Article inspired by this information published by the Mortgage Bankers Association – https://www.mba.org/2020-press-releases/august/mortgage-delinquencies-spike-in-the-second-quarter-of-2020
Today is October 1st 2020 and Florida’s statewide moratorium on foreclosures has expired. There are still moratoriums in place at the federal level related to federally backed loans (about 70% of the mortgage market), but those too are set to expire come the new year. While this may be extended, they can’t be extended forever.
What however does that mean? Where is the market right now and what does it look like compared to, say, the 2008 housing crisis?
Where we are now
- In Florida, 4.7% of mortgages were more than 90 days behind as of JUNE 2020 (bizjournals.com)
- In Florida, 9.4% of mortgages were at least 30 days delinquent
To try and put those two numbers in perspective, I looked for similar statistics and found a great source here – https://www.consumerfinance.gov/data-research/mortgage-performance-trends/mortgages-90-or-more-days-delinquent/#mp-line-chart-container
Taking a snapshot as of January 2010:
- Florida had 8.9% of all mortgages 90+ days delinquent
- Florida had 4.4% of all mortgages 30-89 days delinquent (13.3% at LEAST 30+ days delinquent when combined with those 90+ delinquent)
So, as of June of 2020 (when some parts of the economy started to re-open and the CARES act had already distributed it’s stimulus money) Florida was more than halfway to the delinquency numbers seen during the great recession. Since then, CARES stimulus has dried up, but some parts of the economy have re-opened, though without nearly the economic activity seen before. We’ll have to wait until more up to date numbers come out, but I believe those delinquency rates are likely to continue to grow.
What does this mean? To me, this means that there is going to be a lot more foreclosures happening as I do not see the economy bouncing back immediately, even once a vaccine is approved and widely distributed. While the housing market, today, here in Orlando continues to rise in prices due to demand still outstripping supply, an increase in distressed foreclosure selling will stop the rising prices if not reverse them. The saving grace at the moment is that banks haven’t had the ability to even start foreclosure proceedings in months, and likely won’t even start to ramp up foreclosures until January, and it will still take 6-12 months from that point for properties to go through that process and hit the market.
This time around, there are institutional sized investors ready to buy up much of this coming inventory, but the question remains, are they going to be enough to absorb the number of foreclosures coming? (https://www.floridarealtors.org/news-media/news-articles/2020/09/investors-ready-bonanza-housing) Will the banks have learned from 2008 and stem a wave of foreclosures by offering easy modifications instead? Only time will tell.
In the meantime, I would consider “taking some chips off the table”. If you own several investment properties, I would consider selling a few in the coming months. I also would advise extreme caution if considering purchasing any property that you aren’t planning on holding for at least 10+ years.