The Housing Foreclosure Crisis | The 2022 Real Estate Crash

hey everyone we kevin here it's time to

talk about a real estate update and

what's going on with foreclosures the

credit quality of borrowers and what

home buyers are thinking about

especially since mortgage interest rates

have been going up keep in mind i have

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let's talk about this so here's what we

got right now we have foreclosures up 94

from a year ago that's 19

500 filings in november of almost a

double from a year ago now keep in mind

we did have a lot of foreclosure bans

in 2022

this data also lags again we're filming

this here in january and this data just

came out for november 19 500 in november

that uh is actually down five percent

from october but that year over year

number has some folks with well

experiencing some heart palpitations

over concerns that what if this means

we're starting to see a potential

inflection point in the real estate

market could this be a sign that maybe

the real estate market is starting to uh

prepare to inflect downwards especially

with a change in interest rates which

we'll talk about in just a moment we'll

take a look at this folks if we jump on

over to

a sheet put together by atom of finance

we can see u.s foreclosure statistics

and when we look at these we'll be able

to see relatively how are we doing with

foreclosures and here you go i'll hide

myself for a moment so you can see here

foreclosures have been

obviously spiked going into the

financial crisis 2008 2009 over here at

the peak substantial decline in

foreclosures after that but look at this

folks even though we're seeing a double

in foreclosures here from a year ago

we're still substantially below where we

were with foreclosure filings previously

during previous quarters we would

usually have foreclosure filing

somewhere around the 90 000 foreclosure

filings throughout the nation and right

now we are sitting at just 19

500 uh in november and that's not only

yeah up 94 from a year ago but well well

well down from previous storms

substantially down i mean it's maybe

somewhere around 25 percent of previous

norms of foreclosures and we're actually

down from october

on top of that folks we've got new data

on the credit quality of borrowers

the uh and for relativity it's worth

knowing the median credit score going

into the great recession where we saw

those foreclosure spikes was

707

the median credit score right now is

sitting at 780

so that's almost uh 70 that's actually

74 points higher on a median credit

score so higher quality uh borrowers

potentially with less likely

risk of default or a lower risk of

default compared to what we saw going

into the recession which makes sense

especially since we had a lot of shady

and potentially unqualified borrower or

lending practices leading to unqualified

borrowers getting into homes going into

the great financial crisis not something

that we're seeing right now especially

with dodd-frank and the ability to repay

rules banks have been really tight on

lending and this is why we've seen the

federal reserve's reverse repo market

balloon

with cash deposits because banks just

have too much of freaking cash and not

enough borrowers

one of the reasons we don't have enough

borrowers is because the housing market

is still so tight and competitive that

we're continuing to see real estate home

prices actually tick up which if we go

to the redfin data center we can see

what's going on with home prices

and we'll be able to compare this also

to some of the recent inflection points

that we've seen in interest rates now

it's going to be too soon to determine

what median sales prices are actually

doing relative

uh to the current move in interest rates

but we'll speculate on that

first it's worth noting that usually we

have a an annual decline in home prices

this is best visualized by making sure

we turn on data for 2019 18 and 17 and

here you can see from the summer we

usually have a trough and each of these

three normal years here we had a trough

in real estate data for sales prices

which is the same thing that we saw

happen up until september and october

when home prices actually ticked back up

to record highs now sitting at a median

national average or median national

sales price of 359

000

new listing of prices let's take a look

at what people are asking for have

started coming down though and this does

follow the trend that we usually see

where listing prices do come down

starting in september throughout the end

of the year so this is very very typical

right here but what's incredible is that

even though the listing prices are

following the annual trend of declining

into the end of the year

sales prices are still up this means

things are more commonly selling with

probably multiple offers and above the

listing price more regularly now too

soon to tell yet in terms of what's

going to happen to real estate pricing

because of this folks take a look at

this bump here in mortgage interest

rates you can see we've gone from about

3.08 percent here up about 0.2 percent

to about 3. actually almost

0.3 almost a third up to about

3.38 right now for a 30 year fixed rate

mortgage if we zoom out at just uh one

month here rather than on the week view

we can see that just a month ago at the

beginning of december we were able to

get rates as low as 2.82 percent so

we've seen about a half percent movement

on mortgage interest rates for the

30-year fix

and since we know the rule of 10x we

know this could create a 5 headwind

against real estate prices yet because

of this increased

credit quality these substantially lower

foreclosures

and the fact that homes continue to sell

with multiple offers above the asking

price as we referenced here seeing that

listing prices are going down but

closing prices are actually still either

going up or maintaining it's entirely

possible that we could be in a real

estate market that's appreciating at a

rate of at least five percent per year

so even though we have this five percent

headwind because interest rates went up

about half percent which generally

brings pricing down about five percent

because we're seeing so much pressure we

might not see any decline at all if we

see a decline it's probably expected to

be nominal especially since get this

folks redfin's housing blog posted the

following that in a survey of 1500

individuals currently looking to buy a

home first of all 12 benefited from

putting together a down payment by

investing in cryptocurrencies but more

interestingly that more of a tangent 47

of house hunters

in response to how they feel or how they

think they will feel if mortgage rates

continue to rise and potentially rise

above 3.5 percent

47 percent of house hunters say they'd

feel quote

more urgency to buy a home if mortgage

rates rose above 3.5

in other words the people right now

waiting for a deal would be more

interested in just buying something if

rates go above 3.5 because they believe

that maybe interest rates will keep

going higher uh in the future and that

they'd rather buy something now to lock

in a lower rate in other words as usual

don't wait to buy real estate buy real

estate and wait there are a lot of folks

speculating right now that maybe

if you waited to buy interest rates went

up we might actually see home prices

come down and you'd have an opportunity

to buy housing cheaper even though you'd

have a higher interest rate which you in

theory you could always refinance in the

future assuming market conditions

favored you uh and and when and what you

bought but folks

i mean based on what we're seeing here

in surveys it actually seems like if

rates go above 3.5

more people are going to be more excited

to buy which is kind of the opposite of

what we're expecting we're not seeing

prices fall which seasonally we do we're

not seeing higher foreclosures we're at

one-fourth of the levels we previously

were

credit quality is at substantially high

levels way higher than recession levels

now one downside is we are seeing rents

come in a little bit lower than expected

multi the multi-family housing council

showed that only 92 percent of rents

were collected in december 2021 that's

down from 94.9 percent in july and down

from 93.1 in november so a little bit of

a movement down there on rents collected

but beyond that there's not really a lot

negative to say about the real estate

market and it doesn't look like we're

really setting up for any kind of real

estate crash

or some substantial discounts because of

the rate movement that we're seeing

obviously we'll keep monitoring this

closely but this is the latest on

housing if you found this video helpful

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folks thanks for watching and we'll see

you in the next one thanks goodbye