Carol Hasbrouck knows more than a little about why the housing market failed during the Great Recession – at the time, she was a loan officer who was at the forefront of irresponsible lending tactics that would later have dire consequences.
During the frantic years of home buying before the crash, she remembers hearing about loans given to people a day after they finalized bankruptcy, or negative amortization loans where borrowers would pay less than the amount owed on them. their interests and would go into more debt. each month.
“There was just a lot of nonsense,” said Hasbrouck, who is now a St. Petersburg-based real estate agent with Charles Rutenberg Realty.
When the coronavirus pandemic brought mourning to the United States last spring, home sales slowed in Tampa Bay and beyond. But since the summer, the market has roared white, and some local realtors say they get multiple offers for every new listing, resulting in many above-asking sales. And the prices continued to climb rapidly.
The sustained, gravity-defying rebound in the market – as much of the rest of the economy remains in a pandemic recession – has some wondering if it is headed for another collapse.
Despite the rapid sales, Hasbrouck said the current boom still doesn’t have many similarities to the run-up to the crisis in 2007, as there isn’t the same proliferation of subprime mortgages.
“I don’t think it’s anything like that,” she said. “I believe it’s a matter of pure economics – demand and supply.”
From a statistical perspective, it is not difficult to find comparisons between the current market and the bubble before the Great Recession.
Len Kiefer, deputy chief economist at credit giant Freddie Mac, noted how, by some metrics, national house price growth in 2020 was higher than in the mid-2000s. The S&P CoreLogic Case Indices- Shiller, a national home price measurement tool, revealed that prices in the Tampa metro area rose 10.7% last year.
Earlier this month, Florida Realtors released figures for January that showed the median selling price of a single-family home in Pinellas to be $ 309,450, up from $ 265,000 in January 2020. Hillsborough’s median selling price was $ 297,500 last month; Pasco was $ 265,000; and Hernando was $ 210,500.
Kiefer said it was only natural, with numbers like this, for people to wonder if the housing market is about to fall again. But he said he didn’t think so.
“We don’t know, but the research we’ve done makes us think it’s probably not going to be a repeat,” he said. “There are a lot of ways it’s different, despite similar statistics. “
This time around, booming demand is fueled by millennials coming of age to buy a home – driven by record interest rates – combined with baby boomers living longer, Kiefer said. Compare that to the period before the Great Recession, when a large number of investors were trying to make a quick buck through rapid appreciation, he added.
“The hallmark of the bubble is speculative behavior, where the expectation of future price growth drives current price growth,” Kiefer said. “It’s certainly not what’s happening now … it’s that people need housing.”
Yet one of the biggest remaining questions is whether, at some point, there will be a rush of foreclosures.
According to a new analysis from real estate data firm Black Knight, the national mortgage default rate has seen steady improvements since the start of the pandemic. But About 2.1 million homeowners were 90 days or more past due on their mortgages at the end of January, five times the levels before the pandemic.
At the current rate of improvement, 1.8 million mortgages would still be considered seriously past due at the end of June, Black Knight said. This this is when the foreclosure moratoriums on government guaranteed loans are set to expire, although the Biden administration also announced up to six months mortgage forbearance after that.
Economists said they were optimistic that the housing market, deprived of inventory, could absorb some distressed properties, but that doesn’t lessen the impact for homeowners going through tough times.
“How does it end for the people at the bottom of the ladder, who haven’t had a job,… (their) payments have been delayed? It’s really not clear, ”said Scott Brown, chief economist at Raymond James. “I think it’s going to be bumpy for a lot of households, but overall positive overall.”
Rachel Sartain Tenpenny, CEO and managing broker of Keller Williams Realty St. Petersburg, Gulf Beaches and Seminole, said that with prices rising, homeowners who can no longer afford their payments likely have plenty of equity to avoid the foreclosure.
“All they would have to do is let go of their egos and sell their house,” she said.
The lack of supply, combined with stricter loan requirements than in the days before the Great Recession, strengthened the market, Sartain added.
“There are still a lot of protections that are going to prevent us in the short term from seeing something like we saw 12 years ago,” she said.
So when will skyrocketing price increases slow down? And could the prices go down?
It could depend on external factors, such as how the economy rebounds drastically from the widespread distribution of coronavirus vaccines. Moreover, if the vaccine distribution causes a significant rebound in consumer spending, it could lead to a rapid rise in interest rates, which would significantly affect the housing market, Kiefer said.
For now, however, inventory shortages remain a major concern, especially for Florida, where many out-of-state residents have relocated during the pandemic.
“Sadly, looking at the math… even with the increase in construction, we are still falling short of what we need to stay in place,” Kiefer said, noting that the slowdown in construction after the Great Recession is one of the main culprits of the current crisis. shortages. “I expect the pressure to be even higher in 2021 than in 2020.”
Ann Rogers, a St. Petersburg associate broker at Foresite Residential Real Estate, is a real estate agent who has remained skeptical of the market boom in the past six months. Until recently, she sensed difficult similarities between the current real estate environment and 2006, when she watched people line up to buy condos that hadn’t even been built yet.
But in recent weeks, with so little inventory to sell, she said calls from buyers have slowed down because there was so little to show them.
“I have a buyer willing to buy up to $ 1.2 million, but we can’t find anything,” she said. “There just aren’t any new properties $ 500,000 to $ 1.2 million.”
She advises some of her buyers – especially those looking for homes under $ 400,000 – to wait, in case distressed properties emerge later in the year.
“I think there will be a noticeable change… but there are also a lot of investors ready to scratch them,” she said. “So that’s the question: how long will they be on the market? “