The latest Auction.com Seller Insights Report, released in July 2024, provides a comprehensive overview of the current state and future expectations of the U.S. housing market, as seen by default servicing leaders. The report is based on a survey conducted in Q2 2024 among over 30 key figures in the default servicing industry, including leaders from banks, nonbanks, mortgage asset owners, government agencies, and government-sponsored enterprises (GSEs).
Economic and Housing Market Outlook
The consensus among default servicing leaders is cautiously optimistic:
Economic Soft Landing: The majority expect the economy to achieve a soft landing, with low unemployment rates persisting through the end of 2024. The average forecast for the unemployment rate by the end of 2024 is 3.6%, with slight variations between bank (3.1%) and non-bank (4.1%) servicers.
Home Prices: 76% of respondents anticipate continued home price increases through the end of the year, despite high mortgage rates. On average, the 30-year fixed mortgage rate is expected to be around 6.3% by year-end.
Foreclosure Outlook
There is a mixed but generally conservative expectation regarding foreclosure volumes:
Gradual Increase: 57% of respondents foresee a gradual rise in foreclosure volumes, with an increase between 1% and 4% by the end of 2024.
Diverse Expectations: About 10% expect a more significant increase (5% or more), while another 10% predict a similar decrease. Non-agency and government-insured loan servicers are somewhat more pessimistic, with higher percentages expecting increased foreclosure volumes.
Loss Mitigation and Loan Performance
The report highlights a significant trend in loss mitigation:
Permanent Performance: Slightly more than half (51%) of loans currently in loss mitigation are expected to perform permanently. This positive outlook is partly attributed to the equity cushion in seriously delinquent loans, which have an average combined loan-to-value (CLTV) ratio of 65%.
Variation by Loan Type: The expected permanent performance rate varies across loan types: 58% for GSE loans, 49% for government-insured loans, and 34% for non-agency loans. Higher CLTV ratios are associated with lower performance rates.
Emerging Risks
Survey respondents identified several emerging risks that could impact the housing market:
Hidden Homeownership Costs: Rising costs of homeowners insurance and property taxes are seen as the highest risk for increased mortgage delinquencies, assigned 37% of a theoretical 100 points of risk.
Other Risks: Rising consumer debt delinquencies (32%), rising unemployment (15%), commercial mortgage defaults (10%), and falling home prices (6%) are also noted as potential risks.
Overall
The Auction.com 2024 Seller Insights Report indicates a cautious yet optimistic outlook for the housing market and economy. While there are concerns about rising hidden homeownership costs and potential increases in foreclosure volumes, the general expectation is for continued home price appreciation and a stable economic environment. Default servicing leaders remain vigilant, leveraging insights and data to navigate emerging risks and maintain market stability.
