- FHA homeowners have the most to lose [1:48]
- 2020 housing markets outperform 2019 [5:18]
- Screen your next listing on streaming services like Hulu [6:50]
- Metro homeownership unaffordable for renters [8:05]
- California extends eviction moratorium [11:40]
- Foreclosure and eviction moratorium extended to end of 2020 [13:35]
- New home sales at highest level since 2008 [18:17]
- $75,000/month rentals in the Hamptons [19:12]
- Commercial investors turn to mobile home parks [21:30]
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Aaron Amuchastegui: Real Estate Rockstars, this is Aaron Amuchastegui. Hey, today is the episode for State of the Market 56. I’m coming to you today at September 9th and I am doing this live from Sacramento, California. As I talked about in my last State of the Market, I have been travelling throughout the US and we had a bit of a pitstop. My daughter broke her ankle while we were at Mt. Rushmore about a week ago, and so instead of continuing our journey, we decided to head straight west to our house out in California so she could recover for a couple of weeks so that way we could get back on the road and finish our RV as I’m going around visiting different communities, visiting different real estate agents, different listeners, different people we’ve had on the show and trying to bring to you lot’s of news that’s out there in the real estate world.
So, this first week of September we had a lot of wild news, some of it was directly contradictory to what I thought was going to happen when I was talking to you guys just a week ago. For you guys that are listening to this, if you are watching this on YouTube, I’m actually going to share my screen, show you guys some of the articles again, like I have done once before, but don’t worry, if you guys are just listening to your podcast, you’re still going to have plenty of great stuff going on in there and it’s okay if you don’t see the articles. There’s no charge for anything fancy that I’m going to show you guys today.
Right now, as I pull up my screen, I’m going to go and share so you get the first article with you guys, and here it is. This is on Inman and it says, FHA homeowners have the most to lose during an economic upheaval. This came out just a few days ago. It says, three chief economists share how FHA homeowners have been disproportionately impacted by 2020 Coronavirus’ induced unemployment boom and what it means for next year’s market. Three chief economists share how FHA homeowners have been disproportionately impacted: the pandemic and the resulting economic upheaval have reignited fears that the 2000-esque housing market crash, although common consensus says the average homeowner won’t face the great recession, the people that are FHA buyers, they have a lot more to lose.
Now, a couple of different things that are making them more to lose right now is they tend to have less equity in their houses, so if they have to make a change, if they have to sell the house, they don’t quite have the equity protection. Also, for people that are going into forbearance right now, if they do five or six months of forbearance, if they were trying to sell their house afterwards, those forbearance payments are really going to be the whole amount of equity, so when they go and sell their house they may not have any equity at all.
Here’s what it says, it says, when you look at the forbearance ratio for FHA, we can tell they’re actually significantly higher than conventional or those backed by Fannie and Freddie. In fact, depending on which data source you’re getting, the rate of forbearance for FHA loan is between 10% and 12%. It’s much higher than the 4% to 5% of loans backed by Fannie Mae and Freddie.
There’s a lot of different factors that are affecting the FHA buyers out there. It’s just something to be aware of as we’re trying to figure out where the opportunities are, who needs the most help, and who’s going to be the most willing and able and ready to buy a new house or sell a new house and what’s going to ba available and how that might affect this lending market as we get a little further.
Now let’s jump to another Inman article. This next one says, the 2020 market is now outperforming 2019. Now, this is crazy, right? But I guess everybody we’ve been talking to says it’s really hard to get properties now, driving prices way up, so I’m really interested to hear what they’re talking about when they say the 2020 housing market that is outperforming 2019?
The National Association of Realtors’ Chief Economist Lawrence Yun said he believes home sales will be slightly ahead of 2019, and up again even more in 2021, rising 8% year over year. On Tuesday they projected that 2020 total homes sales will squeak past 2019 numbers, and that was in just a daily conversation we had. In March a massive scare hit the market. Safety concerns over the virus escalated, and you recall worries rose over everything from touching door knobs to economic concerns about the economy slump.
Look at that. Here we are, the first day of September, people are much more relaxed, market activity is doing better now than it was a year ago in September, and people say last year was a good year. So they’re saying, 2020, when all’s said and done, there’s going to have more sales in 2020 than they had in 2019. That’s really interesting to me because even though there’s less inventory on the market, maybe people now are more eager than ever to buy houses, and we all know that interest rates have been really, really low. Interesting article to think that 2020 could actually have more sales than 2019 by the end of the year. We’ve still got a few months left to see if that’s going to hit, but right now, as the article says, market momentum is very solid.
All right, here’s kind of a new, interesting factor that I saw in there. It says Adworks now allows you to stream your next listing on Hulu. The forefather of web advertising continues to evolve with enterprise solutions including a quick, affordable way to run popular ads on streaming media services. Now, this article’s on Inman. It’s probably not really an ad but a pseudo-ad to talk about this new thing that’s out there.
The reason I wanted to talk about this, I think it’s really, really interesting that people could now — There are so many virtual tours happening right now, people are doing a lot of video to sell their houses as they’re trying to figure out how to market them better. It’s really interesting to me that you could be– My kids see so many YouTube ads. Imagine watching a movie on Hulu, and then you see an ad come up that’s a virtual tour for a house for sale in your neighborhood, in your area. They have the ability on there to really target the same thing as houses that people are looking at or where they are when they’re watching TV or where they’ve been in other places on the web. So, really interesting to see that if you are streaming stuff and next time you see one of those things you say you heard it here first. You’re going to see virtual tours come through while you’re watching TV at home, even when you’re streaming.
All right, next article on Inman says, Remote work trend could create two million new buyers. Now this was from Zillow. A study by a Seattle-based company found that approximately two million renters could afford monthly payments on a typical starter home in the US but not in their current metro. What are they really saying there? The study by Zillow found that two million renters could afford monthly payments on a typical starter home, but not in their current city. So nearly two million current renters could potentially become homeowners now with the opportunity to move to a more affordable area by working remotely.
That’s something that we’ve talked about, that the trend of how many people are moving out of San Francisco, right? Maybe last week or the week before on State of the Market we talked about that San Francisco has more houses for sale right now than they had a year ago. San Francisco and New York are two major metropolitan cities where inventories are actually going up. People are try to sell their houses and more people are moving out than moving in. This is one example of that, right? It’s saying there are people that right now are living in the city. They can’t afford to buy a house in the city. They’re just paying rent there, but the reason they’ve been living in the city is so they can make it to work. But now if people are able to actually work from home, they could work from farther away, they could move 50 miles away, 100 miles away, and now they will be able to.
So they say that is actually going to be a big, big opportunity. Remote work trend could create two million new buyers, so you want to be targeting first time homebuyers and first time homebuyers just outside a metro area, and probably first time homebuyers outside a metro area that had been working in one of those companies that used to require working there and they can now work remotely.
So I can see a lot of different tech companies retargeting people that were working in tech companies, again, just outside the city limits so it’s first time homebuyers. We got a lot of people that we interviewed on the Real Estate Rockstars podcast too that talked about targeting first time homebuyers. Kimberlee Meserve was one of the ones 30 under 30 last week did. She’s got some really great ideas for that, and maybe we’ll get her on here again to talk about how you guys might be able to do this.
All right. As I continue to talk about the San Francisco trend, this is one of the things I put on some of the news pieces I put on my Instagram. For you guys that follow me on Instagram you see that every couple of days I’m always posting an article or something to watch and pay attention to. As this article starts to load up, the highlight of it says, Pinterest terminates their San Francisco office lease. I think they paid something like $89 million to cancel a lease. This was for a building that was under construction. That’s the headline. Pinterest pays $89.5 million to terminate a San Francisco office lease. Now it’s not all bad news. It said they also have another office that they’re currently in. This was for one that they were going to be moving into.
There was new construction getting ready to be finished. Now they’re saying they’re not going to be moving into that. I think a lot of the things that we’ve talked about, they’re realizing that they don’t need as much office space because people are going to be wanting to work from home. They say, “As we analyze how our workplace will change in a post-COVID world, we’re specifically rethinking where future employees could be based. A more distributed workforce will give us the opportunity to hire people from a wider range of backgrounds and experiences.”
One of the spins that they did there in their answer is they said, hey, by us being able to not require everyone to work in an office, we’re actually going to get a wider range of people that we could hire. Maybe these companies are even thinking, hey, if they let people work from home, right now there’s a big disparity between how much a programmer gets paid in the Bay area compared to how much a programmer gets paid in Idaho. Maybe they’re thinking now we’re actually going to get better talent as we do this, as we start to spread out into those different areas. Really interesting article.
All right, next article on Forbes. This is one that I have been following pretty closely. This is out in California. This article in Forbes says, California extends their eviction moratorium amid rent crisis. Now, there’s some other news. Now nationwide, one of the next articles that’s going to come up there’s a moratorium thof pat says, you can’t evict people throughout the country until January 1st. There’s some exclusions and some things they have to do to not get evicted. They’re doing that til the end of the year.
Governor Newsom in California, he just signed a bill banning evictions until February, 2021. He’s pushing it even further, two months past the regular federal government deadline. It says, extending temporary relief for millions of Californians amid the coronavirus pandemic as many Americans struggled to pay rent since the federal eviction moratorium and enhanced unemployment benefits ended in July.
One of the things that they highlighted there is the federal eviction moratorium was over, but it hasn’t really been over. The federal foreclosure moratorium has continued to get extended. As soon as that federal eviction moratorium was extended, they extended it in California. In California, I don’t think that people have been able to do any evictions since March out here.
It says, under the new law tenants who pay at least 25% of their rent from September through July 31st will be protected from eviction and won’t be liable for rent that was due from March through August until March 2021. It’s saying, if they make partial payments that they pay 25% of what’s owed, they can’t be evicted until March 2021. At that time, they’re going to have to pay that back rent.
I have to imagine that a lot of the people at that point will go ahead and move out. Maybe some of them will pay that back rent, but every time if they’re only paying 25% of their rent, it can be a lot harder for people to catch back up. I would say in California, I look for March 2021 for some big shifts and available rentals and people moving in and out, and maybe some landlords deciding that maybe they want to sell their property Instead.
Our next article on Forbes is related to that one and it says, eviction foreclosure moratorium on federally backed mortgage officially extended through the end of 2020. Now, there are some different articles that people had talked about. They were going to extend the FHA one vote. They said. as the Federal Housing Finance Authority and Department of Human, Housing and Urban Development announced today will extend its foreclosure and eviction moratorium through the end of 2020. This announcement comes 19 days after Donald Trump signed an executive order saying that they were going to do something.
It’s really interesting that as it comes out, the Center for Disease Control was the one that announced the extension as they were going to do it. No foreclosures or evictions extended through the end of the year. That doesn’t mean that all foreclosures have been done, but it does mean 75% of foreclosures you cannot go through the foreclosure process. The foreclosures we’ve seen going through have been private loans, have been commercial loans, have been loans that weren’t personally guaranteed loans to companies and businesses and things like that.
There are still some foreclosures taking place but the ones that are federally backed, potentially ones that are owner occupied,l are going to be extending through the end of 2020. They stated in the health crisis they didn’t want to have 28 million homeowners that are in default right now to have to move out in the middle of a pandemic with the opportunity they might get sick. That came from the CDC.
There are a few exemptions from that for the evictions. If somebody is going to not get evicted, they have to state under penalty of perjury, there’s like a five-question answer. They’re going to have to say that they’ve tried to get government stimulus for help. They’ve done everything they can, that they physically can’t pay their rent. That their income has been drastically depleted.
Depending on where you are in your city, I would look at that because some judges and some courts, like what we’ve seen in Texas in the last six months is, some courts would just say, “Hey, we’re not going to do evictions no matter what.” Other courts would say, “Well, we’re only going to do them except for if they meet these exemption requirements and they actually give landlords and homeowners a chance to present that.” Depending on your locality, there are exemptions from that deadline. We’d be able to look back and see a place like Bayer County, where they could hardly do any evictions over the last six months, probably going to stay that way.
All right. Another piece of news, this was a week ago on Bloomberg, new homes account for the biggest share of us sales in 12 years. It’s just saying, new homes accounted for more than 12% of the sales this year through July and the biggest since June of 2008. 12% of all the sales that happened through July this year were new homes. I get curious as to why that might have happened this year because the housing market was great. I think maybe there was a better demand for new homes because people could tour new homes and move into new homes that no one else had lived in before.
Maybe as people were afraid of getting sick and the options that were out there, and maybe just from March, April, May, some people weren’t quite sure if they’re going to list their house in the market yet. Vacant houses that no one has ever lived in were probably easier to market than they’d ever been before. I’d be really curious at the end of the year to see if that’s still the case, if it’s still going to be their biggest share of the overall market in the last 12 years.
Here’s something really interesting. It shows a lot of what we’re talking about with people moving out of New York city, Bloomberg article, September 3rd, by James, he says the Hamptons hit an uncharted waters, $75,000 a month fall rentals. This is crazy. There are a lot of people up in the Northeast part of the country that’ll go to the Hamptons for the summer and they go rent these giant houses. They just vacation there before they move back here. It said, the summer season used to end on Labor Day weekend, but not anymore. They’re not in the past Labor Day signaled the end of the Hampton summer season, it was called Tumbleweed Tuesday. You could shoot a cannon down the main street in South Hampton and not hit anyone. This year is different.
As families confront a school season in which kids might be cooped up in the house for remote learning and people with office jobs are still working from home, the Hamptons rental market is entering uncharted waters in the form of fall winter and even year round rentals. The rental market post Labor Day has been extremely active and prices are considerably higher than they were in the past. They got $75,000 a month in the fall at a time when it was usually empty. That is an interesting trend.
One of the trends that we’ve seen in our Airbnb in Northern California, it’s we have a giant house there, 16 beds and it used to be only for company retreats. Company retreats would come up there. There was always going to be 20, 25 people staying at the property and that’s not what’s happening right now. Right now there’s a lot of families from San Francisco, from the Bay area that are coming up with just families of four or five, and they’re coming and staying in the house that has 26 beds in it just so they can get some space and they can go swim in a pool and get an extended vacation. We’ve had more families coming for just some space and some vacation than we’ve ever had before. You’ll start to see really interesting things like that and I wonder how long a lot of this will last.
It used to be summer season was the travel time, but it’s an interesting point they make here that now that families are doing school from home, they have the opportunity to actually just like workers can now work remotely, if people can go to school remotely some families are seeing that as an opportunity to change where they’re living to live in a better place to make it through these COVID impacts. That’s a really interesting article by Bloomberg and an interesting trend that I think we should watch. Again, summer season used to end on Labor Day, same with Airbnb, but we’re still booked in Northern California.
Last article on here, it was just an interesting twist of what’s happening in the commercial market. This was a Bloomberg article by Patrick Clark. It says, property investors tap mobile home parks for COVID era returns. Purchases jumped 23% while other commercial property deals sag. Real estate investors have turned to single family rental homes, warehouses and even movie studios while the pandemic makes it harder to put capital to work in more traditional parts of commercial property. I’ve talked about this a lot over the last month, a lot of commercial properties have been getting foreclosed on, really famous commercial properties have been getting foreclosed on. so mobile home parks are also looking good. More than $800 million worth of parks changed hands in the second quarter up 23% from a year earlier.
According to the report where the commercial real estate firm JLL, total commercial property purchases declined 68% to roughly $45 billion in the same period. There was a whole lot less commercial transactions that happened, but there was 23% more year over year that happened in mobile home parks. Institutional investors accounted for 28% of the mobile home park purchases, the highest share since JLL started tracking this asset in 2010. The parks are attracting new interest while COVID-19 hammers prospects for hotels. The institutions are also drawn to opportunity to consolidate and upgrade assets owned by smaller investors, said Scott Belsky, who leads the Manufactured housing Practice in JLLs valuation group.
It’s really interesting to see that they’re trying to find other opportunities. I think there’s probably another theory too to why mobile homes parks could be better assets right now. There’s a lot of worry about unemployment. There’s a lot of worry about affordability and people being able to afford the housing that they’re in. They’re doing all these things right now to prevent foreclosure, prevent eviction. That keeps kicking the can down the line.
I was trying to think about this the other day. I said, “What is the solution? What is the solution out there when so many people are on unemployment, so many people cannot afford their rent or what they’re paying right now, what is the solution?” I could think the only solution that they’re going to have is they’re going to be able to downsize into smaller properties. What that really means is the lower end properties, the lower end rent, they’re going to have a better opportunity to be able to fill those vacancies.
I think that is really the need. The only solution to people making less money is going to be downsizing, finding properties that cost less to rent. There isn’t much of a solution in saying, hey, we’ll just postpone until they have to pay rent. Now that renter that was paying $2,000 a month and they haven’t paid since March, by the time it comes they’re going to have a check with that. They’re going to owe $14,000. No renter that’s been on unemployment for six months is going to be able to pay for that.
Just some really interesting stuff as we combine and look at all of the news. It looks like there’s a lot of federal and state intervention happening right now trying to push a lot of that thing back. Maybe there’s some investors right now, they’re looking at single family home rentals and mobile home parks. I think there’s going to be a high demand right now and people trying to invest in rental properties where the rent is below average or below the median for those neighborhoods so as people have to move, there are properties for them to move out into.
Again, we also talked about some big opportunities too for targeting those home buyers that are now able to work from home. These are renters that have never been able to afford a house before, but are fairly able to live 30 or 40 minutes from where they used to work. Well now they’ll be able to afford that house. Lots of news out there, Rockstar Nation. Thank you for listening to us today. Hopefully you liked this one. If you did like it, and you got a lot of good info, please share the YouTube link, tell everybody else about it and go on and give us a review.
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