The housing crisis is here

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This summer’s housing market is split into two alternate realities, said Heather Long at The Washington Post. Realtors’ cellphones have been “ringing with eager buyers” looking to flee urban areas for the suburbs while mortgage interest rates are at record lows. One house on the market outside Harrisburg, Pennsylvania, “received 26 offers the initial weekend it was for sale.” For renters, on the other hand, the outlook is grim. A federal eviction moratorium expired last week, meaning that many tenants could have only 30 days to pony up what they owe landlords or get kicked to the curb. This week, Congress signaled it would extend the moratorium to give renters more breathing room while debating whether to extend other aid, such as unemployment benefits and stimulus checks — some of “the few lifelines renters had during the pandemic.”

The eviction wave has already started, said Will Parker at The Wall Street Journal. The national moratorium only covered tenants in buildings with federally backed mortgages. States passed their own eviction limits, but some, such as Texas, have already let them expire. In a sign of things to come, attorneys in Houston are seeing “long lines at courthouses, sometimes people standing shoulder to shoulder” awaiting eviction hearings. “Stuck between tenants who can’t, or simply won’t, pay up and banks that still expect mortgage payments every month,” landlords are also feeling the squeeze, said Tim Logan at The Boston Globe. In Massachusetts, a fifth of the landlords say “they don’t know how they will pay their bills this year.” That will only get worse if the state extends its eviction ban without help for property owners.

There’s a simple reason for this recession’s “uneven” effect on the housing market, said Joy Wiltermuth at MarketWatch. The median income for homebuyers today is $93,000, while renters are substantially poorer and “householders earning less than $35,000 a year have been hit hardest by lost wages since early May.” Just don’t assume wealthier homeowners are bulletproof, said Keith Jurow, also at MarketWatch. Since 2016, “mortgages offered to high-income borrowers who could afford the monthly payments seemed the least risky of all.” Origination of jumbo loans — mortgages that are too big to be backed by Fannie Mae or Freddie Mac — skyrocketed. But now many high-income borrowers are in trouble, too. As of mid-June, “11.8 percent of all jumbo loans were in forbearance” — twice as many as in April, and a higher share than for standard mortgages.

“Perhaps this is all starting to sound like a redux of the mid-2000s housing crisis,” said Derek Thompson at The Atlantic. “It’s not.” In many ways, it is the opposite. Back then, “foreclosures soared” and single-family homes stood empty in the suburbs. Now there is an undersupply of suburban housing and a hot market in new construction. The problem today is in the cities, where the pandemic has accelerated a crisis of affordability. “Without income, renters can’t pay rent and utilities. Without monthly payments, landlords and other companies can’t make mortgages and bond payments.” Housing costs in cities have been approaching a crisis for years; thanks to the pandemic, that crisis is here, and “dangerously close to spiraling out of control.”

This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.

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