Covid-19 Driving Delinquencies, Urban Emigration, And Bidding Wars?
today at 5:14 pm
It’s hard to imagine anything more disruptive than this damn pandemic. In just a few weeks it’s turned the world upside down, forcing millions into immediate and severe financial distress and creating new challenges for home sellers and buyers. Do you want to have strangers walking around inside your house? Do you want to be walking around inside strangers’ houses? And why can’t you just continue to work from home and avoid the commute and wardrobe issues and let your personal appearance degenerate (unless your wife might leave you)?
However, it’s possible that some good will come out of this as it’s forcing all of us to rethink how we work and how we live our everyday life. Something about necessity being the mother of invention – nothing to do with Frank Zappa of course. Let’s look at some of the latest evidence of disruption afoot.
Mortgage Delinquencies Almost Double – In One Month
Earlier this week I posted on how foreclosure activity plummeted in April as a result of government policies temporarily suspending foreclosures. However, that doesn’t mean that mortgages aren’t in trouble. In fact, just yesterday Black Knight released a preliminary report that indicates that mortgage delinquencies increased by 1.6 MM in April, the largest amount ever. The delinquency rate rose from 3.39% to 6.45%.
Also this week the DePaul Institute For Housing Studies released a study that showed that there are 569,000 households in Cook County with at least one worker who is at risk of being laid off as a result of the pandemic and the consequent economic impact. Crain’s looked at this data and noted that it represents 28% of all Cook County households. They then concluded that all of these households were at risk of losing their homes. I think that’s a bit of a stretch. Some of these households might have paid off their homes or other income earners in the household might be able to cover the mortgage or they might be able to use savings for long enough to get to the other side. Nevertheless, we can all agree that the problem can get pretty big.
People May Escape High Cost Cities
For decades I have been mystified by people who live in high cost cities. New York and San Francisco are the first two that come to mind. The usual excuses include some nonsense about the quality of life or cultural opportunities – or the more rational excuse of employment opportunities. All I know is I could never see myself saving much money in those places.
Well, one of the benefits of a potentially lethal virus ravaging the country is that it forces you to think outside the box. With so many people working from home now employers have finally figured out that it is possible to have a distributed work force, which could save them on facility expenses and rapidly spreading illnesses, and workers now realize they can live in cheaper places and/ or avoid an agonizing commute and/ or avoid the next pandemic. You’ve probably heard about all the Silicon Valley companies that are embracing the work from home model and Redfin just conducted a survey that found that more than 50% of the workers in our most expensive cities would move out of those cities if they could work from home.
In fact, over the last few weeks there have been a number of stories about how realtors are experiencing a surge in interest in the New York suburbs. I’ve also previously reported on how the Chicago suburbs have not been hit as hard during this pandemic as the city has been. Nevertheless, I’m wondering if people looking for more affordable options will seek out Chicago as offering the urban lifestyle at a lower cost.
Are There Really Bidding Wars Out There?
This is the most mystifying trend out there. Redfin claims that nationwide more than 41% of the offers that they submitted were in competition with other offers. In fact, they claim that more than 30% of the Chicago offers had competition.
Now I think most people will conclude from this that 41%/ 30% of the properties had multiple bids but that’s not what the press release says. It specifically references offers. In other words, if two Redfin clients submitted an offer on the same property those would count as two offers, not one property. So the percentage of properties facing multiple bids would be slightly less than what they show.
Even assuming some modest correction to the percentage of properties I find it really hard to believe that this many properties would have multiple bids. So my first thought is that maybe there is something about the typical Redfin client that attracts them to underpriced properties?
I find that easier to believe than the notion that there are that many multiple bid situations – at least in Chicago. That’s because none of the data that I look at – in particular, market time and sale price/ original list price – suggests that demand is that strong. If you know otherwise please let me know in the comments section below.
#Foreclosures #ChicagoForeclosures #Coronavirus #ChicagoRealEstate
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider’s view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.