What Will Happen To The Tampa Bay Housing Market When Homeowners Leave Forbearance Plans

Dated: February 2 2021

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What Will Happen to the Tampa Bay Housing Market When Homeowners Leave Their Forbearance Plans?

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According to the latest report from Black Knight, Inc., a well-respected provider of data and analytics for mortgage companies, 6.48 million households have entered a forbearance plan as a result of financial concerns brought on by the COVID-19 pandemic. Here’s where these homeowners stand right now:

  • 2,543,000 (39%) are current on their payments and have left the program

  • 625,000 (9%) have paid off their mortgages

  • 434,000 (7%) have negotiated a repayment plan and have left the program

  • 2,254,000 (35%) have extended their original forbearance plan

  • 512,000 (8%) are still in their original forbearance plan

  • 116,000 (2%) have left the program and are still behind on payments

This shows that of the almost 3.72 million homeowners who have left the program, only 116,000 (2%) exited while they were still behind on their payments. There are still 2.77 million borrowers in a forbearance program. No one knows for sure how many of those will become foreclosures in the State of Florida and the Tampa Bay Areas. There are, however, 3 important reasons most experts believe there will not be a tsunami of foreclosures in Florida like we experienced during the housing market crash over 10 years ago:

  1. Almost 30% of borrowers in forbearance are still current on their mortgage payments.

  2. Banks likely don’t want to repeat the mistakes of 2008-2012 when they put large numbers of foreclosures on their books. This time, many will instead negotiate a modification plan with the borrower, which will enable households to maintain ownership of the home.

  3. With the significant equity homeowners have today and demand for homes outpacing available housing inventory (especially in Pinellas County), many homeowners will be able to sell their homes instead of going into foreclosure.

Will there be foreclosures coming to the market? Most Likely. There are hundreds of thousands of foreclosures in the United States every year. Homeowners experience economic hardships, and in some cases, are not able to meet their mortgage obligations.

Here’s the breakdown of new foreclosures over the last three years, prior to the pandemic:

  • 2017: 314,220

  • 2018: 279,040

  • 2019: 277,520

Through the first three quarters of 2020 (the latest data available), there were only 114,780 new foreclosures. If 10% of those currently in forbearance go to foreclosure, 275,000 foreclosures would be added to the market in 2021. That would be an average year as the numbers above show. And thanks to record low housing inventory, the extra homes hitting the market wouldn't necessarily cause home prices to soften, but simply meet the demand of home buyers entering the housing market. 

As we've said before, in a balanced housing market, there is about 5.5 months of housing inventory available for sale. During these times, home appreciation averages about +4% per year. Right now in Pinellas County, FL housing inventory is sitting at just 1.2 months of inventory. If unemployment rates continue to drop and mortgage rates remain low, our housing market could easily absorb 4-5 times more home inventory without issues arising for the most part.

What happens if the number is more than 10%?

We entered 2020 with 1,210,000 single-family homes available for purchase. At the time, that was low and problematic. The housing market was experiencing high buyer demand, and we needed more houses to meet that demand. We’re now entering 2021 with 320,000 fewer homes for sale, while buyer demand continues to remain extremely strong in Florida and the rest of the United States. This means the housing market has the capacity to soak up a lot of inventory in the event more foreclosures hit the market.

Bottom Line

There will be more foreclosures entering the market later this year, especially compared to the record-low numbers in 2020. However, the market will be able to handle the increase as buyer demand remains strong. If you're thinking about selling your home in Pinellas County or the greater Tampa Bay Area, now is a great time to list a home with us! There is minimal competition and buyers are currently paying a premium for move-in ready homes as they hit our market. Call The Sandy Hartmann Group today and find out how easy we make it for homeowners to buy and sell homes with us!

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Andrea Hartmann

Andrea is the Managing Partner of The Sandy Hartmann Group and runs the team alongside Sandy Hartmann. She would love to talk to you about real estate! Andrea was born and raised in the Tampa Bay a....

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