Housing & Commercial Real Estate for the week ending April 24, 2020

For yet another week, news of the coronavirus continues to dominate both the local and national headlines for the economy, housing and commercial real estate. From forecasts for a “V” shaped economic recovery to “gloom and doom” with the most recent unemployment numbers, it has been quite challenging to determine the path of the trend.

Following are several articles relating to housing and commercial real estate which we found to be most significant in highlighting both where things stand and where they are going.

How Stay-At-Home Orders Are Affecting The Real Estate Market

By Amanda Lauren, Forbes

“As coronavirus progressed from an outbreak to a pandemic at the beginning of 2020, the real estate market slowed down significantly by early March. As mortgage rates declined, despite a general fear of the unknown in terms of public health and the economy, there was still some activity with motivated buyers attending open houses and looking at property. But since social distancing and shelter in place orders were mandated around mid-March in most states, real estate activity hasn’t come to a halt entirely, but it has slowed down in a way the industry hasn’t experienced in a very long time.”

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The Economy, Housing & Commercial Real Estate for the week Ending April 17, 2020

There has been no shortage of news this week as the coronavirus continues to wreak havoc on our daily lives. Following are several articles relating to the economy, housing and commercial real estate which we found to be most significant in highlighting where things stand.

Nearly 4% Of All Mortgage Loans Now In Forbearance

Forbes – by Aly J. Yale

“According to the latest stats, nearly 4% of all mortgage loans are now in forbearance—a form of mortgage relief that allows homeowners to temporarily suspend their payments due to economic hardship. That share is up from 2.74% last week and a mere 0.25% in early March.

Loans serviced by independent mortgage banks are seeing the highest share of loans in forbearance at 4.17%. “

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How will the Coronavirus Impact the National Mortgage Market and Housing

For the past couple weeks we have been hearing from the National Association of Realtors and other media outlets about how the coronavirus will have a limited to moderate impact on housing as homeowners and their lenders are in a much better financial position than during the last economic downturn.

During that time our firm was a very active participant in the distressed real estate market representing lenders and servicers including Freddie Mac, JP Morgan Chase, Nationstar Mortgage, Bank of America and CitiMortgage so we saw first hand how these institutions were dealing with the vast number of mortgage defaults.  While a significant number of properties were foreclosed and resold, there was still a large number of mortgages that were modified or sold to a non-bank investor like private equity or a hedge fund.

Since there is virtually no regulation of these non-bank entities, there is a gap in the overall data about the number of possible loans that could be at risk for default. 

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How Home Sellers in Palm Beach County are Reacting to the Coronavirus

The coronavirus continues to wreak havoc on the real estate market as a large number of buyers of both residential and commercial properties continue not to move forward with their existing transactions. Beyond just buyers of real estate, residential sellers are also reconsidering and removing their property from the market.

Locally in Palm Beach County there has been a sudden spike in residential property listings that have been cancelled or temporarily removed from the market.

According to the Multiple Listings Service (MLS) from March 1st to March 30, 2020 there has been more than 1,500 residential property listings in Palm Beach County that have been changed to a “Cancelled” or “Temporarily Off Market”.  This represents more than a 50% increase based on similar cancellations from February 2020.

The following chart below outlines the sudden increase in cancellations / temporary off the market as compared to prior month and prior year levels.

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How the Coronavirus is Impacting Commercial & Business Real Estate

After years of robust growth in commercial property rental rates, occupancy levels and price appreciation, the landscape in South Florida has plunged into widespread uncertainty due to the impact from the coronavirus.

Property owners face significant challenges with respect to receiving monthly rental payments as commercial tenants with “non-essential” businesses have ceased operations without knowing when, or if, they will reopen. This has affected not only local-based small businesses but also national companies as evidenced by the Cheesecake Factory putting landlords on notice that they will not be able to make rent payments as of April 1st.

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Coronavirus and Real Estate Transactions

The coronavirus is causing all sorts of issues with in process real estate transactions. Everything from physical & engineering inspections, title review and transaction financing is running into delays, if not outright being cancelled.

The term “force majeure” is now becoming more apparent in real estate contracts, allowing for extensions and / or terminations of agreements for unforeseeable circumstances or “acts of God”. 

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