The NEW housing market

[Kevin Semenas]

Who is late on their payments and what does it mean for the housing market?

In 2008 the housing market crashed due to the high level of leverage, but laws have been enacted to prevent that from happening again. Right?

Purchasing a home with cash creates the least amount of foreclosure risk (tax) and FHA and VA loans represents the highest risk due to leverage used in purchasing the home. If there is a drop in home prices, they can quickly owe more than the house is worth.

As of mid may 2020 the largest group of home buyers in forbearance are.... FHA and VA! These loans are bought by Ginnie May and nearly 12% of all these mortgages in Ginnies portfolio are in forbearance.

This means the highest risk borrowers with the most leverage right now are in forbearance. Also, many home owners (due to record low mortgage rates) are refinancing their homes and increasing their risk.

When these people who can no longer afford to pay their monthly payments have to sell, they will have fewer people to sell to because at the same time mortgage providers are making it much more difficult to obtain a loan! The increase of housing supply and decrease in housing demand will result in .... housing prices in the future.....

Do you predict an increase or decrease in housing prices for 2020 and 2021?