COVID-19: Housing Market Updates

June 30, 2020 | 7:09AM CT

Shawn Telford, Senior Leader, Product Management

When COVID-19 triggered shelter-in-place and social distancing orders were implemented nationwide in mid-March, they created an immediate roadblock for lenders as the required inspections that are part of the appraisal process were no longer practicable.  With historically low interest rates fueling demand, the GSEs and other secondary market participants quickly responded by permitting temporary appraisal flexibilities allowing exterior only and desktop appraisals in certain cases.  To facilitate additional primary market originations, federal regulators issued an interim final rule (IFR) to allow up to a 120-day delay in obtaining the completed appraisal for loans placed in bank portfolios.^[1]

Lenders are working with appraisers to use the best option allowed by the loan parameters and considering many other variables affecting the borrower and appraiser.  Additionally, the GSEs, HUD and VA allowed appraisers to modify the standard certifications and limiting conditions in the Fannie/Freddie forms such that an appraiser can rely on information from an interested party such as the borrower, real estate agent, builder, and so forth.  This change allowed appraisers to rely on data not normally relied upon and to make assumptions regarding the data to form a credible opinion of value.

The temporary appraisal flexibilities are currently set to expire on July 31, and the IFR on December 31, 2020.  When used, the flexibilities have been a welcome assist in keeping lending moving.  The flexibilities have been an unexpected catalyst regarding appraisal process modernization, allowing for new technology to be used in the appraisal process.  The temporary flexibilities have, in fact, provided for a nationwide, all-inclusive appraisal modernization pilot, which will shape the future of the valuation processes. Different valuation options suddenly became accepted—even if only temporarily.  Specifically, new technology tools, such as CoreLogic Property Assist, which allow borrowers to collect images, videos and details about their homes using mobile phones and to deliver this data to an appraiser potentially removing the need for an inspection in some cases are being piloted.

Will these changes stick?  Many large lenders hope the “genie does not go back in the bottle”. They desire the flexibility in appraisal options, yet some lenders’ risk groups are unwilling to leverage the temporary flexibilities.  For perspective our data indicate these flexibilities are used on 8% -10% of appraisals. 

Certainly Covid-19 has impacted collateral valuation and will continue to affect the way appraisals and the needed inspections are completed long after the virus fades. Ultimately regulators, investors, and lenders will have to strike the right balance among innovation, modernization, and risk management.

^[1] See https://www.federalregister.gov/documents/2020/04/17/2020-08216/real-estate-appraisals

June 14, 2020 | 4:04PM ET

Russell McIntyre, Sr. Professional, Public Policy & Industry Relations

The first half of 2020 has come to a close and the spread of coronavirus throughout the country shows no signs of slowing down, with its devastating impact being felt by Americans from coast to coast. Over the past month, the federal government’s actions to address the economic impacts of the pandemic continued to evolve in response to the needs of its citizens. During March and April, the first few months of the outbreak, offices throughout the administration rapidly issued new guidance to counteract the immediate effects of an economic shutdown; in May, these same agencies rushed to update and re-issue this guidance to more accurately address the evolving problems that many Americans were facing (and continue to face) every day.

Now, more than four months into its response, the federal government is going beyond simple reauthorization of its current programs by working to expand their scope and flexibilities. The Federal Reserve has looked to expand its Main Street Lending Program to more small- and medium-sized businesses, along with nonprofits, in addition to opening up its Municipal Liquidity Facility to additional entities. In late June, the Federal Housing Finance Agency (FHFA) announced that both Fannie Mae and Freddie Mac would offer new multifamily forbearance options and tenant protections. And the Consumer Financial Protection Bureau (CFPB) provided additional guidance to servicers on managing the forbearance provisions contained within the CARES Act legislation.

This increase in scope has been driven alongside an increase in specificity, as agencies have now had enough time to administer more targeted actions aimed at specific sectors and processes within the economy. The Federal Housing Administration (FHA) was able to issue temporary quality control requirements; Fannie Mae found the time to address green rewards escrows; Freddie Mac had the capacity to update their eMortgage and Workout Prospector systems; and the Internal Revenue Service (IRS) even got around to providing relief for taxpayers for sport fishing equipment. Many of these actions may be unrelated, or tangentially related at best, to your day-to-day operations, but they exemplify the level of detail that many of these agencies are finally able to address four months into the crisis.

Smaller metros in the South see sales bounce back while California coastal metros still lag in May

June 25, 2020 | 5:49AM PT

Selma Hepp, Executive, Research & Insights and Deputy Chief Economist

Leading up to the pandemic, the housing market appeared to have been posed for the strongest year since the Great Recession. However, with the onset of the pandemic and a number of Shelter-in-Place (SIP) orders implemented across the country, the housing market took a sharp turn downward - with new contract signings and new for-sale listings dropping by almost 50% by mid-April. Those early April weeks led to many questions on what the housing market will look through the rest of 2020.

Nevertheless, after hitting the trough in mid-April, housing market activity has started to rebound. By the end of May, new contract signings, a leading indicator to future closed sales, were actually higher - up about 8% - compared to the same week last year, while the new listings were down only 16% compared to last year.

But, while the pickup in housing activity appears strong and possibly not expected this early following the crisis, housing activity differs widely across metropolitan areas and is in part driven by the severity of the pandemic as well as stringency of SIP orders in local areas. The analysis below uses the data from the multiple-listing services (MLSs) to evaluate housing markets across 35 metropolitan areas prior to COVID-19 through the first week of June.  The metro areas represent both large metro regions as well as smaller metros across the country.  

Figure 1 summarizes some relevant market indicators across the metro areas. The first column summarizes the change in home sales in the first twelve weeks of 2020 compared to last year and prior to the declaration of the national emergency on March 13^th. Strong start in home sales was particularly evident in Las Vegas, San Diego, Cleveland and Columbus, Philadelphia, Phoenix and a number of Texas markets. On the other hand, markets showing some weakness compared to last year included largely Seattle, San Jose and Washington DC. Also, the trends prior to COVID-10 do suggest stronger activity in relatively more affordable parts of the country while less affordable cities on the west coast have lost some of the momentum seen in 2019 sales activity.   

The second column in Figure 1 summarizes year-over-year change in pending sales contracts signed over the 30 days ending on June 7th. Since pending contracts are a leading indicator, they are suggestive of what the total sales will look like 30 to 45 days following the contract signing. The change in pending contracts compared to last year varies notably across the metro areas suggested by a stark difference in the numbers shaded in green, indicating an increase, compared to those in red which indicate an annual decline.

The metros that have seen the biggest annual boost continue to be those that already had a strong demand prior to COVID-19, namely markets in Texas – Houston, Dallas, and Austin, Ohio’s Cleveland, Columbus, and Cincinnati, but also Jacksonville, Virginia Beach, and Kansas City. In contrast, some of the larger metropolitan areas, particularly on the California coast remain at half of the activity seen last year, though Northeast cities such as Washington, Baltimore, Philadelphia, Providence, and New York are also slow to see a rebound in housing activity. The three areas that stand out with the largest declines in new contracts signed are Milwaukee, San Jose, and Los Angeles. While the increase in housing activity appears to be correlated with expiration of SIP orders, increased activity in Ohio, for example, occurred seemingly before the SIP expiration on May 29^th and is a continuation of strong trends seen prior to the pandemic. Interestingly too, more affordable Sacramento in California is seeing relatively stronger activity compared to the other California metros but also relative to where it started in 2020. Similar trend is seen in Austin, Jacksonville, and Kansas City which started the year relatively flat, but are showing encouraging trends in recent weeks.

Further, to understand where the home buyers and home sellers struck a balance amid these difficult times, Figure 2 traces the average share of homes that sold below the asking price across the 35 metro areas in the first five months of 2019 and 2020. First, note that the general decline from January to May is seasonal as we see more discounts during the winter months than during the summer. But, while 2020 started off with fewer homes selling at a discount, 70% in 2020 versus 73% seen in 2019, by the end of April, the 2020 share starts picking up again to reach almost the same rate seen in 2019, little less than 60%. Thus, buyers who closed on their homes after the onset of COVID-19 seemed to have been able to negotiate more discounts than those who closed prior. Nevertheless, sellers’ willingness to negotiate seems to have leveled off in May suggested by flattening of the 2020 line.

Figure 3 further breaks the data by the 35 metro areas and summarizes year-over year change in the share of homes sold below the asking price in the weeks prior to COVID-19, and in May, and compares the differences between the two. Specifically, Column A indicates the year-over-year difference in the share of price discounts between January and mid-March and a negative number suggests that there were fewer discounts at the beginning of 2020 compared to the same period in 2019. Column B indicates the year-over-year difference in discounts for the 4 weeks ending June 6^th, 2020. The last column is a difference between columns A and B (note there may be rounding errors).

For example, in Seattle, the share of homes sold with a discount prior to COVID-19 was 17 percentage points lower in 2020 than in 2019. In contrast, in May 2020, there were no difference between the share of discounts compared to last year. Thus, the 17 percent point difference noted in the last column suggests a notable increase in share of discounts in May compared to that seen at the beginning of the year. Put another way, green shades in the last column suggest more discounts in post COVID-19 housing market than seen prior to the crisis.

The other metro areas seeing an important decline in price discounts are Sacramento with 13 percentage point spread, Milwaukee, San Diego, and a few others. On the other hand, buyers in Las Vegas, Atlanta, and Charlotte may be seeing an uptick in discounts in recent weeks.

Taken together, the onset of the pandemic is still relatively recent, and the lasting impacts will only be obvious as time passes and more data is available. But early data suggests that some regions have fared better than others and the trends seen prior to the crisis are continuing to drive their local markets.   

June 23, 2020 | 5:15AM PT

Maiclaire Bolton Smith, Senior Leader of Research and Content Strategy at CoreLogic, sits down with Bridget Berg, Principal, Industry Solutions at CoreLogic to discuss fraud impacts from COVID-19.

Maiclaire: Welcome back to our CoreLogic podcast series looking at the impact of COVID-19 on the U.S. housing economy. My name is Maiclaire Bolton Smith, and I am the Senior Leader of Research and Content Strategy with CoreLogic. Today, I’m joined by Bridget Berg, Principal, Industry Solutions to discuss fraud impacts posed by the COVID-19 global pandemic. Bridget, thank you for joining me today.

Bridget: Thanks for this opportunity, Maiclaire.

Maiclaire: So to start off with today, Bridget, what is the biggest challenge related to COVID-19 and fraud risk that lenders are encountering right now?

Bridget: With record unemployment levels, not to mention the speed with which we reached those levels, lenders are really concerned about borrowers losing their incomes and hiding it so they can still close on their homes. For a borrower, especially one who is refinancing for a lower payment, it is tough to lose your job and then find out that it keeps you from the refinance that was going to decrease your expenses.

Maiclaire: I see how that could be a real problem for lenders. What are they doing about it?

Bridget: Originators are verifying employment as close to closing as possible, even day of closing. It can be difficult to make sure you are speaking to the right person, because HR departments may have been disrupted depending on the size of the business.

Some sources that are heavily relied on for automated pre-close income validation use periodic data feeds from employers. They are not real-time. In normal circumstances, the delays are not usually an issue, but because there are so many job impacts happening so quickly right now, it really increases the chances a borrower could lose their job during that delay period. This means that in addition to the regular number of manual income validations, those that were using automated services have been added to the queue for pre-closing income validation phone calls.

Maiclaire: Are lenders experiencing similar issues as they verify a borrower’s self-employment?

Bridget: Well yes. Disruptions in IRS 4506-T services as well as the age of tax information creates a different problem for lenders as they try to confirm that self-employed borrowers’ businesses are still operating and have a steady income. Many are looking at bank statements to track consistent activity, but there is no perfect solution right now.

Most lenders are asking the borrowers to sign additional certifications regarding their income status. Although signing the loan application certifies the information on it is correct, having a separate form to spell out the fine print is a good idea.

Maiclaire: You’ve touched on challenges with income verification prior to loan closing. What happens if the borrower loses their job after closing?

Bridget: That really depends on the contracts between the loan originator and the investor. There is also a risk for originating lenders that the borrower may ask for forbearance before the loan is sold to the end investor. If this happens, the loan is likely to be assessed a price adjustment of up to 7% of the loan amount, or may not be accepted for purchase, depending on the investor. This creates an urgency to get loans sold quickly to reduce the holding time and the risk of an unsalable or discounted loan. The longer loans take to move through the system, the higher the chance one or more of them has a forbearance request.

Making sure loans have clean documentation is more important than ever to minimize delays in selling the loan. Forbearance requests are not a direct loan-fraud issue, but they raise a lot of questions in gray areas. Lenders are required to disclose forbearance requests, but there may be some question as to what is really considered a forbearance request. There are huge stakes for lenders holding unsold loans when it comes to the forbearance requests.

Maiclaire: It sounds like income verification and speedy sale to the investor is very important for lenders managing fraud risk right now. What else is coming down the pipe?

Bridget: Appraisal flexibility is something lenders should be watching closely. With appraisal flexibility, there are temporary alternatives offered by agencies that allow for an appraisal without a physical inspection by the appraiser, especially for the home interior. Because the initial flexibility was for a short timeframe, misuse of the guideline was unlikely. However, it has been extended through June and may be extended beyond that, or perhaps used again in the future. It may be more likely to be used as a tool to facilitate fraud if and when it matures.

We will also be closely watching home prices and signs of market stress, such as delinquencies and foreclosures, especially in areas hardest hit by unemployment. Distressed areas are targets for fraud schemes, such as illegal property flips, fraudulent short sales, and foreclosure rescue schemes. Many of these schemes use straw buyers. Our quarterly fraud briefs will report on any signs of these activities. The next fraud brief will be released in July, analyzing activity for Q2 2020.

Maiclaire: Thank you, Bridget and thank you for listening. Please check back to this site – corelogic.com/covid19 for ongoing insights from CoreLogic on the COVID-19 pandemic and its impact on the U.S. housing economy.

June 19, 2020 | 8:27AM ET

Saumi Shokraee, Professional, Research & Content Strategy

Fears about the coronavirus pandemic have prompted public officials to order quarantines and stay-at-home orders across the nation. A Gallup poll on April 3^rd indicated that 75% of Americans have self-isolated in their household.¹ This means that all of those hours previously spent at the workplace are now being spent at home.

How much extra time is that?  Data from the Bureau of Labor Statistics gathered in July 2019 found that the average full-time employed person worked 8.5 hours on the weekdays that they worked.² Moreover, Census data from 2018 indicates that the majority of the nation worked primarily outside the home, with only 4.9% of the nation working entirely from home before the start of the coronavirus pandemic.³

Consequently, with stay-at-home orders in place, many people are spending an additional 8.5 hours in their homes each day, often with additional occupants, including college students and extended family, living under one roof. As a result, water heaters, washing machines, bathroom facilities, dishwashers, plumbing, sinks, and faucets are taking on significantly more use and wear.

Sources:

^[1] https://news.gallup.com/poll/307760/three-four-self-isolated-household.aspx?utm_source=alert&utm_medium=email&utm_content=morelink&utm_campaign=syndication

^[2] https://www.bls.gov/news.release/atus.nr0.htm

^[3] https://www.census.gov/programs-surveys/acs/news/data-releases/2018/release.html

June 17, 2020 | 6:25AM MT

Amy Gorce, Principal, Business Development

Home buying has always been driven by principles of affordability, location, and love.  During this COVID-19 pandemic, property search remains consistent.  That’s a digital exercise and hasn’t been affected. Home buyers continue to focus on a city or polygon region of an area where they want to live, put in their price range, then consume photos (and videos) of potential candidates to select. This fundamental behavior, the very start of the buying funnel, hasn’t changed. But so much more beyond online search…has. 

Almost everything “offline” in the real estate world has been forced to adapt to strict social distancing rules that mitigate the fears of homeowners worried about strangers in their home.  Home inventory has been slim for years in normal times – this worry has caused inventory to plunge even further - keeping unit transaction volumes stunningly low for Spring and creating an odd price parity for an almost equal shrinkage of consumer demand for homes as they struggle with the trifecta of job loss, stricter access to (jumbo) mortgage credit, and low consumer confidence. While stock markets are, at the moment, in a surprising rebound – it’s unclear how this might stimulate consumer demand for homes as inventory shrinks. 

In many states, real estate workers were considered an essential service. The challenge to our industry was to enable home buying in the safest possible way. A process of a live digital home viewing was inspired. If you have used Apple’s FaceTime feature on your phone, Skype, WhatsApp, etc., you have become familiar with the use of mobile technology that allows a real estate agent, or sometimes a home seller, to provide a live walk through of a property.

Real estate technology companies have responded by adding new data fields that allow real estate agents to indicate if a live showing request is acceptable, and real estate websites - like Redfin and thousands of others - have added a new feature to their consumer search results that allow a consumer to request a live-stream showing. Typically, a real estate agent now makes an appointment with the seller for the live showing and walks through the home (masked & gloved) answering questions in real time for home buyers. This process is successful at allowing home buyers to gather enough information to make offers on homes they love with some new contingencies protecting the offer pending in-person sign-off.

The developments of these new showing paths were not without some confusion on terms that include differentiation between 3D tour, virtual tour, ED Virtual tour, virtual walkthrough. The industry has not agreed on what to call these various iterations and their meanings remain in flux.  The coming months will help define and standardize this terminology.

Another key change is stronger adoption of the digital transaction. Transaction management solutions have been available for decades to organize all of the people (and tasks) related to a closing. COVID-19 inspired laggards to adopt these digital solutions out of necessity and there is a strong likelihood that many professionals will stay on the digital track. There remain issues with wet signatures (notary) at various stages in a handful of states. But many legislatures have drafted correcting courses which may soon find their way into law. Security, encryption, and validation has come a long way toward reducing identity fraud.

What we can conclude today is, for the first time, the real estate industry is forced to rethink the in-person showings and open houses that have been the mainstay behavior of home buying for more than 100 years. Now, agents representing home buyers do not need to drive around opening dozens of doors all day long. Home sellers have fewer casual shoppers traipsing through their home. New options are available that may disrupt historic patterns of the home buying process. Fully digital transactions are happening in America and there is a likelihood that COVID-19 may provide a lasting impact on the future of homebuying. While the pandemic has been shocking and (short-term) devastating – the long-term structural changes it forces may drive significant improvement for our industry as a whole.

June 15, 2020 | 8:13AM ET

Russell McIntyre, Sr. Professional, Public Policy & Industry Relations

Almost three months into the global COVID-19 pandemic, offices throughout the federal government continue working to address economic and social ramifications. These response mechanisms have continued to evolve over time as our institutions work to keep pace with new challenges as they arise. While many agencies used March and April as a time period to issue new guidance to counteract the immediate effects of an economic shutdown, they used the month of May to update and re-issue their notices, bulletins, and other statements to more accurately address the problems that many Americans are facing.

This includes many of the agencies that regulate the housing and mortgage industries, from the Federal Housing Administration to the Consumer Financial Protection Bureau to Fannie Mae and Freddie Mac, among many others. This past month saw a government-wide extension of the foreclosure and eviction moratoria first enacted in March, a continued increase in flexibility for loan processing capabilities, and a shifting focus to larger liquidity issues affecting our nation at the macroeconomic level.

Finally, as households across the country continue to struggle to make monthly rent and mortgage payments, federal institutions have turned their attention to forbearance programs in an effort to ensure Americans are able to remain in their homes. Forbearance and repayment issues are sure to remain a focus of numerous agencies over the coming months as we enter what is (hopefully) the backend of this pandemic.

CoreLogic has continued to keep track of the daily updates coming from these federal agencies and bodies over the month of May. While this document does not claim to cover every action issued by every office within the executive branch, it does capture those that are of utmost importance to CoreLogic and others throughout the housing and mortgage industries.

June 12, 2020 | 7:45 AM ET

Frank Nothaft,Executive, Chief Economist, Office of the Chief Economist

Join CoreLogic Chief Economic Frank Nothaft in this economic update as he discusses key stats about the ups, downs and changes in the marketplace across the United States for the spring and summer homebuying season.

Topics to be featured include new listings, signings & closings, loan applications and applications by age cohort.

June 10, 2020 | 8:01AM ET

Archana Pradhan, Principal, Economist

Refinance Applications are up for both jumbo and non-jumbo loans

Demand for both home-purchase and refinance jumbo loans started very strong in the beginning of 2020. However, with the spread of COVID-19, applications for jumbo mortgage loans started to decline rapidly. To observe the effects of COVID-19 on jumbo mortgage demand, we used CoreLogic Loan Application data through May 9th, 2020 and compared the number of applications by week with the same week in 2019. We used Federal Housing Finance Agency (FHFA) conforming loan limits to identify the jumbo loans.[1] Loans above the FHFA limit were flagged as jumbo loans and below or equal to the limit as non-jumbo loans.

Figure 1 shows that home-purchase loan applications for jumbo loans picked up more than non-jumbo loans in early January 2020, supported by a robust economy and lower mortgage rate than one year earlier. However, activity started to slow during the second week of February and by mid-March was running below the pace of 2019 and below non-jumbo loans as well. Figure 1 also notes March 13^th, the date the President announced a national emergency.

Home-purchase loan applications reached a trough at the week ending April 11^th and then started to recover. As of the week ending May 9th, home-purchase loan applications rose 22% for the jumbo loans compared to the same week in 2019. As states are reopening, homebuyers have started to come out. Record low mortgage rates layered with pent-up demand has helped the application volume rise. However, for the non-jumbo loans the volume is still below the same week in 2019.

For the entire month of April, total home-purchase applications for jumbo loans were 28% below the prior April compared with 24% drop for non-jumbo loans.  

Similarly, refinance applications for both jumbo loans and non-jumbo loans spiked this year as mortgage rates dropped. The volume reached a peak in the first week of March as interest rates on 30-year fixed-rate reached a record low. Refinance applications dropped as the mortgage rate rebounded about 30 basis points within two weeks of hitting its low, but applications were still higher than a year ago. Refi applications for jumbo loans dropped more than the non-jumbo loan applications before it started to bounce back. As of the week ending May 9th, refi loan applications were up for both jumbo loans (by 177%) and non-jumbo loans (by 234%) compared to the same week in 2019.

As the pandemic recession worsened, credit underwriting appears to have tightened for both jumbo and non-jumbo refinance loans compared to the prior year. Table 1 shows year-over-year change in average credit risk attributes of refinance loan applications, and the changes are consistent with a tightening in underwriting. The average credit scores rose by 32 points and 10 points, respectively, for non-jumbo loans (to 756) and jumbo loans (to 775) from April 2019 to April 2020. Similarly, averages for LTV ratios and debt-to-income ratios have dropped for both jumbo and non-jumbo refinance loans from April 2019 to April 2020.

Due to the current uncertain economic conditions, lenders might be tightening the credit underwriting of mortgages at a time when borrowers also want to take advantage of a record-low mortgage interest rate. As per CoreLogic loan application data for April 2020, the average interest rate dropped about one percentage point for both jumbo and non-jumbo refinance loans from one-year ago. For the entire month of April, total refinance applications were up by 44% and 234%, respectively, for jumbo loans and non-jumbo loans compared with the prior April.

^[1] https://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limits.aspx

June 8, 2020 | 5:29AM PT

Saumi Shokraee, Professional, Research & Content

 As the COVID-19 pandemic continues to impact the real estate economy, renters and landlords are concerned about how the disruption is going to affect their ability to make their payments on time. Over April 20-22, CoreLogic hosted a series of 3 webinars as part of the Strategic Agility in Uncertain Times series providing insight on COVID-19’s impact on the real estate, mortgage, and insurance ecosystems. In the first webinar, we dug deep into some of the effects of COVID-19 on the rental market and received a few questions. We have taken the time to provide further context here:

Tracking Rent Payment Amid COVID-19

With concerns of coronavirus deep in the national psyche, data indicates that tenants are hesitant to look for new properties, whether it be for purchase or for rent. Current tenants are either extending their leases by switching to month-to-month or by signing new leases.

The National Multifamily Housing Council collected data from 11.5 million apartment units on whether tenants made a full or partial rent payment in their rent payment tracker.^[1]

June 05, 2020 | 7:03 AM CT

Elizabeth Greeves and Rhea Turakhia, Professionals, Marketing

Atlantic hurricane season officially begins on June 1. As COVID-19 sweeps the globe, creating disruption for businesses and homeowners everywhere, the risk hurricanes and associated storm surge pose remains strong with nearly 7.4 million homes in America at risk. CoreLogic^® identified the top 15 metros at risk of storm surge, including single- and multifamily residences, accounting for 68.8% of total reconstruction cost value of homes at risk of storm surge on the Gulf and Atlantic coasts in the United States.

June 3, 2020 | 8:31AM ET

Bin He, Sr. Leader, Science & Analytics
Michelle Wu, Principal, Science & Analytics
Jay Liu, Principal, Science & Analytics

The disruption of Covid-19 on the U.S. economy, particularly on jobs and the housing market, could lead to significantly higher mortgage default in the next several years based on Covid-19 scenario analysis and prediction of the CoreLogic® RiskModel.

CoreLogic RiskModel is the CoreLogic propriety mortgage credit risk tool that analyzes mortgage prepay and default using state transition models and Monte Carlo simulation, based on loan characteristics, past payment history, as well as macroeconomic conditions.

Three hypothetical Covid-19 macroeconomic scenarios were studied: baseline, adverse and severely adverse scenarios. For each scenario, macroeconomic inputs, including the CoreLogic Home Price Index (HPI), unemployment rate and interest rates, were generated and fed into the model. Figure 1 shows the HPI under the three scenarios: CoreLogic HPI Forecast released May 5, 2020 (Baseline), one standard deviation worse case peak-to-trough decline (Adverse) and two standard deviation peak-to-trough decline (Severe). The unemployment rate was assumed to peak at the end of 2020 Q2 (15.2% Baseline, 18.2% Adverse, 22.2% Severe) and then revert to the CBO natural rate (4.2%) in the long run. The 30-year mortgage rate was assumed to bottom (2.54% in Q3 2020) at the third quarter of 2020 then gradually go up due to the recovery of bond yields.

Figure 2 and Figure 3 show the conditional default rate (CDR) and cumulative default rate prediction form the RiskModel Agency Model for conventional conforming loans originated during 2013-2016.^[1] The CDR peaks in 2022Q2 at 4 times higher than the April 2020 level under the baseline scenario, and 10 times higher under the severely adverse scenario.

Figure 4 and Figure 5 show the conditional prepayment rate (CPR) and cumulative prepayment rate prediction. The model predicts a brief increase in prepay during 2020Q2, likely due to borrowers taking advantage of the lower interest rates, then a sharp drop for the rest of 2020 due to job losses across the U.S.. The CPR remains at a lower level afterwards.

The CARES Act provides mortgage forbearance to borrowers with a federally backed mortgage impacted by the coronavirus. The MBA has reported there’s almost 4 million mortgages are in forbearance at the beginning of May. The effectiveness of programs like this could have significant impact on the final outcome of the delinquent loans. However, even if the CARES Act mortgage forbearance program take-up rate is high, many borrowers may still be in financial distress after the forbearance period.  They may be candidates for a loan modification.[2]  However, it’s unclear how many of these consumers will qualify or may lose their homes due to a slow economic recovery.[3]

^[1] Default is defined as short sale or REO liquidation. CPR or CDR is the annualized percentage of loans at the beginning of the months that are expected to enter prepayment or default in a year. The cumulative rate is the cumulative number of prepayments or defaults divided by the total number of loans in the pool.

^[2] CoreLogic IntelliMods automates loan modification decisioning with limited manual intervention.

^[3] Congress is debating the extent to which various financial assistance programs are going to be further extended or even increased.  This open question is important to the extent to which consumers have enough of a financial runway to recover prior to the expiration of such programs. 

June 1, 2020 | 7:02AM CT

Amy Gromowski, Sr. Leader, Analytics
Willa Wei, Principal, Science & Analytics

Over the past several years a growing U.S. economy gave way to a strong rental market, with property owners receiving more rental applications from low risk applicants. That is prospective tenants who were more likely to be able to meet their monthly rent payments on time.  These low risk applicants had higher incomes, lower rent-to-income ratios, and better credit histories.   

But as the country stays at home to slow the spread of COVID-19, the rental market is experiencing a significant slow-down and a potential reversal of the gains made in the past several years.  With unemployment rising faster than any other time in recent history and the inability for rental property owners to evict, what will be the impact to the rental market? 

Rental Application Volumes

Using 2019 as a benchmark to understand 2020, the first seven weeks of 2019 had a relatively constant rental application volume, with an increase in application volume starting in week 8 (Figure 1).  As colder climates begin to warm, people begin to move.  In 2020, the first 9 weeks had the same trend as in 2019.  However, somewhere around March 9 (week 10), rental application volumes start decreasing rapidly.  Around this time more jurisdictions were beginning to issue “shelter in place” directives, and the President declared a pandemic national emergency on March 13.  Similarly, the lack of ability to change residence was impacting new home listings for sale.  New home listings track the same between 2019 and 2020 in the first 10 weeks, but in week 11 new home listing volumes drops significantly. 

Figure 1: Application Volume Index by Week Rental vs. New Home Listings  

Rental Lease Default Risk

Though rental applications are trending back up, they are still lower compared to 2019.  With fewer people applying for rental housing during this uncertain time, what will happen when people are able to go back to their daily routines?  Will the rental market explode with applicants looking to move or will there be a gradual increase in volume as the country climbs out of debt?  Perhaps unemployment and rental default risk will help answer the question. The CoreLogic SafeRent Score is a rental screening tool that assigns a score of 200-800 for each potential renter. The lower the score, the higher the probability that the renter will default in the future.  Looking back at the market crash of 2008 and the years that followed, the impact to unemployment and renter default risk is highly correlated. 

As unemployment reaches staggering numbers every week since “safer at home” began in many states, renter applicant risk will likely increase significantly in the coming weeks.  With the moratorium on evictions, there will be fewer evictions for 120-150 days (from March 27).  What will happen to the application volume when that time period is over?  And what will it mean for the ability of new applicants to successfully make their monthly rent payments on time? 

Figure 2: Average SafeRent Score with Unemployment Rate

As shown in the Figure 2, after 2007/2008 crisis, the unemployment rate continued to rise until a peak in 2010. Renter applicant risk started to decline at the beginning of 2007/2008 and hit a trough in 2010. After 2010, the unemployment rate came back down while the renter applicant risk rose concurrently. There is very strong inverse correlation between these two variables, and both were severely impacted by the economic downturn.

Another factor to consider is property class.  Property classes are determined by the quality of the property and amenities provided to residents. There are four categories in property class: A, B, C, and D. Class A indicates the rental property is a high-end property and D indicates a low-end property.

Figure 3: Average SafeRent Score by Class With Unemployment Rate

As shown in the Figure 3, as rental property class moves from high-end to low-end, the renter applicant risk becomes riskier, as shown with the scale for each class adjusting down.  In both mid-class properties (Class B and C), there is clear downward trend in 2009 and 2010, with significant increase in renter applicant risk as the market recovered after the crash.  For the highest-end class (Class A) risk did not trend downward in year 2009 and 2010 to the same degree.  This indicates that the financial crisis didn’t impact the applicants' rent payment likelihood for those applying to the highest-end properties, as it did for other rentals.

A third observation from the Great Recession is that rental markets and the financial wellbeing of prospective tenants varies considerably by local area. Metropolitan areas that are more severely affected by the economic recession will also have larger effects on their population and housing market.

Figure 4 illustrates how the average SafeRent score and average rent were affected by metro area.  On the left are Las Vegas, Nevada, and Orlando, Florida rental properties.  These areas are hot spots for tourism and service industries. When the 2007/2008 financial crisis hit, home prices collapsed and unemployment and foreclosure rates skyrocketed. Mortgage and consumer debt default significantly reduced credit worthiness metrics and unemployment reduced income for many residents, two factors that negatively affect SafeRent scores. Foreclosures added thousands of homes to the rental stock in both metro areas at a time when rental vacancy rates were rising.  As shown in Figure 4, the renter payment likelihood and rent amount were strongly correlated and both decreased dramatically in 2008-2010. On the right-hand side are New York and Washington DC. In these areas the local economies are more diversified, and while home prices fell and foreclosures rose substantially, these changes were far less than in Las Vegas and Orlando.

Figure 4: Average SafeRent Score with Rent Amount 

From these analyses, it’s clear economic factors contribute to renter applicant risk and rent amount, as evidenced in the wake of the 2008 financial crisis.  The risk level of renters across the industry increased with a concurrent drop in rental amount in tourism and service areas.  But whether we will witness the same pattern after COVID-19 will depend on how soon the country will reopen and how fast the stimulus bills help with economic recovery.

With the 2008 housing crash still fresh on our minds, some people think the same thing will happen today. But so far, the housing news isn’t all bad. In this podcast with Real Wealth Network, learn about: 

• Home prices and will they stay in the positive
• Rental insights from property managers  
• Impact COVID-19 will have on certain markets  

We’ll look at the data and see what it tells us. Amy Gromowski is a Senior Leader with the CoreLogic Science & Analytics Center of Excellence.  Jeremy Thomason is the Executive Sales Leader for CoreLogic Rental Property Solutions.

With the 2008 housing crash still fresh on our minds, some people think the same thing will happen today. But so far, the housing news isn’t all bad. In this podcast with Real Wealth Network, learn about: 

• Home prices and will they stay in the positive
• Rental insights from property managers  
• Impact COVID-19 will have on certain markets  

We’ll look at the data and see what it tells us. Amy Gromowski is a Senior Leader with the CoreLogic Science & Analytics Center of Excellence.  Jeremy Thomason is the Executive Sales Leader for CoreLogic Rental Property Solutions.

May 29, 2020 | 7:35AM ET

Maiclaire Bolton Smith, Senior Leader of Research and Content Strategy at CoreLogic, sits down with Molly Boesel, Principal, Economist at CoreLogic to discuss impacts on the mortgage market from COVID-19.

Maiclaire:  Welcome back to our CoreLogic podcast series looking at the impact of COVID-19 on the U.S. housing economy. My name is Maiclaire Bolton Smith and I am the Senior Leader of Research and Content Strategy with CoreLogic. Today, I’m joined by CoreLogic Principal Economist, Molly Boesel, to discuss the mortgage market, looking at potential impacts posed by the COVID-19 global pandemic. Molly, thank you for joining me today.

Molly: Thank you for having me.

Maiclaire: If we start by looking at interest rates, mortgage interest rates have decreased in the last month and hit a new record low, will that help lift the mortgage market?

Molly: Mortgage rates at the end of April 2020 were almost a full percentage point below where they were a year before, and this decrease in interest rates will spur refinancing. The median interest rate for mortgages currently held by borrowers is 4%, so that means that at the current mortgage rates about half of today’s mortgage holders could significantly reduce their monthly payments.

New homebuyers will also benefit from the decrease in mortgage rates. A borrower taking out a loan for a median priced home would save about $100 per month on their principal and interest payments compared with a year ago. We’ve seen first-time homebuyers respond to these record-low mortgage rates pushing the homeownership rate in the first quarter of this year to the highest level since 2013. Post pandemic, homebuying activity among millennials increased while other homebuying among other age cohorts decreased, indicating that younger generations are also taking advantage of shrinking competition in the market.

Maiclaire: What about constraints on refinancing? Will borrowers be able to qualify?

Molly: That’s a great question. Borrowers who have lost income may have some difficulty refinancing. However, having sufficient equity in a home is another qualifying factor, and equity in residential real estate is at an all-time high. So unlike during the last recession, home equity generally won’t get in the way of refinancing.

Maiclaire: Speaking of home equity, what insights can you draw from CoreLogic’s home equity report?

Molly: For the U.S. overall, the share of borrowers with negative equity is just 3.5%, more than 20 percentage points below what it was during the Great Recession. But when we look below the national level, we see that some parts of the country have much higher negative equity shares. Louisiana stands out with 10% of borrowers in negative equity, as do Connecticut and Illinois, both with 7% of borrowers in negative equity. Layering job loss on top of negative equity could lead to high rates of foreclosure in these states, though much of this will be alleviated by the CARES act, which allows up to one year of forbearance for most borrowers.

Maiclaire: Finally, when do you think we will see the impacts of the COVID-19 pandemic in the housing data CoreLogic releases?

Molly: Because our regular data releases are based on a monthly cycle, we’ll need to wait at least another month before the releases show any impacts of COVID-19. For example, the March HPI report came out last week, and it showed that home prices continued to strengthen in March – that’s because prices captured in the March report were from transactions negotiated prior to the implementation of the shelter-in-place policies. To fill the gap until our monthly releases show the impacts of the restrictions, we’ve supplemented our regular releases with weekly data found on the CoreLogic COVID-19 page.

Maiclaire: Thank you, Molly and thank you for listening. Please check back to this site – corelogic.com/covid19 for ongoing insights from CoreLogic on the COVID-19 pandemic and its impact on the U.S. housing economy.

May 27, 2020 | 5:27AM PT

Saumi Shokraee, Professional, Content & Research

As summer quickly approaches and temperatures begin to rise, states are planning for this year’s wildfire season. With the coronavirus pandemic forcing quarantines and stay-at-home orders across the nation, many communities are concerned that the coming months of wildfires will only add to the crisis.

Western U.S. Is Most at Risk

The risk of wildfire is not equally distributed throughout the nation -- from 2002 to 2018, 85% of the acres burned due to wildfire occurred in states in the western US.^[1] The region is also responsible for the overwhelming majority of property damages due to wildfire. This is because many properties in the West are located in the Wildland Urban Interface (WUI), areas where human development comes into close contact with wildfire-prone vegetation.

From 1990-2010, there was a 41% increase in the number of homes located in the Wildland Urban Interface. Today, 1 in 3 homes are in the WUI. ^[2] Combined with expected warmer than average temperatures, experts predict this year’s wildfire season could be significant. ^[3] This potential for disastrous wildfires happening during the COVID-19 pandemic is raising concerns across the nation.

State Resources Stretched Thin Amid COVID-19

As states move to position firefighting assets in critical locations, officials are finding that COVID-19 quarantine measures have resulted in significant staff shortages for fire suppression management. Across the nation, the crisis has stalled the hiring and training of new firefighters while also straining already limited emergency services. For example, as a direct result of the pandemic, local fire services in Washington state canceled all three of their fire academies this year meant to train 4,500 firefighters.^[4]

Wildfire management sites, with high-density living and working conditions as well as a lack of access to proper sanitation, create an ideal environment for infectious disease transmission.^[5] Many firefighters have already caught the virus, as occurred in early April in San Jose, California, when 10% of the local fire department was exposed and 15 firefighters tested positive. ^[6] As a result of lower staffing, firefighters will likely be working on fires for 40-45 days without any breaks.^[7]

These shortages will prove especially challenging considering the federal government was already short of hundreds of firefighters before the virus took hold. An investigation in 2019 found that the Department of Interior had at least 241 fewer seasonal firefighters available than expected. This stands to have a significant effect on fire response in California, as 60% of California’s forests are owned and managed by federal departments.^[8] Moreover, data from the National Fire Protection Association in 2018 indicates that the number of volunteer firefighters per capita has been on a steady decline since 1987.^[9]

Wildfires do not take a holiday when there is global pandemic. Experts predict that there may be a second wave of coronavirus in the fall, which coincides with California’s wildfire season.^[10] This will prove especially challenging for the state as it deals with fire management staff shortages. At-risk communities and state governments serve to benefit from being prepared.

[1] https://www.nifc.gov/fireInfo/fireInfo_statistics.html

[2] https://www.nrs.fs.fed.us/news/release/wui-increase

[3] https://weather.com/forecast/national/news/2020-04-15-summer-2020-temperature-outlook-may-june-july-august

[4] https://www.cnbc.com/2020/04/04/coronavirus-will-obstruct-emergency-services-for-firefighters-during-wildfires.html

[5] https://www.nwcg.gov/committees/emergency-medical-committee/infectious-disease-guidance

[6] https://www.mercurynews.com/2020/04/05/first-coronavirus-cluster-san-jose-fire-department/

[7] https://www.cnbc.com/2020/04/04/coronavirus-will-obstruct-emergency-services-for-firefighters-during-wildfires.html

[8] https://www.latimes.com/politics/story/2019-07-23/peak-fire-season-is-near-and-the-federal-government-is-short-hundreds-of-firefighters

[9] https://www.nfpa.org/-/media/Files/News-and-Research/Fire-statistics-and-reports/Emergency-responders/osfdprofile.pdf

[10] https://thehill.com/changing-america/well-being/prevention-cures/490326-fauci-predicts-another-coronavirus-outbreak-in

May 26, 2020 | 7:44AM ET

Bin He, Sr. Leader, Science & Analytics
Frank Nothaft, Chief Economist

The newly released CoreLogic March Home Price Index (HPI) shows that prior to the COVID-19 outbreak home prices were starting to heat up in most places in the United States. However, home prices captured in the March report were from transactions negotiated prior to the implementation of shelter-in-place mandates, and there was a wide expectation that the growth may have decelerated in response to this interruption in demand.

CoreLogic has developed a Pending Price Index using MLS data. The index is built on the price recorded on the contract date rather than the price on the closing date. Since it generally takes 30-45 days to close a sale on average, contracts negotiated in April can be used to project May home prices, which will be the first time for us to see COVID-19’s full impact on the housing market as the April home prices will still have transactions negotiated in the first half of March prior to the implementation of shelter-in-place mandates. The latest CoreLogic Pending Index indicates that annual price growth began to slow in May. However, home prices held up surprisingly well in many metro areas.

May 22, 2020 | 8:27AM ET

Selma Hepp, Executive, Research & Insights and Deputy Chief Economist

Fewer luxury for-sale listings driving down median home price growth

Understanding the impact of the current pandemic on home prices over the coming years is an important question, yet one that may be difficult to answer until the length of the current pandemic is better understood.

In the year leading up to the COVID-19 outbreak, home price growth has remained solid averaging over 3.5% nationally. According to the latest CoreLogic Home Price Index (HPI®) Report, home prices nationally even started heating up in March with the national index showing a 4.5% increase compared to March 2019.  

Nevertheless, as President Trump declared a national emergency on March 13, and most of the states issued public health orders to Shelter-in-Place (SIP), home buying activity, along with most other economic activities, came to a standstill. On March 19^th, public health officials in Los Angeles – which quickly became one of the nation’s epicenters of COVID-19, issued an order, “Safer at Home”, which prohibited group events and gatherings, required social distancing measures and closed certain businesses. Under the initial order, real estate services were deemed “non-essential”. However, the order was revised April 1 to include real estate as an “essential” service. Nevertheless, even after the revision, open houses were prohibited and buyers resorted to virtual tours. Statewide, similar orders went into effect on the same date.

In the analysis below, we take a look at some of the impacts of the coronavirus on the Los Angeles County housing market using the data from the multiple-listing services (MLSs). But first, similar to the national HPI index, Figure 1 illustrates Los Angeles HPI leading up to the pandemic which showed home price growth accelerating in March, recording a 5% year-over-year increase. The acceleration in home price growth began in the third quarter of 2019 after a 16-month period of slowing growth in the region.  

Figure 2 takes a look at recent weekly data and illustrates year-over-year change in median prices of homes sold and homes that entered into pending status, i.e. a contingent offer was signed on the home. Pending sales, which are generally signed about 30 to 45 days before a closing, are a leading indicator for closed sales and hence a preview into possible price changes ahead. Prices of homes sold appear to have remained on average around the 5% growth rate since the beginning of the year. As suggested by the HPI, home price growth accelerated at the end of 2019 and reached almost 8% at the beginning of the year before moderating to an average of 5%. Even in recent weeks, home prices maintained about a 4% annual increase.   

In contrast, median price growth of homes that entered into a pending status starting mid-March have started slowing and show some year-over-year declines in the week ending May 2nd. As a result, the leading indicator value of the pending price trend suggests that prices on sold listings will show some slowing for April. According to Corelogic Pending HPI index for Los Angeles, home price growth in April is expected to slow down to a 4.7% year-over-year increase, from a 5% increase seen in March (see Figure 1).

Nevertheless, since the data in Figure 2 captures median home prices which are subject to varying mix of sales, declining pending prices may reflect more lower priced homes going in contract compared to last year. It may also reflect higher bargaining power that buyers now have as competition for homes has waned down.

Figure 2 also illustrates another housing market indicator - the share of homes that sold below the asking price, and according to latest weeks’ data, the share has picked up from about 37% at the beginning of the pandemic to 50%. And while the increase accounts for closings that were contracted prior to the pandemic or at the beginning of the SIP orders, it may reflect some negotiations that occurred as a result of the pandemic. Last time the share of homes selling below the asking price increased to 50% was in late 2018 to early 2019 when Los Angeles and many other housing markets in California hit a speed bump.

Looking forward, Figure 3 illustrates another price trend worth noting – a year-over-year change in median price of new listings – which suggests that the price growth of newly listed homes has slowed considerably from 8% in mid-March to a slight decline at the end of April. Since again these are changes in median prices, the decline may reflect changing composition of the new for-sale inventory. And, as Figure 4 suggests, availability of higher priced inventory in Los Angeles has declined on a faster rate than lower priced inventory. However, these inventory declines in general are providing a floor for home prices. In other words, the relative strength of home prices is supported by very, very limited for-sale inventory.

Taken together, estimating the impact of the current crisis on the housing market is still a moving target with many moving parts. There are certainly consumers who are forced to make some decisions about their homes, though there are also many others who are waiting for some level of normalization. Most recent market dynamics are not necessarily an indication of what’s to come particularly given the momentum gained in the housing market prior to COVID-19.

According to CoreLogic mortgage purchase application data, millennials were the most active buyers in the market prior to COVID-19 with application rates 20% to 30% higher compared to the first two months of last year (Figure 5). Even through March, the mortgage application rate among millennials exceeded that of last March, up 2%, while the other cohorts saw a notable decline in applications in March. Continued demand from millennial buyers is a positive sign that home sales will bounce back when the economy returns to a “new normal”.  

May 20, 2020 | 8:18AM ET

Archana Pradhan, Principal, Economist

Home-purchase demand started strong for both first-time homebuyers and repeat homebuyers in January and February of 2020, supported by a lower mortgage rate and unemployment rate than one year earlier. As the novel coronavirus (COVID-19) spread in the U.S., we have begun to see its impact on decisions to buy homes. To observe how COVID-19 may have affected home purchases by first-time and repeat buyers, we used CoreLogic Loan Application data for January through May 2nd, 2020 and compared this year’s activity with 2019.

May 18, 2020 | 9:24AM ET

Yanling Mayer, Principal, Economist

Record-low interest rates combined with record-high home prices can unleash superior value for HECM borrowers

The Coronavirus pandemic has disrupted the global economy, sparing no economic sector across its indiscriminating path. The U.S. housing market has already seen an 8.5% decline in March’s existing-home sales compared with February and even a steeper decline of 15.4% in new home sales.^[1]  More dramatic declines are expected for the coming month as the lockdown measures across the U.S. are expected to continue at least through the end of April. Leading economic indicators such as unemployment insurance claims shows that in the 6-weeks ending on April 25, total job losses reached a staggering 30 million, or an equivalent of 20.8% of the civilian workforce.^[2]  

Millions of homeowners have sought the mortgage forbearance relief provide by the CARES Act: As of April 19, forbearance loans have reached 7% of the loans in servicing.^[3]  Lenders have tightened credit standards due to unprecedented uncertainty and market conditions. Despite all the challenges presented by the crisis, reverse lending may emerge as a bright spot as the current market conditions seem to offer an attractive value proposition. Here are some of the reasons.

1. Housing wealth is at all-time highs

Before the pandemic crisis, home prices were at all-time highs with annual growth at a robust rate of 4.0% (as of February 2020). See Figure 1.  On average, Home Equity Conversion Mortgage (HECM) borrowers have occupied their home for about two decades.^[4]  That means today’s average HECM borrower typically moved into their current home around 2000.  For the two decades from 2000 to early 2020, the CoreLogic national Home Price Index had more than doubled (up 113%).

1. Dual benefits of record-low mortgage rates

Mortgage rates have fallen to new lows following the pandemic breakout. Reverse mortgage borrowers can benefit from low interest rates in more than one important way. First and foremost, the cash value of the reverse loan is enhanced when interest rates are low. The cash value, knowns as initial principal limit, is the discounted value of the property’s current appraisal and therefore, the lower the interest rate, the larger the present value of loan proceeds that are available to the borrower. This feature belongs uniquely to reverse products, and no other mortgages are like it. Figure 2 provides the sensitivity of cash value to different interest rates for a borrower aged 62.  Different cash values are shown at different interest rate.

At a 3.25% interest rate, a home appraised at $341,000 has a cash value of $178,000. But that will decline quickly with rising interest rates. At 4.00%, for example, the cash value has already dropped by nearly $20,000 to $160,000.

Low interest rates also mean the loan balance will grow slowly over time. This second feature is similar to forward mortgages except that the borrower does not need to make any repayment of the loan or accrued interest until the borrower decides to pay part or the entire loan off.  

1. No credit history or credit score required

The pandemic has been a huge blow to many Americans’ finances as millions have lost their job and income. While lenders have quickly tightened credit standards in a time of high uncertainty, the impact on reverse mortgage borrowers are expected to be minimal. More than 95% of the reverse market consists of FHA-insured HECM loans which are supported by Ginnie Mae in the secondary market securitization. Nor can HECM lenders underwrite the loans based on borrower’s income or credit history. All that is required of borrowers is that they demonstrate a financial ability to maintain the property by paying property tax and insurance.

In today’s challenging time brought on by the pandemic, financial planning has taken on a whole new dimension when consumers are confronted with financial as well as public health uncertainties. For seniors and retirees looking to secure additional financial stability through their home equity – whether to supplement their retirement income or to help deal with the financial hardship the crisis may have inflicted – current market conditions seem to offer an attractive value proposition.

^[1] Source: National Association of Realtors; U.S. Census Bureau.

^[2] Source: Department of Labor.

^[3] Source: Mortgage Bankers Association https://www.mba.org/2020-press-releases/april/share-of-mortgage-loans-in-forbearance-increases-to-699.

^[4] See https://www.corelogic.com/blog/2019/12/hecm-loans-in-2018-borrower-demographics-and-ownership-tenure.aspx

May 15, 2020 | 8:14AM ET

Russell McIntyre, Sr. Professional, Public Policy & Industry Relations

The United States spent the past decade recovering from the worst economic downturn since the Great Depression in the 1930s. During this span, our economy has rebounded significantly: lending standards have been gradually loosened to expand access to credit; homebuilders have continued construction of both single-family and multi-family residential properties; and the average American household income has gradually risen for all income brackets.

Now, after ten years of recuperation, our country faces the worst global pandemic since the spread of the Spanish influenza in the late 1910s, and we must prepare for the effects it will have (and is already having) on affordability within our nation’s housing market. 

While the recent developments mentioned above have helped millions of Americans gain access to the housing market, they have not done much to make that housing market more affordable. With growing costs for materials, labor, and land, homebuilders have increasingly focused on the top of the housing market, despite demand being strongest for entry-level homes. Although construction starts have risen steadily, the entrance of the millennial generation into the housing market (coupled with historically low interest rates, an increased propensity for renovations, and a number of additional factors) has helped to create a shortage in supply. And though average household incomes continue to improve, they have not kept up with corresponding increases in home prices since at least the mid-1980s.

With these economic trends in mind, one question begs to be answered: will the COVID-19 health crisis exacerbate pre-existing affordability conditions in the housing and mortgage markets? And if so, how?

Tightening Supply

As mentioned above, supply was already shrinking prior to the arrival of the coronavirus pandemic, and predictions for 2020 had this supply diminishing even further. However, total housing starts showed promising signs in the early months of the year, with warm winter weather and low interest rates fueling a rise in demand during Q1. This led the National Association of Home Builders (NAHB) to forecast a much rosier expectation for 2020 than originally expected. Unfortunately, the COVID-19 crisis has led NAHB to drastically alter their estimations to reflect what they predict will be an “incredibly disruptive” second quarter. Why? Two main reasons: a shortage of workers, and a shortage of materials. Regarding the former, the overwhelming majority of states have enacted stay-at-home/shelter-in-place policies that make it difficult for many workers to continue their jobs unless deemed ‘essential employees’, which varies from state to state. In addition, supply chains are beginning to be disrupted, leading to shortages or higher prices for materials such as lumber and sheet rock.

Impacted Individuals

Our nation’s preexisting housing affordability issues disproportionately impacted low-to-moderate-income individuals and families, many of whom are spending more than 30%, 40%, and sometimes even 50% of their monthly income on housing expenses. When an individual has to pay that high of a cost for housing, and when wages don’t keep pace with home-price growth, every hour worked and every dollar earned matters that much more. Unfortunately, many of these workers are part of the service, retail, and/or transportation industries and are unable to bring their jobs home with them, which means those wages are simply lost. Congress has attempted to aid some of these individuals by increasing unemployment benefits, instituting eviction forbearance programs, and establishing the Paycheck Protection Program in an effort to keep small business owners afloat. Unfortunately, the question remains: will these benefits come soon enough for those families who were already living paycheck-to-paycheck prior to the pandemic? And once this crisis passes, will there be enough available jobs for those attempting to reenter the workforce?

Reduced Access to Credit

Over the past decade, millions of Americans gained access to credit as traditional lenders gradually recovered from the initial shock of the recession, and as nonbank lenders began to exert a larger presence in the market. Unfortunately, the COVID crisis has “has caused the perfect storm for mortgage markets” and has led to a contraction of the credit box. Lenders are able to set their own credit score requirements and, as many brace for an incoming wave of mortgage (and other) loan defaults, they are now taking on less risk and toughening their loan requirements by asking for higher credit scores and larger down payments. These recent developments are bad signs for affordable housing advocates, who feel uncertain about the short-term effects the coronavirus is already having on the markets. This tightening of credit is being felt on a larger scale by the construction industry as well: FDIC data shows a significant decline in year-over-year growth rates for acquisition, development, and construction AD&C loans, which companies rely on to get projects off the ground.

May 13, 2020 | 5:59AM PT

Mikhail Palatnik, Executive, Product Management
Saumi Shokraee, Professional, Research & Content

As the COVID-19 pandemic continues to wreak havoc on the economy, businesses are facing new challenges as they find ways to take care of their employees and customers. In particular, the coronavirus is proving challenging to the property & casualty (P&C) insurance industry, where inspectors and adjusters traditionally visited properties in-person. Policyholders, afraid of the possibility of infection, are opting out of allowing outside individuals into their home. With the nation simultaneously struggling through a convective storm season, insurers are needed more than ever to provide coverage and settle claims promptly and efficiently.

Fortunately, using the latest technology, we can create solutions that allow us to continue underwriting and claims processing even during these trying times.

In an exclusive podcast with Insurance Journal, CoreLogic insurance executive Mikhail Palatnik discusses how technology and value-added services can keep business running strong amidst the crisis.

Here are three solutions to COVID-19 P&C insurance business disruption.

1. Virtual Surveys in Underwriting

Traditionally, inspectors visited policyholders in-person to verify property characteristics and assess the risks and vulnerability of a property. With a virtual survey, underwriters can comprehensively assess risk without ever seeing or visiting anyone at the property site. Leveraging the power of high-resolution public and proprietary imagery sources, these images along with robust pre-fill data provide information on property condition and exposure. Software can be used to calculate valuation and coverage. Once underwriters finish with all their observations and valuation, they can review hazard risks and occupancy data to make a final underwriting decision.

1. Do-It-Yourself (DIY) Surveys in Underwriting

Policyholders can get involved in the process too. Now that all policyholders most likely own their own camera or smartphone, they can take their own photos, answer a few questions about their property, and then submit the information to their carrier in an instant. These images can be used to compile and create measurements such as total living area or external wall materials. Combining this information with public and proprietary imagery can allow underwriters to determine property conditions and exposures.

1. DIY Surveys in Claims Processing

Unlike an automobile claim, property claims typically require an adjuster to enter a home to document damages with measurements and photographs and then write an estimate. This in-person component of handling property claims combined with the pandemic is posing a serious challenge to the way P&C insurers conduct their business.

With virtual adjustment solutions, we can leverage forecasting and weather forensic services to remotely predict potential damages before disaster strikes. Afterwards, DIY tools used by policyholders can expedite the claims process and avoid the need for in-person visits amid the coronavirus pandemic. Policyholders can leverage a claims portal to have direct access to their claim; where they can take their own photographs and measurements of their property and upload them directly to a claims platform. This creates a direct conduit for sending and receiving information with the policyholder.

Virtual surveys and DIY surveys are less expensive than in-person solutions, providing cost effective solutions for carrier underwriting inspections and claims adjuster budgets. With modern technology, we can ensure that underwriting and claims, critical pieces of the P&C insurance industry, continue to operate amid COVID-19.

May 11, 2020 | 7:31AM ET

CoreLogic Chief Actuary Howard Kunst sits down with Brian A. Fannin, Staff Actuary at the Casualty Actuarial Society, author of a recent paper for the Casualty Actuarial Society “COVID-19: The Property-Casualty Perspective” to discuss his findings.

May 8, 2020 | 8:03AM ET

Russell McIntyre, Sr. Professional, Public Policy & Industry Relations

While our nation faces its worst public health crisis in over a century, it also faces a potential economic one. With Americans across the country stuck at home, many sectors of the economy are running with a reduced labor force and shorter working hours. Many families aren’t collecting paychecks, and small businesses are forced to find ways to cope, if not shut down entirely.

In an effort to address some of these negative repercussions, the federal government has taken a number of steps via statements, notifications, bulletins, and additional actions that have been issued by agencies and bureaus spanning the entire breadth of the executive branch.

The housing and mortgage industries have seen their fair share of actions over the past few weeks that have had drastic effects on both day-to-day operations and potential long-term forecasts. CoreLogic has been keeping track of the daily updates coming from agencies and bodies such as the Federal Reserve, U.S. Department of Housing and Urban Development, Federal Housing Finance Agency, Fannie Mae and Freddie Mac, and many others. These updates address the many facets of the Paycheck Protection Program, implementation of the provisions in the CARES Act passed by the U.S. Congress, interagency guidance on property inspections and appraisals, and a range of additional issues. While this document does not claim to cover every action issued by every office within the executive branch, it does capture those that are of utmost importance to CoreLogic and others throughout the housing and mortgage industries.

Within a matter of mere weeks in March, the mortgage industry underwent massive changes. New market trends have emerged in the wake of COVID-19, and the housing market has drastically changed course from the beginning of the year.

In this webinar hosted by HousingWire Magazine, CoreLogic Chief Economist Frank Nothaft is joined by mortgage industry experts and economists to review and educate you on new trends that are developing. This includes perspectives on the impact of COVID-19 to Conventional, Government and Private RMBS mortgage markets.

The following topics are addressed:

●       Housing and mortgage market impacts as a result of the coronavirus pandemic

●       New market trends that have developed in the wake of COVID-19

●       Public policy developments and possible outcomes for the housing market

●       Loan performance projections using CoreLogic risk models under different recession forecasts

May 6, 2020 | 7:30AM ET

Bin He, Sr. Leader, Science & Analytics
Frank Nothaft, Chief Economist

COVID-19 effects on housing market include slowing of home-price growth

Home price indexes (HPI), such as the CoreLogic HPI and the CoreLogic Case-Shiller Indexes, are vital tools for understanding valuation and risk trends in real-estate markets. The main ingredients in the CoreLogic indexes are prices on settled transactions, as subsequently recorded by local jurisdictions in publicly available records. Since it takes time to record transactions, collect data, and produce indexes, there is always a lag between the availability of the data and the calculation of the HPI. Thus, the effect of the COVID-19 disruptions on home sales may not appear in HPIs for another month or two. 

On the other hand, the home buyer and seller agree to a price in their sales contract, which is generally signed about 30 to 45 days before a sale is settled. This information can be a leading indicator of what to expect over the next couple of months.

CoreLogic has developed a Pending Price Index using MLS data. The index is built on the price recorded on the contract date rather than the price on the closing date, and hence by design is a leading indicator of HPIs that utilize final recorded home price to generate the index.   The Pending Price Index is built using a hedonic approach, which differs from repeat sales methods used for most other HPIs.^[1]

To understand the time series relationship between the contracted price and the settlement price data, we estimated correlation coefficients for a 20-city composite Pending Price Index to its corresponding 20-city composite CoreLogic HPI. The 20-city composite index is the aggregated index for 20 major metropolitan areas.^[2]

^[1] Stephen Malpezzi, Hedonic Pricing Models: A selective and Applied Review, Housing Economics and Public Policy Chapter 5, 2008

^[2] The 20 urban areas are Atlanta, Cambridge (MA), Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, Phoenix, Portland, San Diego, San Francisco, Seattle, Nassau County-Suffolk County (NY), Tampa, and Washington DC. The composite index is the weighted average of indexes in these cities where the weight is the entire housing stock in units.

May 4, 2020 | 7:46AM CT

Maiclaire Bolton Smith, Senior Leader of Research and Content Strategy at CoreLogic, sits down with CoreLogic Executive, Research Director for Asia Pacific Tim Lawless to discuss Australia's response to and ramifications from COVID-19.

Welcome back to our podcast series looking at the impact of COVID-19 on the housing economy. My name is Maiclaire Bolton Smith and I am the Senior Leader of Research and Content Strategy with CoreLogic. Today, I’m joined by Tim Lawless, CoreLogic Executive, Research Director for Asia Pacific based in our Sydney, Australia office to give us a perspective on how COVID-19 has impacted the housing market in Australia.

Maiclaire: Tim, thank you for joining us today. Similar to here in the U.S., Australia also implemented a range of social distancing policies in March, with some specifically aimed at the real estate sector. Have you seen an impact on housing activity since these policies were implemented?

Tim: Australia’s response to COVID-19 has been relatively quick and it’s been centred on closing borders along with mandatory quarantining measures for travellers, limiting public gatherings and conducting a large-scale testing and tracing regime.  Australia also implemented a range of policies around social distancing that involved closing businesses within the hospitality, food services, gaming, gyms, public galleries and other sectors. The policies also extend specifically to the real estate sector, with a ban on open home inspections, although private inspections can still go ahead, and barring on-site auctions, although online auctions are still progressing.

Monitoring the flow of housing related activity does show a sharp reduction in real estate agent activity, although housing values seem to be holding somewhat more resilient.  Prior to Easter, real estate agent activity had slumped by around 60% compared with the same time a year ago and the number of newly advertised properties has fallen by around a third relative to last year.  Mortgage related valuation activity is also trending lower, pulled down by a drop in valuations related to home sales, while valuations related to refinancing have held firmer.    

The decline in transaction activity may be something that is helping to preserve housing values as well, because there isn’t an influx of new supply putting further downward pressure on prices. Much of this has to do with Australian Banks offering a temporary reprieve on mortgage repayments to customers, helping Australia’s housing market avoid a surge in distressed sales.

Maiclaire: Australia’s federal and state governments, as well as the Reserve Bank, Federal Treasury and prudential regulator seem to have been on the front foot to support economic conditions in Australia.  Can you comment on the impact this stimulus might have on the residential housing market?

Tim: Adding up the total value of federal, state and monetary stimulus announced to date equates to almost 17% of Australian GDP.  The stimulus measures have been anchored by a $213 billion fiscal stimulus that focusses on keeping small to medium enterprises afloat, subsidising worker incomes, incentivising investment and temporary tax relief. 

The stimulus measures are tailored to the structure of the Australian economy. Unlike Europe and America, nearly half of the Australian workforce are employed by small businesses, and the vast majority of businesses in Australia are small to medium enterprises made up of less than 20 people. This presents a risk during the downturn, because small businesses do not tend to have large capital reserves which can act as a buffer during a downturn.

A game-changing policy in Australia has been the Jobkeeper package, which essentially allows employment relationships to stay intact by providing employers with wage subsidies for employees, and encouraging businesses to provide employees with some level of work, even if that’s just a few hours a week.

Without this level of stimulus, Australia’s unemployment rate would have risen from the current 5.2% in March, to around 17% by June. The current forecasts have the unemployment rate peaking at around 10% in June before drifting lower as social distancing policies are eased.

Keeping a lid on unemployment through supporting businesses is a key pillar in supporting housing markets, but also we have seen each of Australia’s major lenders announce leniency measures for distressed borrowers who can take a repayment holiday over the next six months if required.

Another positive from the government stimulus is that it should support a more rapid recovery as social distancing policies are lifted.

Maiclaire: Predicting where housing values may end up is a challenge under the best of conditions, but nearly impossible at the moment - considering the unprecedented level of uncertainty.  Do you have any ideas for where Australian housing values may end up?

Tim: The performance of the housing market is reliant on a variety of factors with labour market conditions, credit availability and interest rates some of the most influential elements affecting performance.  Predicting the trajectory of housing values implies an accurate prediction of economic conditions and credit trends, which is hard at the best of times, but virtually impossible while so much uncertainty abounds.  While we are certain that interest rates will remain at their emergency lows for at least the next three years, the stimulus of low interest rates is likely to be offset by a high jobless rate, broadly weak economic conditions and heightened risk aversion from lenders.

I think there will be substantially more downwards pressure on housing activity than housing values.  Historically, Australian housing values have weathered previous shock events quite well, generally showing only mild falls before stabilising or rising, whereas the number of homes sales has typically fallen significantly; by at least 20% but through the most recent downturn we saw housing market activity slump by around 40%. 

Overall, we expect housing values are likely to fall by around 10%, which is a view held by most of the mainstream economists as well, although as always there are some more pessimistic views at the extremities. 

Housing values should be provided some insulation from a range of factors, but most importantly the six month loan repayment leniency from lenders will be a significant factor that will limit the flow of distressed properties onto the market.  The significant stimulus helping to support incomes and retain jobs is another factor, along with record low mortgage rates and the temporary nature of this disruption.

Of course our views on the market are constantly evolving as more information emerges and policy changes are announced, and clearly there is a significant level of downside risk to our outlook.

Maiclaire: As a result of COVID-19, how do you see the real estate sector changing over both the short term and long term?

Tim: The biggest change is likely to be around digital technologies becoming more popular and widely used.  With social distancing policies preventing group open homes and on-site auctions, the industry has quickly and successfully pivoted towards enabling these critical activities in a digital environment. 

This digital environment goes well beyond searching for a property, virtual inspections and remote bidding.  It extends into digital signage, online conveyancing and settlement.  There is a high likelihood that physical distancing will remain a feature of our communities for some time, so we are expecting this move towards digital enablement to be more a structural shift rather than something more temporary.

Shorter term we are seeing the real estate sector respond to this disruption in a number of ways.  The best agents have stepped up their communications with the market to ensure their clients and prospects are well informed about changing conditions and prospects.  With some additional downtime, we are also likely to see agents taking advantage of professional development opportunities around training and coaching, as well as mentoring from more experienced agents towards those with less experience.

Longer term, with the move towards digital technologies, potentially we will see less requirement for a substantial physical presence from real estate agencies which implies less requirement for desk space and shopfronts while the industry maximises the digital footprint.

Maiclaire: It’s always nice to end these sessions on a positive note, so Tim, is there anything at all we can take away from this crisis?

Tim: With housing values likely to fall over the coming months, housing affordability could improve, as long as incomes don’t fall by a larger amount than housing values.  Coming into this crisis, Sydney’s dwelling price to income ratio was around 9 times and Melbourne’s ratio was around 8 times.  The previous housing downturn, which saw Sydney housing values fall by around 15% and Melbourne values down around 11% resulted in a significant affordability boost which was a major factor supporting a substantial rise in first home buyer activity. 

Another positive could be a renewed willingness from employers to support remote working arrangements.  The most affordable markets generally have long commuting times to the major working centres.  Increased opportunities to work from home could see these more affordable housing locations become more popular as commuting times become less important. 

Another positive legacy from COVID 19 is likely to be the holistic move towards full digital enablement.  The real estate sector embraced online searching quite early, but a fully digital sales and settlement process has been a much slower process.  Social distancing policies have pushed the industry much further along the digital enablement spectrum which is likely to result in long term productivity benefits for both buyers and sellers.

Maiclaire: Thank you, Tim. And thank you for listening. Please check back to this site – corelogic.com/covid19 for ongoing insights from CoreLogic on the COVID-19 pandemic and its impact on the U.S. housing economy.

May 4, 2020 | 12:34 PM ET

Pete Carroll, Executive, Public Policy & Industry Relations
Anusha Ayyar, Executive, Program Delivery & Business Intelligence
John Gilberti, Sr. Leader, Operations
Tripti Sarda, Sr. Professional, Finance
Rich Terbrack, Sr. Professional, Data Analysis

The COVID-19 global pandemic is a public health crisis of unprecedented proportions that has upended the global economy in ways we’re only beginning to understand. On March 27^th, 2020 the CARES Act legislation was enacted, which included critical relief for single family residential homeowners with federally-backed mortgage loans.^[1] Among other relief, the CARES Act created a 60-day foreclosure moratorium, as well as the right for borrowers to request forbearance (i.e., a pause) to their mortgage payments for an initial term of up to 180 days, with the right to request an extension for up to an additional 180 days.

Over the last month, mortgage market stakeholders and policymakers alike have worked hard to put this important legislation into practice. Among the early operational concerns to emerge, which continues to be a topic of discussion, is the possible risk of financial disruption to mortgage servicers that own the mortgage servicing rights (MSR) to the mortgage loan.^[2] When borrowers initiate a pause to their monthly payments, it’s their servicer that ensures mortgage principal and interest continues to be “advanced” to the bond investor, along with escrowed property taxes to the county and escrowed homeowners insurance to the insurance carrier (these payment components are referred to as “PITI”).^[3]

Importantly, when mortgage servicers advance PITI payments on behalf of the borrower, they source the capital from their own balance sheet, typically in the form of a line of credit they hold with another financial institution or even with their own cash reserves. However, this outlay is intended to be short-term; after varying periods of time, the servicer is reimbursed for these advances by the applicable federally-backed mortgage program.^[4]

Under ordinary circumstances, this system continues uninterrupted. However, when unexpected catastrophes occur on a significant scale, as is the case with the COVID-19 national emergency, mortgage servicer liabilities have the potential to outstrip available assets of at least some servicers. This is a particular risk for non-bank servicers that tend to hold less capital relative to their bank servicer counterparts that have retail deposit bases to draw from.

Accordingly, policymakers and regulators have been closely monitoring the number of homeowners that request their right to forbear their mortgage payments. They are also monitoring the impacts of servicer advance requirements on the health of servicer balance sheets; particularly given the significant demands on servicer capital. Based on this ongoing monitoring effort, regulatory agencies overseeing the federally-backed mortgage programs have announced a series of program and policy changes that provide liquidity relief to servicers, which industry has welcomed. These actions may well ensure sufficient liquidity relative to both PI and TI advances, however, discussions persist in some quarters with respect to whether more needs to be done to ensure servicers have the ability to advance escrowed property tax payments and homeowners insurance premiums in a timely fashion. The implications of a material drop off in escrowed TI advances extends beyond mortgage market and homebuyer disruptions. Municipalities tend to rely, at least in part, on timely receipt of property tax revenues (whether advanced by the servicer via escrow account disbursement or paid directly by the borrower) to fund their basic services and public works.^[5]

Accordingly, the objective of this spotlight series is to make available data and facts that can assist regulators and industry stakeholders alike as they evaluate possible risks of a material drop-off in servicer advances of escrowed property tax payments or delinquent non-escrow borrower property tax payments. As the largest provider of property tax and escrow services to the single family residential mortgage markets, CoreLogic is uniquely positioned to size the universe of escrowed property tax payments expected to be advanced by servicers over the course of the remainder of 2020, including what the outer-boundary of potential risk exposure to municipalities may look like at varying levels of forbearance activity, among other insights.

^[1] Includes loan programs offered by Fannie Mae, Freddie Mac, and Ginnie Mae (including FHA, VA, and USDA programs)

^[2] Also known as “mortgage lenders,” the mortgage servicer is the company to whom borrowers sends their monthly mortgage payment

^[3] The federally-backed mortgage lending programs require servicers to establish borrower escrow accounts to help ensure the borrower’s timely payment of property taxes, homeowners insurance, and any other applicable assessments on their property, in addition to the borrower’s monthly principal and interest payments on the mortgage loan. Note that Fannie Mae and Freddie Mac permit servicers to waive the escrow account requirement for borrowers under certain circumstances, which are the relative exception. The analysis herein distinguishes between servicer advances of property taxes from the borrower’s escrow account and non-escrowed property tax payments made directly by the borrower.

^[4] Each federally-backed mortgage lending program has its own requirements for the PITI components the servicer is expected to advance. For example, Fannie Mae and Freddie Mac requires some servicers to advance ITI-only and others TI only. Fannie Mae requires others still to advance the full PITI, as does Ginnie Mae. Moreover, each program has different event triggers and timeframes defining when servicer advances can cease and receive reimbursement during the COVID-19 national emergency.

^[5] Some and perhaps many MSAs/counties have a range of tax revenue sources and some also may have better reserves in place than others.  Predicting the consequence to a given MSA/country of even a material drop off in property tax revenues isn’t within the purview of this research.

May 1, 2020 | 7:53AM ET

Archana Pradhan, Principal, Economist

Purchase Applications drops by 30% in the second week of April compared to the same week of the prior year; Refinance Applications are up

To observe effects of COVID-19 on mortgage demand, we used CoreLogic Loan Application data through April 11, 2020 and compared the number of applications by week with the same week in 2019. The two charts show the year-over-year percent change in the number of loan applications for home purchase and for refinance.

Figure 1 shows home-purchase loan applications and Figure 2 shows refinance applications. Two dates are highlighted on each chart:  February 29 recorded the first death in the U.S. from COVID-19 and announcement of travel restrictions to Italy and South Korea; on March 13 President Trump declared a national emergency.^[1]

Home-purchase loan applications picked up after the second week of January 2020. The increase in demand in early 2020 was supported by a robust economy and lower mortgage rate than one year earlier. However, activity started to slow during the second week of February and was running below the pace of 2019. As of the week ending April 11, home-purchase loan applications for 2020 were 30% less than the same week in 2019.

Similarly, refinance applications spiked this year as mortgage rates dropped. The volume reached a peak in the first week of March as interest rates on 30-year refinance loans reached a record low, according to interest rates reported in the CoreLogic application data. Refinance applications dropped as the mortgage rate rebounded about 20 basis points within a week of hitting its low before it started to rebound during the last week of March.

We will continue to monitor the performance of the housing market in light of COVID-19 using CoreLogic high-frequency and current high-frequency and current data.

^[1] https://www.nytimes.com/article/coronavirus-timeline.html

April 29, 2020 | 7:19AM ET

Yanling Mayer, Principal, Economist and Frank Nothaft, Executive, Chief Economist

—3 Million Borrowers Estimated to be in Forbearance or Delinquency at Least 90 Days in Baseline Projection—

The serious delinquency rate, the percent of mortgages past due at least 90 days or in foreclosure, is an important gauge of the conditions in the mortgage market. At the end of January 2020, prior to unprecedented lockdowns and social distancing measures to contain the spread of the coronavirus, the serious delinquency rate stood at a generational low of 1.2% and the CoreLogic Home Price Index for the U.S. was growing at a robust rate of about 4.0%.^[1]

But all that is expected to change quickly in the coming months. After all, the coronavirus has brought the U.S. economy to a virtual halt in just a matter of weeks, throwing millions of Americans out of work. According to the Department of Labor, new unemployment insurance claims in the four weeks ending April 11 reached more than 22 million, averaging 5.5 million per week and amounting to 13.2% of the civilian workforce, as the U.S. economy fell into recession.

The unemployment rate – 4.4% in March – is expected to exceed 10% soon, despite unprecedented economic stimulus by the U.S. government and the Federal Reserve to counteract the recession. For the mortgage industry, staggering jobless claims will contribute to missed or delayed mortgage payment as millions of homeowners who, without a job and the steady income it provides, will be unable to continue those monthly payments.

The CARES Act provided protection for homeowners with a federally backed mortgage loan, that is, a loan insured, guaranteed or held by a Government Sponsored Enterprise or a federal agency. Under the Act, a borrower may request forbearance for up to 180 days and may request an additional 180 days after that.^[2]  About 70% of home loans are estimated to be federally backed^.[3]

While there has not been a historical precedent for how a pandemic could impact mortgage forbearance, we chose to model the relationship between the unemployment rate and the serious delinquency rate.  We have seen high unemployment have had a profound impact on mortgage delinquencies during the last financial crisis when millions of Americans lost their jobs and income. After all, what could be a better predictor than homeowner’s employment and job security when it comes to affording mortgage payments? We view the resulting projection of the serious delinquency rate as a measure for the percent of home loans that are likely to be seriously delinquent or in forbearance for at least 90 days.

The model was estimated from January 1999 to February 2020 and uses three different scenarios for the path of the unemployment rate through the end of 2021 – Baseline, Optimistic, and Pessimistic – to develop alternative projections.^[4]

Under the baseline scenario with the unemployment rate rising to 12% in 2020Q2 and remaining at or above 8% for four quarters, the forbearance-serious delinquency rate is expected to rise quickly from its current 1.2% (as of January) to reach 3.2% in June and 4.9% in December. This suggests about 3 million homeowners will have had at least three months of forbearance or have been seriously delinquent by then.^[5]  At its peak, which is projected to occur in Q1 of 2021 with an unemployment rate 8.0%, the forbearance-delinquency rate will reach 5.1%  

In a pessimistic scenario, where the unemployment rate is projected to hit 20% in 2020Q2 and remain above 10% through 2021, the forbearance-delinquency rates are projected to rise rapidly and reach double digits (10.3%) in 2021Q1, or about 5.5 million homeowners.  In the optimistic scenario the unemployment rate peaks at 6.4% in 2020Q2 and declines to below 4% by the second half of 2021, the forbearance-delinquency projections for June and December of 2020 and June 2021 are 1.8%, 2.0%, and 1.6%, respectively, and a peak of about 1 million homeowners who are in forbearance or delinquency for a minimum of 90 days.

As of April 12, the percent of loans that had entered forbearance had already reached 5.95% of all outstanding mortgages, according to the Mortgage Bankers Association.^[6]  How many of these loans – plus those that may enter the forbearance pipeline in the coming days and weeks – will remain in forbearance for 90 days or more and at some point become latent defaults? It is too soon to predict how the mortgage market will unfold without a better sense of when the crisis will be resolved. For now, the more relevant questions are perhaps how bad the recession will become and low long it will last. Will it outlast the full 12-month forbearance? Will it rival the Great Recession so that millions of these homeowners ultimately could not afford their mortgage but contemplate giving up their home?

^[1] See CoreLogic’s Latest Loan Performance Insights and U.S. Home Price Report: https://www.corelogic.com/blog/2020/4/mortgage-delinquencies-started-2020-at-very-low-levels.aspx; https://www.corelogic.com/blog/2020/4/us-home-prices-were-heating-up-prior-to-the-coronavirus-outbreak.aspx

^[2] See https://www.consumerfinance.gov/coronavirus/cares-act-mortgage-forbearance-what-you-need-know/

^[3] See https://www.urban.org/urban-wire/price-tag-keeping-29-million-families-their-homes-162-billion

^[4] The three U.S. civilian unemployment rate paths were from the National Association for Business Economics Flash Survey (April 10, 2020).  The “full sample median” was used for the Baseline path, the “five lowest” for the Optimistic, and the “five highest” for the Pessimistic.

^[5] The CoreLogic Home Equity Report for the fourth quarter of 2019 estimated that the number of first liens home loans in the U.S. was 54 million as of year-end 2019.

^[6] See https://newslink.mba.org/mba-newslinks/2020/april/mba-weekly-survey-share-of-mortgage-loans-in-forbearance-rises-to-5-95/

April 27, 2020 | 8:14AM ET

Archana Pradhan, Principal, Economist

Older Homebuyers are Affected more than Younger Homebuyers by COVID-19

Millennials represented the largest share of homebuyers at 47% in 2020, followed by Generation Xers (32%) and baby boomers (19%), according to CoreLogic loan application data for January through March.[^1] As the novel coronavirus spread in the U.S., we have begun to see its impact on decisions to buy homes as well. To observe how COVID-19 may have affected purchases by age cohort, we used CoreLogic Loan Application data by week for January through March 28, 2020 and compared this year’s activity with 2019.

Figure 1 shows home-purchase loan applications by age cohort. Two dates are highlighted on each chart:  February 29 recorded the first death in the U.S. from COVID-19 and announcement of travel restrictions to Italy and South Korea; on March 13 President Trump declared a national emergency.^[2]

Home-purchase loan applications picked up after the second week of January 2020 for all age cohorts, with the highest surge for millennials. The increase in demand in early 2020 was supported by a robust economy, a lower mortgage rate than one year earlier, and a rising desire for first-time homeownership among Millennials. However, activity started to slow during the second week of February and was running below the pace of 2019 for all the age cohorts. As government officials warned that the elderly were at greater health risk from the virus, many prospective buyers who were older appear to have delayed their purchase decision in favor of ‘sheltering in place’. As of the week ending March 28, home-purchase loan applications made by the silent generation for 2020 were 42% less than the same week in 2019 compared with a drop of just 13% for millennial applicants.^[3]

Figure 2 shows year-over-year percent change in the number of home-purchase loan applications by age cohort relative to the same month of the prior year, using loan applications through March 31. Summed across all cohorts, loan applications in March 2020 fell 5% from one-year ago. Home-purchase applications submitted by the silent generation fell the most (22%) in March compared to the same month of the prior year, followed by baby boomers (12%), and Generation Xers (12%). In contrast, applications submitted by millennials went up by 4%. As the clinical evidence suggests that older people might be at higher risk for severe illness from COVID-19, more older homebuyers appear to have delayed their decision to purchase a home compared with younger homebuyers.^[4]

We will continue to monitor the performance of the housing market in light of COVID-19 using CoreLogic high-frequency and current high-frequency and current data.

^[1] Pew Research Center defines generations born 1981 to 1997 as millennials, 1965 to 1980 as Generation X, 1946 to 1964 as baby boomers, and 1928 to 1945 as the silent generation.

^[2] https://www.nytimes.com/article/coronavirus-timeline.html

^[3] Applications for the week ending March 28, 2020 were compared with applications for the week ending March 30, 2019.

^[4] https://www.cdc.gov/coronavirus/2019-ncov/need-extra-precautions/people-at-higher-risk.html

April 24, 2020 | 7:51AM CT

Molly Boesel, Principal, Economist

Trends in Home Equity by State

As the coronavirus pandemic continues to wreak havoc on the economy and claims for unemployment insurance reach record highs, homeowners are at increased risk of becoming delinquent on their mortgage loans. For those borrowers in negative equity, risk of foreclosure is even higher.

Negative equity across the nation peaked in 2009 after the 2008 financial crisis, with 26% of all mortgaged properties in negative equity. Since then, the negative equity share gradually decreased to 3.5% by the end of 2019. However, in some states (Figure 1), the negative equity share continues to be elevated, notably in Louisiana (9.8%), Connecticut (7.1%), and Illinois (7.0%). Layering job loss on top of negative equity could lead these states to see high rates of delinquency and foreclosure in the coming months, though the CARES act will alleviate some risk from delinquencies and foreclosures to borrowers through forbearance. While claims for unemployment insurance increased across the U.S. starting in mid-March, Louisiana saw claims increase by about 4,600% compared with about 1,900% for the U.S. on average[1].

If home prices were to fall, more borrowers would be at risk. In addition to the negative equity share, CoreLogic also tracks the near negative equity share, which is the share of mortgages with less than 5% equity. If home prices fall by 5%, this share will fall into negative equity. While the United States average near negative equity share at the end of 2019 was 0.8%, figures from some states were much higher (Figure 2). If home prices drop by 5%, homeowners in Connecticut (1.9%), Maryland (1.8%), New Jersey (1.5%), and Illinois (1.5%) are the most at risk.

[1] The percent increase in claims for unemployment insurance compares the average of the weeks ending March 21 through April 4, 2020 with the 2020 average through March 14.

April 22, 2020 | 8:12AM ET

Russell McIntyre, Senior Professional, Public Policy & Industry Relations
Kari Mezzetti and Elizabeth Greeves, Professionals, Marketing

Facing the current threat of coronavirus, one question begs to be addressed: what are the lasting financial ramifications this pandemic will leave on individuals, our nation and our world?

Millions of Americans are currently living paycheck to paycheck. With social distancing and shelter in place orders across the nation, the question of ‘how and if rent will get paid’ is on the minds of many Americans struggling to pay the bills.

Housing payments are one of the many issues our public leaders at a local, state and federal level are working to address. Cities such as San Francisco, Seattle and Boston were among the first to temporarily halt the issuance of new eviction notices. States were next to take swift action. California Governor Gavin Newsom issued an executive order to “halt evictions for renters and homeowners, slow foreclosures, and protect against utility shutoffs for Californians affected by COVID-19.” In the state of Washington, Governor Jay Inslee announced a statewide moratorium on evictions for 30 days for all residents. On a federal level, the United States Department of Housing and Urban Development announced on March 18 that it would suspend all foreclosures and evictions nationwide until the end of April.

The CARES Act

Mortgage Forbearance

Section 4022 of the CARES Act establishes a borrower’s right to request forbearance on any federally backed mortgage loan due to financial hardship experienced, directly or indirectly, as a result of the COVID-19 emergency. This forbearance shall by granted for up to 180 days and shall be extended for an additional 180 days at the request of the borrower. During the forbearance period, no fees, penalties, or interest shall accrue on the borrower’s account (beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract). In order to provide the forbearance, mortgage servicers shall require no additional documentation beyond the borrower’s attestation to a financial hardship cause by the COVID-19 emergency. For more information about the mortgage forbearance program contained within the CARES Act, visit this resource from the Consumer Financial Protection Bureau (CFPB).

Evictions

Section 4024 of the CARES Act established a temporary “moratorium on eviction filings, fees, and penalties for tenants for nonpayment of rent for 120 days on properties insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, or covered by the Violence Against Women Act.” For more information about the eviction moratorium contained within the CARES Act, visit this resource from the National Association of Realtors.

Based on the rapid and decisive action at all levels of public policy, it is clear that our public officials believe there will be long-term economic implications from the coronavirus outbreak. And thus, we should continue to expect additional action at the local, state and federal levels throughout the weeks and months ahead.

April 20, 2020 | 5:53AM PT

Tom Larsen, Principal, Content Strategy

The Atlantic Hurricane Season begins on June 1 and early forecasts have begun. The Colorado State University forecast [1] issued on April 2, 2020 includes an estimate that “The probability of U.S. major hurricane landfall is estimated to be about 130 percent of the long-period average”. Early forecasts like this include significant uncertainty, although the forecast direction of a higher than average season is more stable. The occurrence of a natural catastrophe like a hurricane is unaffected by human afflictions like the ongoing COVID-19 pandemic. We must challenge ourselves to understand if the “new normal” of everyone sheltered-in-place will impact the operational normal of hurricane response.

The threats of extreme winds, coastal storm surge and inland and riverine flooding from hurricanes affect broad geographic areas. Hurricanes Dorian (2019), Irma (2017), Matthew (2016), Ike (2008) and Katrina (2005) all relied upon emergency evacuation orders affecting more than 1 million people. Evacuation orders from Irma affected nearly 7 million people. Even the U.S. Northeast is not immune: Hurricane Irene (2011) triggered evacuation orders for more than a quarter million people. In normal times, evacuees find accommodations with friends and relatives, at hotels or public evacuation centers. The shelter-in-place and cessation of non-essential business rules present a challenge to preparation. The absence of staff may inhibit the installation of hurricane shutters and other active protection devices and evacuations would make it impossible to maintaining social distancing rules in evacuation centers. After the immediate response, the absence of fully operating hotels and restaurants will challenge most claims and recovery activities.

While the initial forecast of the year does indicate a higher than average number of hurricanes, it’s important to remember that it’s not the occurrence of a hurricane, but the location of its landfall that is important. A higher than average number of events increases the probability that one may make landfall along a populated center, so preparation is key. We may not see a landfalling hurricane this year, but history has shown that it’s only a matter of time before one will cause significant damage and disruption. And it is not just hurricanes; Severe Convective weather produces hail, strong winds and tornadoes, and as we enter the peak of severe convection activity we are running at the 10-year average [2], NOAA [3] predicts another year of dangerous spring floods, and Northern California is in drought [4] conditions as we enter into the summer fire risk season. Just as the COVID-19 virus has caused disruption and is anticipated to persist with us for our near-term future, it is imperative to prepare for natural catastrophe events like hurricanes, tornadoes, floods, earthquakes and fires and factor in any additional challenges that may occur like those highlighted by the COVID-19 pandemic.

[1] https://tropical.colostate.edu/media/sites/111/2020/04/2020-04.pdf 
[2] https://www.spc.noaa.gov/exper/archive/event.php?date=20200409
[3] https://www.noaa.gov/media-release/us-spring-outlook-forecasts-another-year-of-widespread-river-flooding
[4] https://droughtmonitor.unl.edu/CurrentMap/StateDroughtMonitor.aspx?CA

April 17, 2020 | 7:44 AM CT

Shu Chen, Sr. Professional, Economist and Selma Hepp, Executive, Research & Insights and Deputy Chief Economist

Although the housing market had come roaring into 2020, the onset of COVID-19 has led to a sharp turnaround in consumer sentiment and housing activity across the country. Similar to many other sectors of the economy, some prospective home buyers and sellers have found themselves unable to proceed with their transactions. Using the data from about 152 multiple-listing services (MLSs) across the country, the following analysis takes a look at the impact of COVID-19 on housing market activity through the end of March.

The two indicators outlined herein include the number of new home-purchase contracts signed and the number of closed home sales. As shown in Figure 1, in the first eight weeks of 2020 the number of signed home-purchase contracts had been running about 8 percent above the same period last year, while the number of closed home sales were running about 11 percent above last year.

Unfortunately, with the spread of COVID-19, contract signings and home-sale closings started rapidly declining. Figure 1 also notes two important dates for understanding the changing housing market activity – February 29th, the date of the first COVID-19 death reported in the U.S., and March 13th, the date President Trump announced a national emergency.

In the last two weeks of March, the number of new home purchase contracts signed declined 10 percent and 26 percent, respectively, compared to the same period last year. With the first two weeks of March still holding the early-year momentum, overall month of March shows a 7 percent year-over-year decline in the number of new contracts signed.

At the same time, while home buyers and sellers generally proceeded with closings in early March, settlements fell during the second half of March compared with last year. For the entire month of March 2020, total closed sales were 1.5 percent below the prior March.

As shown in Figure 1, for the week ending March 28, 2020 closings had declined 29 percent compared to the week of March 24-30, 2019. However, comparing the changes in the week ending April 4th, 2020 to week ending April 6, 2019 is not as straight forward because the former includes last business day of March – March 31st, 2020, while the latter does not. Keep in mind that a large number of closings occur on the last business day of the month – March 29, 2019 and March 31, 2020 – and those would be included in the data for the weeks ending March 30, 2019 and April 4, 2020, which maybe the reason why week-end April 4th, 2020, year-over-year decline is seemingly lesser than the week ending March 28th, 2020.

To account for the impact of the last business day on annual differences, we have instead compared the weeks of March 22-28 in both 2019 and 2020 which showed closings had declined 13 percent. For the weeks of March 29 to April 4, sales in 2020 were 20 percent lower [1].

Further, however, if the strong activity seen prior to onset of the pandemic is an indication of what housing sales would have been like, the real decline in home sales is actually larger for March. As the data shows, the number of home-purchase contracts signed in February was averaging over 10 percent higher compared to last year.

Going forward, the true impact of the pandemic on the housing markets will be clearer as more data comes in. With the number of signed home-purchase contracts declining in recent weeks, home sales are likely to follow with a similarly notable dip over the next 30 to 40 days. Also, there will likely be more cancellations of the contracts signed prior to the emergency declaration and had been scheduled to close in the month of April. Typically, the rate of contract cancellations has averaged about 4 percent[2], but the cancellation rate is likely to have risen in the latter half of March.

CoreLogic will continue to closely track the data in the coming weeks and provide an update to this analysis. Stay tuned!

[1] Data for the week ended April 4, 2020 are preliminary and subject to revision.

[2] Source: The REALTORS® Confidence Index

CoreLogic Chief Economist Frank Nothaft joins Dr. Albert Lee as they discuss single family transaction volume and US regional house price trends.

April 15, 2020 | 8:52AM ET

Archana Pradhan, Principal, Economist

Home-purchase demand started strong in most urban markets in January and February of 2020, supported by a lower mortgage rate and unemployment rate than one year earlier. As the novel coronavirus spread in the U.S., we have begun to see its impact on home sales as well. To observe effects of COVID-19 on sales, we used CoreLogic Loan Application data for January through March 28, 2020 and compared the recent trend with 2019 data.

Figure 1 shows year-over-year percent change in the number of home-purchase loan applications for major markets, relative to the same month of the prior year.[1] Home-purchase demand in the Philadelphia area dropped by 31% in March compared to the same month of the prior year, followed by Los Angeles (29%), and New York (24%). In another hard-hit area, Seattle purchase applications dropped by 15%. The chart shows that purchase applications had been running higher in January and February, relative to the same month of the prior year.

Figure 2 shows week-over-week percent change in the number of home-purchase loan applications for the weeks ending March 21, 2020 and March 28, 2020, relative to the prior week.

Home-purchase applications in the Los Angeles metro area had the biggest drop (14%) in the week ending March 21, followed by Miami (12%) and New York (8%). For the week ending March 28, Miami had the biggest drop in purchase applications (31%), followed by Seattle (16%), Atlanta (15%), and Chicago (15%). Though, week-over-week purchase applications were falling in the last two weeks of March in Dallas area, overall purchase applications for this March was still higher than the last March.

We will continue to monitor the performance of the housing market in light of COVID-19 using CoreLogic high-frequency and current high-frequency and current data.

[1] Market areas were defined as Core-Based Statistical Areas (CBSA)

April 13, 2020 | 8:02AM ET

Shu Chen, Sr. Professional, Economist

Trends in new listings reported in Multiple Listing Services

To observe effects of COVID-19 on home sales activity, we used CoreLogic Multiple Listing Service data from 288 Core-based Statistical Areas through March 28, 2020 and compared the recent trend with 2019 data.[1] The chart shows year-over-year percent change of the number of new listings, relative to the same week of the prior year. Two dates are highlighted in the chart: February 29 recorded the first death in the U.S. from COVID-19 and announcement of travel restrictions to Italy and South Korea; on March 13 President Trump declared a national emergency.[2]

Increases in new listing picked up after 2020 began and reached a peak of 10.7% above year-ago levels in the first full week of March. The increase in new listings early in 2020 was supported by a mortgage rate and an unemployment rate that were much lower than one year earlier. Activity slowed starting at the end of February showing large decreases compared with the same period in 2019. As of the week ending March 28, new listings for 2020 were 30.1% less than the same week one year ago (week ending March 30, 2019).

We will continue to monitor the performance of the housing market in light of COVID-19 using multiple listing service and other data.

[1] Core-Based Statistical Areas are metropolitan and micropolitan areas defined by the Office of Management and Budget.

[2] https://www.nytimes.com/article/coronavirus-timeline.html

April 10, 2020 | 7:18AM CT

Maiclaire Bolton Smith, Senior Leader of Research and Content Strategy at CoreLogic, sits down with CoreLogic Executive of Public Policy and Industry Relations Pete Carroll to discuss the mortgage loan application process during COVID-19.

Maiclaire: My name is Maiclaire Bolton Smith and I am the Senior Leader of Research and Content Strategy with CoreLogic. Today, I’m joined by Pete Carroll, Executive of Public Policy and Industry Relations at CoreLogic and formerly a senior executive at the Consumer Financial Protection Bureau. Today we’ll discuss potential impacts posed by the COVID-19 global pandemic on the housing and mortgage markets. Pete, thank you for joining me today.

Pete: I’m happy to be here.

Maiclaire: We’ve heard from our economists over the past two weeks about some impacts on the housing market, but today, we’ll dive a little deeper into someone looking to purchase or refinance their home. So, to start -- have home buyers ever experienced a housing market like this one before?

Pete: Never. More than 30 states have issued “Shelter in Place” orders during this state of emergency, allowing people to leave their homes only for important needs like groceries and medicine. The remaining states are essentially recommending the same. While for the most part there are exceptions for businesses engaged in “essential activities,” the default setting is still, and very wisely, to work from home and maintain prudent social distancing protocols to the maximum extent possible.

Meanwhile, COVID-19 is wreaking havoc on the broader economy. On the one hand, mortgage interest rates are at record low, and are fueling a refinance boom, which helps. On the other hand, the unemployment picture is looking increasingly grim and is expected to dampen new home sales during this spring’s peak home buying season. Finally, the recent COVID-19 stimulus bill (known as the CARES Act) has provided consumers facing financial hardship due to the COVID-19 virus with critical relief – for example, six months or more of forbearance (i.e. temporary suspension) in the homeowner’s monthly mortgage principal and interest payments, without any penalties, fees or additional interest.

All of this adds up to unprecedented disruption for mortgage lenders who wish to continue serving their customers, while navigating these very challenging circumstances.

Maiclaire: If we look specifically at consumers seeking to finance the purchase of a home or refinance their mortgage -- what does this mean for them?

Pete: In general, it means consumers will experience, by necessity, a more digital, standardized, and automated mortgage experience than would otherwise have been the case. The consumer will also need to be patient with their lenders who are working through extraordinary backlogs of loan applications and other requests with limited staff available.

Maiclaire: What will this mortgage process look like? Will it differ from the normal process?

Pete: Well first, consumers can expect more of a “do-it-yourself” experience. Lenders have recently invested in digital mortgage lending platforms that permit the consumer to electronically complete their loan application, submit their financial information from third-parties, such as their checking account and direct deposit information from their bank, and sign and submit documents. This is not new. But with fewer and fewer call center staff available to answer calls and mortgage bank branches temporarily closed, these digital platforms will be the primary channel for consumers applying for a mortgage loan.

Maiclaire: But what about the rest of the process? Will consumers still need to physically attend their loan closing to sign those large stacks of paper?

Pete: That is possible, yes. However, it’s also possible that both consumers and lender staff will, broadly across the industry, be able to complete the end-to-end mortgage process online and at scale for really the first time in our industry’s history. This is the result of temporary, but important changes made by the largest mortgage investors: Fannie Mae, Freddie, Mac, and HUD (including the FHA and Ginnie Mae loan programs). These changes are designed to keep the mortgage supply chain flowing smoothly, while at the same time employing crucial social distancing protocols. They include modifications to underwriting guidance, making it easier to verify borrower employment, income, and assets electronically. They have also modified their appraisal policy so that appraisers need not enter the home. Remember, appraisals are the process through which a lender determines the condition and value of a borrower’s home via an independent third-party appraiser. Finally, they have clarified their policies, which further permit consumers, lenders, and settlement agents to close the mortgage electronically, where permitted by state law.

These changes should have the effect of streamlining the mortgage process, allowing lenders to serve more homeowners seeking to take advantage of historically low rates, while serving distressed homeowners during this very difficult period.

Maiclaire: Thank you, Pete. And thank you for listening. Please check back to this site – corelogic.com/covid19 for ongoing insights from CoreLogic on the COVID-19 pandemic and its impact on the U.S. housing economy.

April 8, 2020 | 7:37AM CT

Maiclaire Bolton Smith, Senior Leader of Research and Content Strategy at CoreLogic, sits down with CoreLogic Deputy Chief Economist Selma Hepp to discuss initial economic analysis on the housing market due to COVID-19.

Maiclaire: My name is Maiclaire Bolton Smith and I am the Senior Leader of Research and Content Strategy with CoreLogic. Today, I’m joined by the CoreLogic Deputy Chief Economist, Selma Hepp, to discuss the housing market, looking at potential impacts posed by the COVID-19 global pandemic. Selma, thank you for joining me today. We heard some initial insights on the housing market from Dr. Nothaft last week, but can you comment further? How has COVID-19 impacted the housing market - are prices going up, down or staying the same?

Selma: Hi Maiclaire. Thank you so much for having me. While we will know with more data over the coming weeks how the housing market has been impacted, shelter-in-place calls across the country coupled with general consumer concern led to an abrupt slowdown in home buyer activity. And while the impact on home prices may be less evident at the moment, the traffic activity from home buyers has come to a full stop in some hot spots, such as Los Angeles and New York. Nevertheless, very limited for-sale inventory and a recent decline in available new listings will continue to prop up home prices. Further, demand resulting from exceptionally favorable mortgage rates coupled with the pent-up demand that was seen leading up to the pandemic suggests price growth will likely return to its steady path once buyers return and economic activity resumes.

Maiclaire: Do you anticipate that we might see fewer homes on the market?

Selma: As the data on CoreLogic COVID-19 response page suggests, there has been a pullback in new listings starting in late February. This trend will also likely continue until home sellers feel it is safe to open their homes to others. Note, too, that prior to the crisis, we saw an increase in new listings compared to last year, averaging about 7% in the first 45 days of 2020. This suggests that there may be more opportunities for home buyers in the future.

Maiclaire: Along with that, do you expect we will see fewer home buyers as a result of the economic slowdown?

Selma: Some potential home buyers will certainly be impacted by the economic fallout. And while the majority of workers who are being hit hard by the abrupt shutdown of economic activities are generally hourly workers who would not necessarily be in the market to buy a home, unfortunately the impact has been spreading to salaried workers as well. And, as with many economic activities, it will all depend on how soon the pandemic can be contained. It seems that the potential home buyers who were working in the industries that were most affected will most likely put off the home buying decision. Also, the sharp decline in stock market values will have a negative wealth effect on the higher-earning population. But then again, the strong demand from millennials who are reaching their prime home-buying age will remain, and they will likely stay in the market.

Maiclaire: During the last recession we saw significantly more home foreclosures. There are speculations that the COVID-19 pandemic may send us into a recession. So with this in mind, do we expect more foreclosures in the second quarter of 2020?

Selma: Well fortunately, and unlike following the 2008 market collapse, the HUD and GSEs have already rolled out forbearance programs for their mortgages and implemented foreclosure and eviction moratoriums. Together, they cover about 70% of the home mortgage market. In addition, some banks are following along the same lines. The programs do allow people who have suffered a loss of income to qualify for reduced payments or are granted a pause in payments. While these programs should help keep a lid on foreclosure rates, implementation of these programs and consumer awareness of the proper protocol will be crucial.

Maiclaire: And what about existing homeowners? How will the COVID-19 pandemic impact existing homeowners in the near-term?

Selma: Yes. Well, with the mortgage rates trending even lower, some existing homeowners will have an opportunity to refinance their mortgages and lower their monthly payments. According to CoreLogic data, 50% of outstanding debt has an interest rate of more than 4%, and 24% has an interest rate greater than 4.5%. And then, while refinancing is not free, there will be a potential for many homeowners to save on their mortgage payments.

Maiclaire: And finally, what about loss of equity? Is it expected that existing homeowners will lose equity on their properties?

Selma: Great question Maiclaire. Loss of equity will depend on what happens to home prices. As mentioned earlier, widespread home price declines are not anticipated given the tight supply of homes for sale across most major metropolitan areas. There are some areas more vulnerable to price declines depending on what is the primary driver of the local economy. Nevertheless, in most states, the share of homeowners with negative equity is less than 5% today. According to the latest CoreLogic Homeowner Equity Report, only 3.5% of all mortgaged residential properties had negative equity – that is about 20 percentage points lower than the peak negative equity share of 26% that was recorded in Q4 2009. And then lastly, an average family with a mortgage had a total of $177,000 in home equity as of the end of 2019.

Maiclaire: Thank you, Selma and thank you for listening. Please check back to this site – corelogic.com/covid19 for ongoing insights from CoreLogic on the COVID-19 pandemic and its impact on the U.S. housing economy.

Originally posted on April 1, 2020 | 4:52PM ET

Bin He, Sr. Leader, Science & Analytics 

There is a widespread expectation that the U.S. as well as the whole world have entered or will be in recession amid the coronavirus pandemic. Goldman Sachs and JPMorgan forecast a more than 20% US GDP contraction for next quarter[1]. The International Monetary Fund declared a global recession[2] . In this blog, the impact of the past five recessions on regional housing markets is examined and sheds some light on what may occur during this coming recession.

April 1, 2020 | 6:21AM PT

Tom Larsen, Principal, Industry Solutions

As our society addresses the effects of the COVID-19 pandemic with quarantines, shelter-in-place rules and business disruptions, a rational next step is to look for sources of funds to cover the expenses and revenue shortfalls that businesses may have.

Business interruption insurance is designed to cover a loss of income incurred by an organization due to a slowdown or suspension of operations at its premises. Business interruption insurance endorsements may also include extra expenses needed to operate and contingent business interruption where a location is impaired due to damage.

In general, commercial property insurance policies are not triggered unless there is physical damage at an insured location, and it is not clearly established that the COVID-19 pandemic represents physical damage to properties. A communication of the American Property Casualty Insurance Association (APCIA) notes, “Many standard event cancellation, business interruption, and travel insurance policies do not include coverage for communicable diseases such as COVID-19. Although, some businesses have purchased broader protections through specialized coverage.” If the interpretation of current policy wordings remains consistent, then most businesses do not have insurance coverage for the impacts of COVID-19.

March 30, 2020 | 8:36AM ET

Molly Boesel, Principal, Economist

According to the Freddie Mac Primary Mortgage Market Survey, the four-week moving average on the 30-year mortgage was 3.45% through March 26, 2020. With the trend of declining interest rates that began in early 2020, CoreLogic is able to monitor the share of consumer held mortgage debt that may be able to refinance and potentially save on the mortgage payments. CoreLogic tracks the current interest rates on outstanding mortgages in TrueStandings Servicing, a servicer-contributed database.

The accompanying chart shows the cumulative share of outstanding debt by its interest rate for mortgages with 30-year terms. As the chart suggests, 50% of outstanding debt has an interest rate of more than 4%, while 24% has an interest rate greater than 4.5%. Those shares equate to about $2.5 trillion to $5.3 trillion in outstanding debt that would likely be “in the money” to refinance.

Because a refinance isn’t free, borrowers that want to save money on their payments would need to have mortgage loans with rates above the currently offered mortgage rates. However, depending on other closing/refinance costs, there is still a significant portion of the outstanding debt well above the rate where borrowers would be “in the money” to refinance. Mortgage industry processing capacity has contracted and could extend the duration of a refinance wave if mortgage rates remain low.

March 27, 2020 | 7:24AM ET

Frank Nothaft, Chief Economist

To observe effects of COVID-19 on mortgage demand, we used CoreLogic Loan Application data through March 13, 2020 and compared the recent trend with the 2019 and 2018 trends. The charts show a two-week moving average of the number of home-loan applications, relative to the first two weeks of January for each year (that is, we create an index of application volume, with the first two weeks of January set equal to 100).  Data for 2019 and 2018 were similar and were averaged together.  

Figure 1 shows home-purchase loan applications and Figure 2 shows refinance applications. Two dates are highlighted on each chart:  February 29 recorded the first death in the U.S. from COVID-19 and announcement of travel restrictions to Italy and South Korea; on March 13 President Trump declared a national emergency.^[1]

For home-purchase applications, the volume of activity picked up significantly after 2020 began, and during the first two months of the year was 3% above the same period in 2019.  Activity slowed during the first two weeks of March and was running below the pace in 2019.  Through March 13, purchase applications for 2020 year-to-date totaled about the same as during the same period in 2019.

Refinance applications rose this year as mortgage rates fell.  Volume soared as interest rates on fixed-rate loans reached new lows in early March.  During the first two weeks of March, applications were about double the level at the beginning of January and were more than four times the volume during the first two weeks of March 2019.

We will continue to monitor the performance of the housing market in light of COVID-19 using high-frequency and current data.

March 25, 2020 | 9:25AM ET

Maiclaire Bolton Smith, Senior Leader of Research and Content Strategy at CoreLogic sits down with CoreLogic Chief Economist Frank Nothaft to discuss some initial insights into the impact of this global pandemic on the U.S. housing economy.

Maiclaire: My name is Maiclaire Bolton Smith, and I am the senior leader of Research and Content Strategy with CoreLogic. Today I am joined by CoreLogic Chief Economist Dr. Frank Nothaft to discuss some initial insights into the impact of the COVID-19 global pandemic on the U.S. Housing Economy. Dr. Nothaft, things are changing so quickly. I know it’s difficult to say, but are there any early indicators that show a shift in the housing and mortgage market?

Frank: Yes there are. While March month-end data will be more telling, data for the week ending March 20th suggests that home-purchase mortgage applications, availability of homes for sale, and the number of home-purchase contracts signed are all showing weakness due to COVID-19, particularly given that this is typically the ramp up to the spring home-buying season. Rental applications among prospective tenants also appear to have dipped as many households are required to ‘shelter in place’.

Maiclaire: The Federal Reserve has announced aggressive steps to keep interest rates low and pump liquidity into financial markets, and the Congress has taken steps to implement a fiscal stimulus package that targets those workers and industries that have been economically impacted. Can you comment on how this could impact the residential housing market?

Frank: With shelter being one of the top basic needs for human life, the government has opened up its full arsenal of tools to ensure that people remain in their homes and the housing sector remains posed for a bounce back. Also, banks and landlords are increasingly willing to prioritize the welfare of their borrowers and renters to help them weather this storm by providing short-term relief from debt payments.

And while in the short term the housing market will see slowdown in activity, ensuring that people remain in their homes will enable our economy to recover faster once this pandemic is under control. What is critical in this moment is that the response is speedy, robust and well-crafted.

Maiclaire: As a result of COVID-19, how do you see the home sales and rental industries changing?

Frank: Early signs suggest that the pandemic may be a catalyst for widespread shift towards digital interaction, such as virtual open houses and tours, digital appraisals, use of geospatial and artificial intelligence data and technology in ensuring people are able to find, buy and protect their homes.

In the rental space, we may see tenants more likely to renew leases rather than search for a new rental during the next several weeks. Once the U.S. has made it through the pandemic, we may see renters more often opt for larger rental space and single-family over multifamily apartments. For some tenants, this could meet a desire for a home-based office and for greater distance between housing units.

Maiclaire: In the past year we have seen interest rates drop significantly, and this has helped increase mortgage and refinance rates across the country. Do you expect this to continue in this pandemic climate, or is there anything to suggest either interest rates could increase or mortgage and refis could drop?

Frank: The impacts of the pandemic on the economy are evolving very quickly and in ways previously unforeseen. Interest rates will likely follow this unpredictable pattern in the short term. The Federal Reserve’s announcement that it will purchase more than $200 billion in mortgage-backed securities should help stabilize the mortgage market and nudge mortgage rates lower. Our TrueStandings data shows that the median interest rate on home mortgages outstanding is 4%; thus there should be ample opportunities for homeowners to refinance their mortgages if the interest rates remain low.

Maiclaire: And one final question: are there any regional impacts that we could see from the Shelter in Place ordinances showing up in local housing data?

Frank: We do expect to see more notable slowing in housing activity in areas that have been ordered to ‘Shelter in Place’ and where local economies depend on tourism and business conferences. Many agents in these areas have cancelled open houses, and some current owners have delayed listing their homes for sale. Our Housing Analysis tab will provide more insights into the impacts on local housing activity in coming days and weeks.

Maiclaire: Thank you Dr. Nothaft. And thank you for listening—please check back to this site, corelogic.com/covid19 for ongoing insights from CoreLogic on the COVID-19 pandemic and the impact on the U.S. housing economy.