A sizeable increase in new listings in April offered some good news for buyers, but it was matched by an even greater increase in sales. With supplies depleted, and homes being snapped up within days, nearly every area saw double-digit price gains. The current forecast as we head towards summer: the market remains as hot as ever.

Despite the influx of new listings, inventory in the region remains one of the tightest in the country. At the end of the month there were 43% fewer homes on the market in King County than there were a year ago. Snohomish County had 49% less inventory, and has just 519 single-family homes for sale in the entire county. There were only 309 homes for sale on the Eastside, which stretches from Renton to Woodinville.  Demand is so outstripping supply that 95% of the homes that sold last month on the Eastside sold within two weeks. In Seattle that number was 84%.

Home prices hit record highs in April, with nearly every area seeing double-digit price increases. The median price of a single-family home in King County last month was $830,000. Snohomish County’s median price soared to $675,000. Seattle’s median home price hit $875,000.  All were new records. At $1.3 million, the median price on the Eastside was down slightly from its all-time high in March, but up a whopping 39% from the same time last year. In another show of the strength of the market, 82% of homes on the Eastside sold for over the list price. That compares with 60% of homes in Seattle. The Seattle market remains strong, however price appreciation there has slowed relative to other areas of King County and inventory has crept up. Condos present one bright spot for buyers. Price growth has been slower and inventory has been higher than for single-family homes. The $460,000 median price for a condo in King County is 45% less than the median price of a single-family home there.

Needless to say, this is a challenging market for buyers. With multiple offers and escalation clauses the norm, it’s critical to work with your broker on a plan to consider all possible scenarios when looking to buy a home.  If you’re thinking about selling, it’s an ideal time to get a maximum return on your property before the prospect of rising interest rates starts to moderate the market.

The charts below provide a brief overview of market activity. If you are interested in more information, every Monday Windermere Chief Economist Matthew Gardner provides an update on the US economy and housing market. You can get Matthew’s latest update here.

There has been a lot of discussion as to what will happen once the 2.3 million households currently in forbearance no longer have the protection of the program. Some assume there could potentially be millions of foreclosures ready to hit the market. However, there are four reasons that won’t happen.

1. Almost 50% Leave Forbearance Already Caught Up on Payments

According to the Mortgage Bankers Association (MBA), data through March 28 show that 48.9% of homeowners who have already left the program were current on their mortgage payments when they exited.

• 26.6% made their monthly payments during their forbearance period
• 14.7% brought past due payments current
• 7.6% paid off their loan in full

This doesn’t mean that the over two million still in the plan will exit exactly the same way. It does, however, give us some insight into the possibilities.

2. The Banks Don’t Want the Houses Back

Banks have learned lessons from the crash of 2008. Lending institutions don’t want the headaches of managing foreclosed properties. This time, they’re working with homeowners to help them stay in their homes.

As an example, about 50% of all mortgages are backed by the Federal Housing Finance Agency (FHFA). In 2008, the FHFA offered 208,000 homeowners some form of Home Retention Action, which are options offered to a borrower who has the financial ability to enter a workout option and wants to stay in their home. Home retention options include temporary forbearances, repayment plans, loan modifications, or partial loan deferrals. These helped delinquent borrowers stay in their homes. Over the past year, the FHFA has offered that same protection to over one million homeowners.

Today, almost all lending institutions are working with their borrowers. The report from the MBA reveals that of those homeowners who have left forbearance,

• 35.5% have worked out a repayment plan with their lender
• 26.5% were granted a loan deferral where a borrower does not have to pay the lender interest or principal on a loan for an agreed-to period of time
• 9% were given a loan modification

3. There Is No Political Will to Foreclose on These Households

The government also seems determined not to let individuals or families lose their homes. Bloomberg recently reported:

“Mortgage companies could face penalties if they don’t take steps to prevent a deluge of foreclosures that threatens to hit the housing market later this year, a U.S. regulator said. The Consumer Financial Protection Bureau (CFPB) warning is tied to forbearance relief that’s allowed millions of borrowers to delay their mortgage payments due to the pandemic…mortgage servicers should start reaching out to affected homeowners now to advise them on ways they can modify their loans.”

The CFPB is proposing a new set of guidelines to ensure people will be able to retain their homes. Here are the major points in the proposal:

• The proposed rule would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021.
• The proposed rule would permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application.
• The proposal rule wants temporary changes to certain required servicer communications to make sure borrowers receive key information about their options at the appropriate time.

A final decision is yet to be made, and some do question whether the CFPB has the power to delay foreclosures. The entire report can be found here: Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X.

4. If All Else Fails, Homeowners Will Sell Their Homes Before a Foreclosure

Homeowners have record levels of equity today. According to the latest CoreLogic Home Equity Report, the average equity of mortgaged homes is currently $204,000. In addition, 38% of homes do not have a mortgage, so the level of equity available to today’s homeowners is significant.

Just like the banks, homeowners learned a lesson from the housing crash too.

“In the same way that grandparents and great grandparents were shaped by the Great Depression, much of the public today remembers the 2006 mortgage meltdown and the foreclosures, unemployment, and bank failures it created. No one with any sense wants to repeat that experience…and it may explain why so much real estate equity remains mortgage-free.”

What does that mean to the forbearance situation? According to Black Knight:

“Just one in ten homeowners in forbearance has less than 10% equity in their home, typically the minimum necessary to be able to sell through traditional real estate channels to avoid foreclosure.”

Bottom Line

The reports of massive foreclosures about to come to the market are highly exaggerated. As Ivy Zelman, Chief Executive Officer of Zelman & Associates with roughly 30 years of experience covering housing and housing-related industries, recently proclaimed:

“The likelihood of us having a foreclosure crisis again is about zero percent.”