Michigan real estate news weekly brief

Weekly Brief – February 22, 2021

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As I discussed last week, the impact of mortgage forbearance and foreclosures on the residential market remains unknown. There are multiple variables that could impact the ultimate effect: government intervention, the outcome of the COVID-19 pandemic, and the state of the economy and job growth when foreclosures are once again allowed.

The Biden administration bought more time for job growth and to bring an end to the economic impact of the COVID-19 pandemic this week by extending the foreclosure moratorium, which was set to expire on March 31. The moratorium now lasts until (at least) June 30. This gives the economy another three (3) months to recover. From an optimistic viewpoint, this could blunt the impact of foreclosures, as more borrowers could get back on firm financial footing during this three-month period. A pessimist might argue that this only kicks the can down the road another three months.

Regardless of your viewpoint, this extension does delay the potential impact of foreclosures on the residential market. As has been noted in several articles, residential prices are growing at a brisk pace. A glut of foreclosures could slow down that price growth. However, given the timing to process a foreclosure, the redemption period, and the post-possession sale process, it does not appear that foreclosed properties will hit the market until late in Q3 2022, or early Q4 2022, given this new extension of the foreclosure moratorium.

The residential market in Michigan remains strongly favorable to sellers. Inventory is limited, and demand remains strong. Perhaps in 2022 the entry of foreclosed properties to the marketplace will shift the pendulum back in the buyer’s direction.

Wayne County Expands Back Tax Assistance Program

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The Wayne County Treasurer’s Office has expanded its tax assistance program to now assist commercial property owners and landlords who have up to five occupied rental properties. The program gives eligible landlords and businesses time to pay off the back tax debt but doesn’t lower the 18% yearly interest rate. It allows them to pay 25% down and then pay off the rest of their balance through March of the next year.

One incentive to participate in the plan: The tax foreclosure process will move forward this year for all property classifications; the Wayne County Treasurer does not anticipate extending the foreclosure moratorium through this year, even for residential properties.

Detroit’s Rental Market Shows Decline

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The vacancy rate for apartments rose 16% in the fourth quarter, double what it was in the first quarter of 2020.  Pre-pandemic occupancy rates were at 92%. They currently hover in the mid-80s. Landlords are offering move-in deals and lower rental rates to moderate the decline. Anecdotal data suggests that renters left when their jobs pivoted to virtual work or with the closures of area businesses like restaurants, bars, and sports and music venues. Developers predict the downward trend is temporary.

Detroit Transit Center’s Placement Upsets Preservationists

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Plans for a new $7 million Detroit transit center are moving forward despite an outcry from preservationist groups. The new bus hub would require the demolition of two historic state fairground structures: The State Fair Riding Coliseum and the Dairy Cattle Building. The city agreed to conduct a three month study on the feasibility of saving them, but preservationist argue that the process hasn’t been prioritized and reuse hasn’t seriously been considered.

Biden Extends Foreclosure Moratorium & Expands Relief Program

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Using a three-pronged approach, President Biden rolled out mortgage protections. He extended the expiration date for the foreclosure moratorium from March 31 to June 30 and extended the enrollment window to request a mortgage payment forbearance. The third protection allows borrowers to defer mortgage payments for an additional six months. Eligible homeowners must have enrolled in a forbearance plan by June 30, 2020.

Homebuyer Mistakes That Can Derail or Delay Closing

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Sometimes, first time home buyers don’t know what they don’t know.  Buyers need to be proactive at the start of the home buying process or common mistakes can stall their efforts. Some proactive steps include paying attention to the paperwork when it’s first received to check for errors, making sure the property assessment matches or is under your offer by doing your market research before submitting your offer and keeping a tight rein on big-ticket spending prior to closing.

Michigan real estate news weekly brief

Weekly Brief – February 15, 2021

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One of the biggest unknowns of the real estate market in 2021 is the impact of the lifting of COVD-19 forbearances, and the expiration of foreclosure moratoria.

The number of mortgage loans in forbearance is still quite high, at 5.38%. And the pace of borrowers exiting forbearance plans is the lowest since tracking began in the summer of 2020. This could mean that borrowers are unable to resume regular mortgage payments due to continuing weakness in the economy.

However, some commentators argue that an accelerating economic recovery due to the reduced impact of the COVID-19 pandemic will lead to borrowers being in a position to resume mortgage payments. If this is the case, the rate of foreclosures once moratoria are lifted could be lower than expected.

The other unknown variable is whether we will see further governmental relief targeted to the housing and mortgage industries. This could be an x-factor that upends the normal market forces.

Obviously, the rate of foreclosures will have a significant impact on home prices. Right now, home sales are increasing at a healthy rate. Perhaps even too quickly. Too many foreclosures, however, could shift that pendulum back to stagnant, or even decreasing home prices.

The ultimate outcome of the COVID-19 economic crisis and its impact on housing prices will be a trend to watch this summer and in 2022.

Home Buyers Face Bidding Wars

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Due to a record low supply of homes on the market, 56% of home buyers face bidding wars in their offers. This is an increase of 52% from December of 2020. More than half of the homes listed go under contract in less than two weeks. Lower interest rates are making expensive homes more affordable, but a low market supply forces homebuyers to act quickly.

Mortgage Forebearance Crashes to a Halt

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With 2.7 million Americans still taking advantage of mortgage forebearance programs as late as mid-January 2021, the reality of a housing crisis looms. The CARES Act programs will end at the end of March unless changes are made to the rules. Most of the programs have a 12-month cap. If no intervention occurs, 600,000 Americans will have to begin paying their mortgages again.

Home Builder Proposes 56-Home Luxury Subdivision

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Toll Brothers is proposing a 56-home luxury subdivision in northeast Ann Arbor. The intent is for the development to meet the needs of first time luxury home buyers, retirees, families, and working professionals. The subdivision proposal still needs to go before city staff for review and to Planning Commission and City Council for approval.