Volume 170 | January 19, 2024

Guardian Asset Management

Weekly Newsletter

Guardian endeavors to provide you with the latest in housing, industry and market news from Washington D.C. and around the country. It is our goal as your industry partner to be informative, relative and topical.

California foreclosure filings climb 41%

off pandemic era lows

California’s 32,905 foreclosure filings in 2023 were No. 2 among the states. Economic rivals Florida was No. 1 at 35,813 and Texas was No. 3 at 30,467.

Yes, California foreclosure activity was 41% above the 2020-22 pace – the 13th smallest jump among the states. The national pace was up 55%.

The biggest leaps were found in DC (up 403%), West Virginia (up 155%), Oregon (up 116%), New York (up 102%), and Idaho (up 101%). Texas was No. 9, up 85%, and Florida was No. 32, up 46%.

Mortgage rates are expected to fall below 6% this year, according to Fannie Mae

After reaching a post-pandemic high of 7.8% last fall, the average 30-year mortgage rate is now expected to end the year below 6%, according to analysts at Fannie Mae.

Yet even as the housing market rebalances, home sales rates are expected to remain below their long-term trajectory.

The 30-year mortgage rate is currently at about 6.6%. Mortgage rates tend to run counter to demand for U.S. government bonds. That means when demand for bonds is up, mortgage rates fall.

And thanks to a slowing economy, demand for bonds has been increasing. Specifically, the 10-year Treasury yield has fallen nearly 1% from its peak in October.

"The outlook for both short-term (bond) rates and mortgage rates is now decidedly lower than what we had previously forecast," the Fannie Mae analysts said.

Why distressed loans are scarce but market activity is up

Serious delinquency rates by at least one measure have dropped to a low not seen since 1999, but distressed servicing trades may be trending in the other direction.

That's in part because interest rate-related developments have created an environment where more mortgage firms are interested in selling, according to Pamela Hamrick, president of Incenter Due Diligence.

"What's happening a fair amount in the marketplace is there are small- to medium-sized originators that had been holding onto servicing for the last several years and because volumes have been down so much there, a lot of organizations are looking for ways to increase their capital position," Hamrick said.

Distressed assets tend to be most cost-intensive so mortgage companies tend to shed them first, and while delinquency rates have been low for a while, housing finance firms may have older servicing with issues. Some may have new distressed loans from expiring pandemic relief.

Did the housing market just hit a bottom? New data reveals home sales hit their lowest point in 28 years in 2023

Just when the U.S. housing market showed signs of thawing, brutal new data revealed a pretty dysfunctional market in 2023: existing home sales dropped to their lowest level since 1995 at just 4.09 million transactions. That’s a worse figure than the entire Global Financial Crisis, famously caused by a housing bust that put millions of people underwater on their mortgages.

The Economy is Starting to Look Normal - Housing Isn't

Cooling inflation, a moderating job market and steady growth are making the economy look familiar. But housing is a complete mess

If you haven’t tried to buy a home lately, the U.S. economy is starting to look kind of, sort of normal. But the housing market is still a mess, and it looks as if it will be that way for a long time.

When the Commerce Department reports fourth-quarter gross domestic product next Thursday, it looks as if it will show the economy grew at close to a 2% annual rate from the third quarter. That would put GDP about 2.8% above its year earlier level, matching the annual pace it experienced during the three years before the pandemic.

Nationwide, 88.5% of U.S. homeowners with mortgages have an interest rate below 6%, down from a record high of 92.8% in mid-2022.  

That means more than 88.5% of homeowners with mortgages have a rate below the current weekly average of 6.66%, prompting many to stay put instead of selling and buying another home at a higher rate—a phenomenon called the “lock-in effect.” 

But for most people, it’s not realistic to stay put forever. The share of homeowners with a rate below 6% has fallen from its record high partly because some homeowners are opting to bite the bullet and give up their low rate in order to move. Many are selling because a major life event like a divorce has given them no other choice, while others are putting their homes on the market because they want to live in a different house or city.

Another reason the share has dipped: Everyone who purchased a home in the last year—repeat buyers and first-time buyers alike—was entering the market at a time when the average mortgage rate was above 6%.