A housing correction – but not a crash

Some locals who want to buy a home – just not at today’s prices – have marshaled their reserves and are waiting for the current local housing market to crash. It could be a long wait. For now, the pandemic is likely to keep housing demand strong.

There’s no doubt that local supply-demand dynamics are out of balance. And a case could be made that some of the current market is overpriced. But there’s little hard indication of a housing bubble or that a major crash that will flood the market with foreclosures is on the horizon.

What’s more likely is a correction that will slow growth rates but still leave homeowners with good equity appreciation. That equity is a cushion for owners – even those who haven’t made a mortgage payment in a year.

Yes, the foreclosure rate will increase after the government forbearance program ends.

There’s also a possibility that some of the region’s single-family rentals will go on the market.

Both would offer some relief to the region’s serious lack of inventory. How much relief remains to be seen.

FEB. FORECLOSURES

New foreclosure activity across the region was higher in February, but not by much.  There were 17 new filings – up six from January, according to ATTOM Data Solutions. This time last year, there were 57 new filings.

The current 98 foreclosure count in the seven NE Tenn. counties and two SW Va. counties.

  • Carter Co. – 10
  • Greene – 9
  • Hawkins – 14
  • Johnson – 0
  • Sullivan – 39
  • Unicoi – 0
  • Washington TN – 18
  • Scott, VA – 0
  • Washington VA – 8

Foreclosure activity is at a historic low due to the federal government’s moratorium and CARES forbearance program. “These government actions, and the efforts of lenders and mortgage servicing companies, have helped millions of homeowners avoid foreclosure during the year-long global pandemic and a recession that resulted in 22 million lost jobs,” according to Rick Sharga, executive vice president of RealtyTrac, an ATTON Data Solutions co.

A count of local forbearances was not available for this report.

FORECLOSURE – DELINQUENT MORTGAGE RATES

CoreLogic’s most current delinquency and foreclosure reports show the Kingsport-Bristol Metropolitan Statistical Area (MSA) had a foreclosure rate of 0.2%, down from 0.3% last year.

The seriously delinquency rate was 3.5%, up from 1.3% last year.

Hawkins and Sullivan counties in NE Tenn. and Scott and Washington in SW Va. make up the MSA.

The Johnson City MSA’s foreclosure rate was also 0.2%, up from 0.3% last year. The seriously delinquent rate was 3%, up from 1.3% last year.

Carter, Washington, and Unicoi counties make up the Johnson City MSA.

ATTOM’s Q4 underwater report listed 9,161 seriously underwater local mortgages. To make that list the property’s mortgage was at least 25% more than its estimated value.

The 2020 total was 268 lower than it was in Q4 2019.

WHEN IT’S TIME TO PAY UP

It’s likely some homeowners who took advantage of the forbearance program will end up losing their homes when it’s time to pay up. Those who have already negotiated a repayment schedule may see their mortgage’s term extended. Others will refinance, do a short sale or go to foreclosure. But there are no projections so far.

June 30 is the current forbearance sunset date.

RISKY RENTALS

There’s also a possibility for some sales – or foreclosures – on local rental properties.

A duo of reports from ATTOM signal stress in that sector. The analysis found that half of the Tri-Cities single-family rentals have vacancy rates higher than the U.S. average. Washington and Sullivan were also the two Tennessee counties where investment properties are most at risk as the economic recovery stagnates and affects the housing market.

There are a little over 110,000 investor-owned single-family rental properties in the Tri-Cities region. That’s 42% of the region’s total housing inventory. Most are owned by mom-and-pop investors who own fewer than 10 properties. Some ]are highly leveraged.

Greene Co. had the highest risk score in the analysis, and Washington Co. had the lowest risk score.

Don Fenley is a seasoned Tri-Cities journalist specializing in housing, economic and demographic trends. The Times-News carries his reports on the Sunday Money Page. He is also a frequent contributor to Business Matters on WETS and the Business Journal of the Tri-Cities’ print and electronic editions. Detailed or specific reports are available by contacting him at djfenley@gmail.com.

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