One Big Thing
In the first week of December, the proportion of mortgage borrowers that sought forbearance rose to its highest level since August. Delinquencies are climbing as well, as some borrowers are either not eligible for forbearance or are still unaware that they may be eligible. NREI
Reading the paragraph above, it is natural to assume that the end result will be a wave of foreclosures and distress. However, I remain skeptical of that view for two reasons:
- With the pandemic still raging, it is extremely likely, in my opinion that federal forbearance programs that expire next year will be extended for a substantial period of time.
- Forbearance and defaults have been increasing at a time when housing values across the country are actually RISING, a stark contrast to what happened when the housing bubble popped and values plunged. Couple this with the fact that mortgage underwriting never got too loose this cycle and it results in borrowers having a lot of equity in their homes – in other words they may be cash flow poor but are generally equity rich. My working assumption for months has been that we will see a substantial increase in residential sale leasebacks – which large Wall Street SFR investors have been preparing to roll out – rather than a wave of outright distress.
What I’m Reading
All Talk: Political rhetoric around rent has gotten so bad in some regions that it is actually impacting collections. This has gotten bad in cities and states where mayors and governors are effectively saying that tenants don’t need to pay. (h/t Steve Sims) Globe Street
Running On Empty: Goldman Sachs says that 90% of small businesses have exhausted PPP funds leaving many in jeopardy. CNBC
Built to Last: Starbucks is planning on opening another 22,000 stores in the coming decade despite the pandemic fallout. Bisnow
This Will Leave A Mark: About 3.57 million people left New York City this year between Jan. 1 and Dec. 7, according to Unacast, a locations analytics company which analyzes anonymized cell phone location data. Approximately 3.5 million people earning lower average incomes moved into the city during that same period, for a net loss of around 70,000 people. That loss resulted in roughly $34 billion in lost income. Unacast
Chart of the Day
Homeowners are refinancing cash out of their homes again.
Source: JBREC
WTF
Heart of the Matter: A young Moldovian medical student and Instagram star wannabe allegedly ripped out her mother’s heart, lungs and intestines – then calmly washed the blood off in the shower and met up with her boyfriend. Judging from the pictures, this one pretty much crushed the hot/crazy matrix. NY Post
Smallest Violin: Bill Gross testified that his tech investor neighbor made him feel like a prisoner in his oceanfront Laguna Beach mansion. For those not following this story, Gross and his neighbor have been suing each other over a big ugly statue on Gross’ property. I’m becoming increasingly convinced that Gross is the big boss Karen that you have to face after vanquishing all of the other Karens. OC Register
Basis Points – A candid look at the economy, real estate, and other things sometimes related.
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