Foreclosures Surge As Lending Tightens

Foreclosures surge as lending tightens
Hey there, my fellow real estate enthusiasts! I've got some news for you about the housing market that will make your eyebrows raise higher than a kangaroo on a pogo stick.



 
So apparently, foreclosures are back in style after years of taking a nap. And it's all thanks to lending conditions tightening faster than a python during the Great Financial Crisis, according to JP Morgan.

They released a report recently that now forecasts consumer credit (including mortgages, credit cards, auto loans, personal loans) YoY growth for year end 2023 will be just 2%. To put that into perspective, Q4 of 2022 was 11%.

That's historic tightening of consumer credit availability folks...

 

Brace yourselves because it's only the beginning of loan delinquencies and defaults that will continue to get worse throughout 2023 and 2024... yikes!

But wait, there's more! The Federal Reserve released its weekly balance sheet data, and guess what? Small regional banks tapped the discount borrowing window for more emergency money than the prior week.

 
 

That's like borrowing from Peter to pay Paul, but on a much grander scale. And it's not just the discount window that's seeing emergency borrowing increase, but the Fed's new Bank Term Funding Program.

The BTFP lending program eliminates the need for distressed banks to sell their Treasuries, but the fact remains — the banks are broke. It's like everyone is rushing to get a piece of that emergency borrowing pie. 

All this emergency borrowing is causing small banks to tighten their lending standards faster than a lid on a pickle jar. And they're not doing it because they want to, but because they have extremely low liquidity positions. So, they're taking a closer look at the loans they already made, including the ones in serious delinquent status... which will lead to an increase in foreclosures.

Speaking of which, foreclosures are finally starting to make a comeback after years of being MIA. The low foreclosure activity was all thanks to government intervention, but it looks like things may finally be changing. According to Black Knight, foreclosure starts and activity have jumped significantly. But don't get too excited; we're still significantly below pre-housing bubble levels.

That's all for now, folks. Remember, don't panic and keep a sense of humor even in the face of an unpredictable housing market. Till next time!

 
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-Market Watch
 
-Redfin
 

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