How much is the spike in unemployment affecting the housing market? … and what the heck is forbearance? The recent webinar hosted by Jim Belfiore of Belfiore Real Estate Consulting (BREC) provided some insight into these often-asked questions. The livestream event called COVID-19 and Housing was moderated by Jordan Rose of Rose Law Group and included three local industry executives as panelists – Sheryl Palmer of Taylor Morrison Homes and Steve Hilton of Meritage Homes represented the homebuilders/land buyers and Sean Walters of Sunbelt Holdings provided insight from the Land Seller/Developer perspective.
Jim Belfiore opened with a housing market overview with fresh data from recent surveys. According to Belfiore, the homebuilders who found a way to stay open during the recent quarantine period gained market share. This was attributed to several key factors, including showing empathy to buyers, demonstrating a safe and sanitary environment and the added attention that each prospective buyer received due to the appointment-only conditions. As suspected Belfiore reported that the new-home sales were down YOY, but only 50% vs. the 80% originally forecasted by BREC a month earlier. BREC noted that new-home sales are expected to be lower YOY through the rest of 2020 into Q1 2021.
The panelists discussed a variety of ways their organizations have been affected by COVID-19 ranging from managing tele-commuting to effects on company culture, but unemployment and credit were predominant themes. The panelists expressed concerns that the increasing unemployment may have a lagging impact as the PPP loans and other benefits expire. The consensus was “we have to watch this”. The impact of the forbearance rules on lenders was discussed in some detail, particularly the upward pressure this puts on mortgage rates and the concern that many borrowers do not fully understand how forbearance works and that they could get stuck with a balloon payment or a re-amortized loan.
In summary, there is little doubt that the uptick in unemployment and the tightening credit markets will continue to soften demand for new homes for the foreseeable future. The consensus of the panel is that the Phoenix housing market had strong fundamentals and was under-supplied going into this pandemic, which will help sustain pricing and allow some time for the industry to adjust to this new reality.
Anthony Sumner is co-founder and Principal at Sandbox Development Consultants a Phoenix-based land development consulting firm.
*Meritage Homes and Sunbelt Holdings are clients of Sandbox.