Investors & Agents – Distressed Property Vulnerabilities in 3 Sectors

Key Highlights

• RealtyTrac and ATTOM Data Systems not foreclosure doomsayers
• Industry experts point to three sectors within distressed properties having potential vulnerabilities 

RealtyTrac and ATTOM Data Solutions Not Foreclosure Doomsayers for Overall Housing Market

Industry experts with RealtyTrac and ATTOM Data Systems  stand with those who are not dreading housing market upheavals when it comes to their forecast on potential distressed property foreclosures.

True, at the beginning of the COVID pandemic and devastating job losses , millions of homeowners were hard pressed to make their mortgage payments.  As latest research in February, 2021 indicates, however, some 2.7M homeowners are in CARES-established forbearance programs but only 11% are considered to be seriously delinquent, according to Black Knight.

Locations of Seriously Delinquent Homes in Forbearance

RealtyTrac and ATTOM Data Solutions have identified the cities where most of the 11% seriously delinquent forbearance properties are:

Atlanta GA                              Riverside CA

Chicago IL                              Baltimore MY

Houston TX                             San Antonio TX

Dallas TX                                 Orlando FL

Washington DC                         Tampa FL

Differences in COVID-Recession and Great Recession

During this COVID-Recession, 1.7% of residential properties are involved in the foreclosure process.

During the Great Recession, 4% of residential properties were in foreclosure.

Why Is This Difference So Huge?

• The loan quality is much superior due to tight lending restrictions and no more subprime lending.
• The economy is outpacing expectations. Jobs are returning faster.  Workers in the hardest hit labor sectors (entertainment, retail, restaurant, travel) are predominately renters, not homeowners.
• Then, the imbalance in the market was supply heavy and demand light. Today, the imbalance is completely different with limited supply and soaring demand.
• Today, there is record-high home equity. Then, there was record-low home equity.
• Government and industry interventions exist today and the distressed market is healthier than before. The original 8.8% of mortgages that were in forbearance at the beginning of the pandemic have come down to 5% of all mortgages.  Of that 5%, 86% of them are in extensions or re-entries and are exiting forbearance successfully.
• Moratoriums have been extended through June 30, 2021.

Potentially Vulnerable Housing Sectors  Equivalent to Potentially Strong Investment Opportunities?

ATTOM Data Solutions and RealtyTrac are pointing to three areas of the housing market that could be most vulnerable to foreclosure.

These three areas include:

• Commercial Sector – this makes sense since the hardest-hit industries by the pandemic included restaurant spaces, retail spaces, hotel spaces, etc. Plus, in-office working, remote working and hybrid working continue to be up in the air. i All that said, current research indicates commercial markets are down -40%.
• FHA Loans
• Residential Rental Properties – Since renters have not been paying rent, rental property owners (the vast majority being small, mom-and-pop landlords with limited savings and limited access to borrowing) are stuck.  Rents are down an average of -4% nationwide and much more in specific locations. How long these rental property owners can hang on is anyone’s guess.

Thanks to RealtyTrac and ATTOM Data Solutions.

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