Wildfires have burned across Northern California and yet Napa County and Sonoma County have both seen 42% increases in the last 5 years. Meanwhile the Tahoe area has seen a nearly 60% increase in the same time period in spite of devastating fires. Logic says that smoke, risk of total loss, power outages, and difficulties insuring homes in fire prone areas would bring values down but the demand is so strong and supply so short values have increased significantly. Due to anti-development regulations in safer urban zones, nearly half of all homes in California built between 1990 and 2010 were built in areas most at risk for wildfires. As CA is often the leader in housing & insurance legislation it will be interesting to see how they address their housing & zoning issues moving forward.
Rates increased this week as mortgage backed securities moved lower and are trading below all of their moving averages. Rates are approximately 1/8% higher than this time last year.
Loan Performance – the number of folks in foreclosure proceedings is down 0.1% year over year to 0.2%. Remember that only 2/3 of homes are mortgages. Seriously delinquent borrowers (classified as 90+ days past due is down 0.4% year over year to 3%.
Jobs – The number of people filing for unemployment benefits increased by 20K but is still hovering in a range that isn’t significantly elevated from pre-covid levels (200k). There continue to be about 12 million folks receiving benefits of some type(2M pre-covid). We will start to see the impact of benefits expiring in a few weeks as these numbers are delayed.
Forbearance – the share of mortgage loans in Forbearance dropped to 3.08%, approximately 1.5M homeowners are in forbearance plans. Of folks exiting forbearance only 0.65% are resulting in short sale/foreclosure. Nearly half of folks exiting are current on payments or reinstated with lump sum payments. If this trend holds only about 2,400 homes would become a short sale or foreclosure – easily absorbed by the market.
Mortgage Applications increased 0.3% week over week. If you adjust for labor day purchased increased by 7% week over week. Year over year purchases are down 12% but cash buyers are up significantly keeping purchase demand strong in light of inventory being down 12%. Refinances are down 3% week over week and year over year and make up 65% of volume.