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Is the Housing Crash Already Here? 12% of FHA Loans Delinquent

October 2, 2024

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Is the Housing Market Crash Already Here? A Deep Dive into Current Trends

As we navigate through uncertain economic times, a pressing question emerges: Is the housing market crash already upon us? Recent data and trends suggest that we might be facing more than just a looming recession. Let’s dive into the numbers and explore what they mean for the real estate market and the broader economy.

The Widening Gap: Nominal vs. Real Home Values

One of the most telling indicators comes from a comparison of nominal versus real home values:

  • Nominal home values have skyrocketed to $440,000
  • The actual (real) value of these homes is only $375,000

This discrepancy represents the largest divide between nominal and real values since 2020. But what does this mean?

Nominal value refers to the price of an asset at face value, without adjusting for factors like inflation.

The significant gap between these two figures isn’t just a statistical anomaly—it’s a glaring sign that we might not be approaching a recession, but rather, we’re already in the thick of it.

FHA Loan Delinquencies: A Red Flag

Another alarming statistic comes from the Federal Housing Administration (FHA) loan sector:

  • 12.29% of all FHA loans are currently delinquent
  • That’s more than 1 in 10 loans

This delinquency rate is eerily reminiscent of the 2008 real estate crisis. If these delinquencies evolve into foreclosures, we could be looking at a dramatic and unrecognizable shift in our housing market.

The Economic Crossroads

The future of these delinquent loans—and by extension, the housing market—hinges on the overall direction of the economy. We’re at a critical juncture, facing several key questions:

  1. Are we on a path to economic improvement or decline?
  2. Will inflation resurge, or can it be contained?
  3. How will we address pressing issues like national disasters, job markets, and affordability?

Unfortunately, it appears that our policymakers lack long-term solutions for these critical challenges. Issues like inflation, natural disasters, employment, affordability, personal and national debt, and home prices continue to loom large without clear resolutions in sight.

Expert Insights: The Longshoreman’s Perspective

To underscore the immediacy of our economic challenges, consider the recent statement from the head of the longshoremen’s union. Their insights paint a picture of imminent economic impact that we cannot ignore.

The Foreclosure Forecast

Given the current economic climate and the lack of robust, long-term solutions, it’s reasonable to anticipate that many of the 12.29% delinquent FHA loans will ultimately result in foreclosures. This scenario aligns most closely with the economic indicators we’re observing.

A Silver Lining for the Mortgage Industry?

While the prospect of widespread foreclosures is undoubtedly concerning, it’s important to note that these properties will eventually re-enter the market. Each foreclosure represents a future property that will require new financing—creating opportunities for mortgage professionals prepared to navigate these turbulent times.

In conclusion, while the housing market faces significant challenges, those in the mortgage industry who can adapt to these changing conditions may find new opportunities amidst the uncertainty. As always, staying informed and prepared is key to weathering economic storms.