(00:04) [Music] Welcome to the Dearwood Realty YouTube channel. I’m John Schink. How are you today? You know, we get this narrative right, and the narrative goes something like this: The housing market is fine. Okay, and then you say, well, why is it fine? Prove to me that it’s fine. You say, well, look, I mean, you can’t even get a home right now, prices are through the roof. Isn’t that great? And I’m always kind of bothered by that because it’s no, it’s not great. If you want to buy a house right now, it’s very, very difficult, it’s very, very expensive. The affordability, the ability to buy a home is severely limited due to high mortgage rates.

(00:54) And then you get to the point where you say, well, okay, John, what would you need to do or what would you need to see before you started to believe that the housing market is not great? I’ll tell you right now, it’s foreclosures. Foreclosures, oddly enough, for the past three or four years, have been just nowhere to be seen. I speculate that much of it is due to the fact that when you have a home and it increases in value 40% over three years, how much is that covering up your financial problem? And then, you know, you’re going to refinance way before you’re going to let the house go to foreclosure if it’s a house that you really, really want to live in. We have seen a spike in refinances, not massive or anything like that, but that is something.

(01:54) But what I saw here in this article gave me pause, and I wanted to bring it to you. This was off of Yahoo. You can see the headline, it says, “Home foreclosures are on the upswing Nationwide.” Well, now that’s not good, right? I mean, I don’t think foreclosures are great. I don’t look, I don’t feel like that’s kind of Schadenfreude, taking pleasure in the pain and suffering of others, but let’s get into it. It says, “Home foreclosures are on the rise as Americans continue to grapple with the ongoing cost of living crisis.” Well, I don’t know if it’s a crisis, depends on what your definition is. Things are way more expensive, inflation’s gotten out of control, the Fed is trying to do something about it, the Congress is just throwing money out the window, burning cash. They don’t care about deficits, they don’t care about anything like that, they just keep spending. So the Fed has a real tough time, a real hard go here because no matter how much they raise the rates, the politicians just continue to spend and spend and spend.

(03:02) It says that, according to a new report published by real estate data provider Adam, which found that foreclosure filings, which include default notices, scheduled auctions, and bank repossessions, surged 28% in the third quarter to 24,539. Foreclosures are up 34% from the same time year ago. I have looked at my MLS, I have noticed that there are some foreclosures available, and there had not been for like I said, two to three years. So this is very, very interesting.

(03:34) It says, “Even with the national economic upturn and job stability, it’s evident that some homeowners are still grappling with the pandemic’s financial aftermath or encountering new challenges,” said Rob Barber, Adam CEO. Now, look, even with the national economic upturn and job stability, I don’t know if you’ve looked at the job numbers, they’re very good, like topline job numbers, right? But then when you dig into it, more and more people are taking two jobs just to make ends meet. That’s not great, that’s not a sign of a strong consumer. If you look at credit card debt, not great. Some people say, oh, that’s okay, that the debt is high, people can just afford it, it’s no problem. I don’t know that that’s the case.

(04:21) It says the report also indicated that there were 37,679 properties with foreclosure filings in September, up 11% from the previous month and up 18% from 2022. So this is, to me, an indication, an early warning, a canary in the coal mine, if you will, that house prices are elevated, that the housing market might have issues coming forward. And you know, this is something to pay attention to, to me. Although foreclosures are on the rise, it says they remain well below the levels recorded during the 2008 financial crisis. I am troubled by the idea that you would take the worst foreclosure situation in our history and use that as the benchmark, as the benchmark currently right now to the issue. We know that foreclosures have been kind of naturally held out of the market for a while now because most people had enough equity to cover, and if something went south, and they were at 2%, I believe it’s 80% of the public has like a two or 3% mortgage, it’s unbelievable.

(05:34) Real estate experts, I don’t know if I’m a real estate expert, I would say real estate guys like John are bracing for a significant blow to the market since the pandemic-era freeze on federal student loan payments officially came to an end at the beginning of October. I did notice this, I did put a video out on it. I do think that student loan repayment is going to put a dent in the general economy, which is so odd because you say to yourself, how can paying back a loan be troublesome for the economy? Well, it’s who you’re paying back. If you’re paying back institutions and not buying groceries, and not buying movie tickets, and not buying houses, then it’s going to cause some issues.

(06:31) It says a recent poll conducted by Pulsenomics, which I’ve never heard of, found that most economists said homeownership rates will be affected for at least a year by the resumption of student loan payments, and many predicted the impact could be longer than that. I don’t really know the length of time. I mean, anytime you have to pay more, it seems like that will be an issue. It says about 40% predicted an even longer impact of at least 3 years. I don’t know the year, how many years you have to pay back student loans, I have no idea. But it says on top of that, many of the economists believe that the resumption of payments could significantly hit the US homeownership rate, and nearly one quarter expected would cause an uptick in the delinquency rate. I don’t think that Mark Zandi, he likes to play around the economy, he’s from Moody’s, I don’t think he thinks that’s the case. I think it’s quite possible.

(07:35) It says about 44 million borrowers in the US were affected by the payment pause, which initially began in March of 2020. So I just wanted to bring that to you. Look, it’s not a huge number, right? It’s not a crash, right? It’s literally just the foreclosure number is starting to tick up. Is it something to be concerned about? I don’t know if it’s something to be concerned about as much as I think it’s something to pay attention to because if there’s a couple of things, if there’s a heavy amount of refinancing at high rates on homes, if you continue to see the credit card debt be high or go higher, if you continue to see the softness of the consumer in retail’s earnings calls, Walmart, Target, etc., it’s not good.

(08:44) I don’t see an easy out in this situation. You know, if the Fed is convinced that they have to raise rates or keep rates high for a long period of time to bring down inflation, and they feel they have the mandate and the political capital to do so, they’re going to. And who’s going to suffer? Well, you might lose your job, but again, you know, it’s a small price we pay for inflation, right? It’s going to be really interesting. I mean, the amount of money that’s just paid to service the debt is kind of wild.

(09:19) So, just pay attention to this stuff. If you’re going to buy a house right now, rates are terrible, but I can understand why you might want to. I can understand, you know, based on certain things, it may be the time to buy because houses might even get more expensive, which is absolutely crazy if you think about it. And if you want to hold off and wait, that’s certainly a way to go too. I don’t have an easy answer. I don’t have a crystal ball to know what’s going to happen. My one thought was that if a house price was, say, $200,000 at a 3% mortgage, okay, then how can it be a $200,000 home at an 8% mortgage, which we have right now? And currently, in the Midwest, at least in St. Louis, it’s still staying at that $200,000 range, even though payments have more than doubled for whoever buys it. So just something to think about.

(10:24) With that, I’m going to head on out. Thank you for watching, thank you for listening, and I will catch you on the next one.