Home Foreclosure Housing market to remain stable as COVID era protections end, experts say

Housing market to remain stable as COVID era protections end, experts say

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Housing inventory is expected to come from a number of sources over the next year, including existing homeowners and home builders – but very little is expected to come from foreclosed homeowners after key federal protections expire, according to a Zillow expert survey. The housing market is expected to remain broadly stable as homeowners exit the forbearance, while rents and vacant homes are not expected to rise significantly after the end of the federal moratorium on evictions.

As part of Zillow’s Q3 2021 Home Price Expectations Survey, more than 100 nationwide property experts and economists were asked for their views on the expected appreciation of house prices over the next five years, inventories and the state of the market once the key homes of the pandemic era. end of protections. The survey is sponsored by Zillow and conducted quarterly by Pulsenomics. Panelists said they expect the biggest source of available home inventory to be existing homeowners buying and moving to another home, accounting for 39.7% of the supply expected to hit the market. over the next year.


READ ALSO: Are Short-Term Rental Investors Ruining the Arizona Housing Market?


Inventories trended downward throughout 2020 and into 2021 as housing demand took off, driven by the big shuffle, low interest rates and a demographic wave of homebuyers from millennials and baby boomers. The combination of low supply and high demand pushed prices into new territories, reaching an annual record appreciation of 17.7% in August. But at the same time, stocks increased compared to the previous month, and the share of listings with lower prices increased for the fourth consecutive month, suggesting a modest improvement in purchasing conditions. In February, the panel accurately predicted this additional inventory would enter the market in the second half of the year, as existing homeowners become more comfortable listing their homes as part of a widespread vaccine distribution.

• In the Phoenix subway, inventories rose 3.6% in August but are still down 12% from a year ago.

• The current annual appreciation of home values ​​in the Phoenix market is 31.8% over the past year.

The panel expects foreclosures to be the smallest source of inventory available, at 5.4%. Additional supply is should hit the market over the next few months as homeowners walk away from forbearance and some sell their homes, according to a previous Zillow study. The federal moratorium on foreclosures ended on July 31, and about 850,000 borrowers are expected to exit forbearance programs by November 2021.

However, a strong appreciation in prices in recent years and very few loans with negative equity mean that open market sales are a realistic option for the majority of distressed borrowers. It’s different from 2008, when financial conditions and a sour housing market pushed many homeowners into involuntary foreclosure.

New construction is expected to be the second largest source of inventories, at 22.5%. New home construction was slashed in 2021 due to a shortage of key building materials, but even despite setbacks it remained well above pre-pandemic levels.

Existing owners intending to rent, or not to buy again, are expected to contribute 9.6% of the supply, according to the panel.

Limited impact on the rental market

In the rental market, given the expiration of the federal moratorium on evictions, evictions from Zillow projects will be about 1.5 times what they typically would have been before the pandemic.

After the moratorium expired on July 31, the Centers for Disease Control and Prevention imposed a new policy to prevent evictions in areas with high COVID infection rates. However, the Supreme Court blocked the new ban, leaving a number of tenants threatened with eviction. Zillow estimates that there will be more 485,000 deportation requests in September and October after the Supreme Court ruling, with 268,000 likely to be evicted – about 0.6% of the 43.9 million tenants in the United States

The vast majority of survey participants do not expect rents to change much as the moratorium ends. The largest group of panelists – 34% – said no changes are likely to happen, while 26% expect rents to rise slightly. In total, 14% of those polled said that rents would go down slightly or moderately. Predictions of a modest increase in rents were made by 20% of the panel, and those who believe rents will rise significantly were 6%.

When asked how rental vacancy rates would be affected, the largest share (38%) said vacancies would increase slightly due to the end of the moratorium, just ahead of forecasts that vacancies would not increase (37%) and beyond calls. that they would increase modestly (24%).

The number of at-risk tenants who will be evicted will be greatly influenced by the pace of distribution of federal relief funds. According to the US Department of the Treasury, only $ 5.1 billion of the $ 46.5 billion rental relief has been distributed by state and local governments as of August 25.

Silver lining

Experts surveyed expect nationwide home prices to rise 31.8% through 2025, the equivalent of an average annual rate of 5.7%, well below the current annual appreciation of around 17%.

“In the United States, home appreciation rates and annual rental price increases are at historically high levels, and home price expectations are now the highest we have seen in 12 year history of this survey, ”said Terry Loebs, founder of Pulsenomics. . “The bright side for would-be homeowners is that the worst of the housing supply crisis finally seems to be behind us, and most experts believe the rapid price boil over the past year has started to lift. mitigate.”

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