloomberg / By William Watts

        $tocks have bounced back $trong in the 100 trading days since the March 23 low

        Regardless, both the current rally and the 1933 rebound follow historically steep selloffs that accompanied global cataclysms. The present rebound comes in the midst of global public health crisis caused by the deadly COVID-19 pandemic, which has infected more than 20 million people world wide and resulted in more than 750,000 deaths, including more than 160,000 U.S. fatalities, according to data compiled by Johns Hopkins University.

  9. This site went offline after I found this article a couple of weeks ago:

    ‘On July 16, The California Association of Realtors (C.A.R.) said of this summer that the state’s realty market has bounced back from its worst housing market since the Great Recession.’

    ‘Jeanne Radsick, the association’s 2020 President, noted, “Home sales bounced back solidly in June after hitting a record bottom in May, as lockdown restrictions loosened and pent up demand driven by record-low interest rates roared back.”

    ‘Indeed, the number of homes for sale in California is now at its highest since 2011.’

    ‘According to a Socketsite report on Monday, the number of homes listed in San Francisco’s housing inventory increased by six percent this past week, and the market’s inventory is now only 120 homes away from its July 2008 numbers.’

    https://www.thesfnews.com/housing-market-produces-recession-level-numbers-ready-for-review/60320

    ‘the number of homes for sale in California is now at its highest since 2011’

    That’s some shortage!

  10. Helena, MT Housing Prices Crater 16% YOY As Retirement/Vacancy Property Market Takes A Severe Beating

    https://www.zillow.com/east-helena-mt-59635/home-values/

    *Select price from dropdown menu on first chart

    As one broker said, “Would it be fair to say a 35% decline in prices is a minor adjustment? Ok then. Our market here in the Rockies is experiencing a minor adjustment.”

  11. “We are seeing a migration out of San Francisco to what we’ll call the North Bay, the East Bay, the Central Valley, and even Sacramento,” said Scott Fuller, a real-estate broker and founder of LeavingTheBayArea.com, a real-estate services firm that helps people relocate out of California.

    “People are feeling like they’re being given some independence and some flexibility and they want what they would consider a better quality of life,” he said.

    Many of the counties from Realtor.com’s list — including Sacramento and San Joaquin— are in the Central Valley. This region has become increasingly popular in recent years because of high home prices in areas like San Jose and San Francisco.

    (Realtor.com is operated by News Corp NWSA, 1.45% subsidiary Move Inc., and MarketWatch is a unit of Dow Jone, which is also a News Corp subsidiary.)

    But moving to this part of California has its trade-offs. “The most exciting thing you could do is go to Safeway or maybe duck hunting,” said Pat Kapowich, a Silicon Valley-based real-estate broker. “It’s still really a bedroom community — you have to get in your car if you want to do anything exciting or fun.”

    Because it’s so fun in silicon valley

    1. How about the speed limit signs on mountain bike trails around the Bay Area?

      If you live in Sac you are that much closer to Tahoe…

      1. If you live in Sac you are that much closer to Tahoe…

        And that’s been a disaster lately. So many people, so few places to park. We went to Ice House reservoir last weekend and were pleasantly surprised that the hordes hadn’t found it yet. It’s a B-list lake but the lack of crowds made it A-list that day.

        This weekend we’re headed up Hwy 1 toward Seattle. Hopefully once we get away from the bay area it will calm down a little. If work doesn’t call me back onsite we may go all the way around the USA and see some family and friends in the outdoors as we make our way around.

  12. “..Fannie Mae and Freddie Mac said they would impose a new fee to insulate themselves from losses on refinanced mortgages they guarantee”…

    “…For the GSEs to add a 50 basis-point surcharge on refinances…”

    “… is outrageous,’ said Bob Broeksmit, chief executive of the Mortgage Bankers Association….”

    So Bob Broeksmit, wasn’t it you guys at the MBA who were pushing unstable NINJA loans to begin with or do you have some spin to blame current situation on somebody else?

    1. I’m hearing that mortgage rates started going back up after the most recent fed actions this last week. With all the volatility going into the fall/election season, I was wondering if we already just passed bottom or not, and I suspect even just talk of a 50-point surcharge on refis will be spooking the marketplace.

      1. Since lending is solid the 50-point surchage is no problem. It’s all basic supply and demand, econ 101 dontcha know!

  13. “…outrageous,’ said Bob Broeksmit, chief executive of the Mortgage Bankers Association.”

    Just a whiff of the free market, and Bob’s losing it!

      1. “…for the “I need to out-do everyone else” crowd….”

        There are some people in this world who have way too much time (and money) on their hands.

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