Hedge funds, banks, and insurance companies caused the 2008 subprime mortgage crisis. It created the worst recession since the Great Depression.
Now we have to ask if this booming housing market will soon give way to a rising tide of foreclosures that will submerge many homeowners this year.
With interest rates at rock bottom for the last year, resales and new home construction have been better than they have been for almost 15 years, even in the face of COVID-19.
With less than a two month inventory of used homes on the market, turning to building or buying a new single family home was the best solution for hundreds of thousands of buyers.
With rising building material prices, lack of skilled construction workers and workers fearful of returning to work because of the pandemic, new house prices are skyrocketing. Off-site and modular home factories are straining to keep up. Manufactured housing is making a huge comeback from years of dwindling sales.
This time the housing crisis won’t be caused by the subprime market collapsing but rather by foreclosures being held at bay by Federal rules barring mortgage companies from repossessing homes.
Lenders and loan servicers were told they couldn’t file foreclose on federally backed loans until after February 28, 2021 and cannot foreclose on loans backed by Fannie Mae or Freddie Mac until after January 31, 2021. Both of those dates have arrived.
It has been estimated that 10% of the eight million single-family mortgages backed by the Federal Housing Administration were delinquent. That’s 800,000 homes that could be added to the resale inventory by the end of 2021.
Many people wanting to buy a new home this year may find their new home coming on the market as a foreclosure, leaving new home construction in a situation similar to 2008.
While federal forbearance policies put a temporary freeze on foreclosures—only 352 foreclosures were started in August, compared with 10,438 in February, 2020, from the result of passing the CARE Act, those forbearance provisions are expiring. Expect a wave of foreclosures to follow.
That may set off another round of lumber mills shutting down…again.
This is one of those times I hope my crystal ball is wrong, but…
Gary Fleisher, the Modcoach, writes Modcoach News and Modular Home Coach blogs as well as the best site for off-site consultants, Modcoach Connects.
Contact Gary at modcoach@gmail.com
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One Response
The huge difference between then and now was the massive unsold inventory of new homes from publicly traded production builders, thus the $8,000 cash windfall that was part of the ARRA. Just the opposite now. Massive unmet demand from the absence of new homes from the past decade. Blame Dodd-Frank for that.