Housing Market Affordability?

While we’re waiting on some clarity on the student loan mess, I’ve been wandering around some facts and figures surrounding the housing market here in Florida.  Our law firm was front and center during the 2008 financial crisis, handling thousands of short sales, loan modifications, deeds in lieu of foreclosure, foreclosure defense and finally bankruptcy if helpful for our clients so it’s only natural that we’ll pick that back up if that’s the direction we’re headed.

Bankruptcies have been picking up of course – particularly for those who are unable to pay the bills or worried about getting further in debt.

But what about the housing market and what we can expect going forward?  Sales are way down, partially due to high prices, affordability concerns, high interest rates etc.  We are entering the Spring seasonal timeframe where new listings increase until a peak around May.

According to an analysis by Fannie Mae, the U.S. housing market would, on paper, return to pre-pandemic 2016-2019 housing affordability levels if one of the following occurred:

• If U.S incomes increased 60%, we’d return to pre-pandemic housing affordability levels.
• If U.S. home prices fell 38%, we’d return to pre-pandemic affordability.
• If mortgage rates fell 4.7 points (from 6.93% to 2.23%), we’d return to pre-pandemic affordability.

Do we expect any of those three things to occur?  Not really.  Perhaps a little of each though may bring housing affordability a little closer.  With headlines of insurance costs, non-renewal and the LA fires being front and center, I’m not sure how much housing demand there really is.  Rental prices have dropped considerably and my family is considering selling and renting to reduce risk.  We didn’t flood during this year’s hurricanes, but we came a little too close for comfort.  I haven’t rented since I was a baby lawyer in the 90s.

I don’t see mortgage rates decreasing much in the next couple years with inflation headed back up for the last six months or so and expected to continue higher.  Incomes, for those with jobs, have been increasing, but expenses seem to be increasing at a more rapid pace.  Home prices have stabilized a bit, kind of similar to a company on a hiring freeze – not filling recently vacated positions.

Sustainability is key.  Using this time to get yourself in a position to weather all storms may be the wisest course of action.  If you have debt, figure out how to reduce it, or at least reduce its carry costs.  That might mean bankruptcy to re-structure things.  It might mean some calls to your debt servicers to see what options exist.  Remember though, they don’t represent you, they represent your creditors, so take their advice with suspicion.  Gather as much information as you can before making any decisions.  Your future depends on it.

If you would like to review your options with us, please reach out.