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Is Mortgage Ready For The Second Lockdown? iBuyers aren’t 😬

By November 19, 2020 November 24th, 2020 No Comments

THURSDAY,  NOV 19 2020

Mortgage and Housing: Bring on the second lockdown!!

Officials in Harris County, where Houston is located, appealed to the public to forego gatherings with anyone beyond their own immediate households during the holiday season in an effort to help stop the spread of COVID-19.

On Tuesday, Harris County sent out an emergency text alert to all 4.7 million of its residents asking them to cancel their holiday gatherings and to get tested.

The second lockdown is beginning ( if you don’t believe us, just check-out your local market’s toilet paper supply), at least at a local level. And, well, we kinda figured we’d reach this point, didn’t we?

What’s remarkable in the mortgage and housing space is the overwhelming sense of confidence we can better weather this lockdown compared to the first. We are all very bullish and this might not be a bad thing.

“Our market has done very well within the confines of current restrictions, so if those persist we may not see too much difference as long as demand remains high,” writes Ryan Lundquist in his Sacramento Appraisal Blog about the coming of a second lockdown. “But if the rules change and access to the market changes, that’s where we might expect to see a difference in the way the market feels (or a change in the stats).”

But, is it a house of cards? Mortgage applications are stalling and the jobs outlook is not getting significantly better. First American Chief Economist Mark Fleming sees both as a clear risk in 2021.

“The trend in housing market potential will likely depend on the labor market’s recovery and how lenders adjust credit standards,” he blogged yesterday. “Will the labor market continue to recover or weaken in the coming months as we battle the pandemic, and will any labor market weakness impact potential home buyers? If there is more uncertainty, will lenders tighten credit once more? The historic rebound in housing market potential will slow down if lenders won’t lend and consumers can’t spend.”

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iBuyers face uphill battle to retake market share

While most in the housing and mortgage space felt well-positioned to continue to ride out the COVID-19 storm, others in the industry aren’t as optimistic.

Websites that buy and resell homes straight from the owners, and often tack on excessive closing fees, are facing an uphill battle to retake market share, according to an independent analyst who observes the space.

In an email to clients, Mike DelPrete notes that overall volumes and market share of iBuyers are set to drop by 50 percent compared to 2019, a reflection of the iBuyer business model coming to a complete standstill followed by a slow recovery.

From his email, signup for updates here:

“Segment market share continues to shift among the big four iBuyers. Opendoor's share of the market is down to 50 percent — a gradual decline from 2018 as new players entered the market and the overall segment grew rapidly. Zillow has made a strong entrance while Offerpad has maintained its position.”

“The pandemic of 2020 affected real estate in a variety of unprecedented ways. The drop in iBuyer market share and transaction volumes isn't a failure of the model, but it is a result of the model. The iBuyers face a slow climb back to the levels of 2019, as they conservatively ramp up operations in a new, uncertain housing market.”

🔥 Serious Delinquencies Set Record Highs…and WHY this doesn’t matter! 🔥 

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Fewer babies = Bad for business

Here’s another industry that is being hit hard by the pandemic. The WSJ reports (metered paywall) that makers of infant formula and diapers are girding for another possible Covid-19 challenge: fewer babies.

Birthrates have been declining for years in the U.S. and China, and new projections suggest that the coronavirus pandemic could lead to hundreds of thousands of fewer births in the coming months.

A dropping birthrate is bad news for developed economies. The shrinking of Japan’s population – deaths have outpaced births for several years – is already affecting the economy in areas including the job and housing markets, consumer spending, and long-term investment plans at businesses.

If the United States can’t reverse the trend of a dropping birthrate, the long term negative impacts on the economy will far outweigh the troubles of those businesses currently impacted by COVID-19 lockdowns.

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