The Most Vulnerable Housing Markets

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Report reveals the most at-risk markets

It’s no secret that home values are a linchpin of reverse mortgage lending. Higher home values increase the likelihood that reverse mortgage applicants will qualify while falling home values typically result in more applications being deemed short-to-close and lower consumer interest.

In the first weeks of the COVID-19 pandemic, many began to suspect a housing crash was on the horizon. After all, the economy essentially came to a screeching halt with most office workers working remotely from home. That was the case until real estate professionals were deemed essential workers and the Federal Reserve repeatedly slashed interest rates triggering a historic runup in home prices. Mortgage professionals of all types breathed a sigh of relief and reaped the rewards of higher home values and record refinances. 

Today a nationwide housing crash is highly-doubtful yet several markets around the nation are beginning to show weaknesses that could lead to a housing downturn. 

Reverse mortgage professionals will want to see which housing metros they market in that may be at risk.

Real estate data aggregator and software provider ATTOM recently released its Special Housing Risk Report highlighting the most vulnerable housing markets. Their conclusions are drawn from fourth quarter 2023 foreclosure, affordability, and negative equity data. 

The Big Picture

California, New Jersey, and Illinois have the most at-risk markets in the country. Not surprisingly these are the states that have seen some of the largest gains in home prices. These three states account for 34 of the 50 counties most at risk of a significant decline in home values.

Housing markets near the coastline traditionally have the biggest surges of home values in a booming market and the largest risk of decline. However, 14 California inland counties far from the coast are showing signs of strain. 
 
“Fault lines running through the foundation of the U.S. housing market continue to appear in different parts of the country, with some areas remaining more or less vulnerable than others,” said Rob Barber, CEO at ATTOM. “As always, this is not a warning sign for homeowners to run out and sell, or rush to buy, in any specific market. The housing market remains strong throughout most of the country despite some recent small downturns. Rather, this report again spotlights areas that appear more or less exposed to a market fall, should that start to happen, based on key measures.”
 

Key Performance Indicators

  

Those key performance indicators (KPIs) include the number of potential foreclosures, the number of homes underwater with mortgage balances that exceed the home’s estimated value, a disproportionate ratio of the local median household income when compared to the area’s median-priced single-family home, and a higher than average unemployment rate. 
 
ATTOM that 36 of the 50 most at-risk markets have five percent of traditional residential mortgages that were underwater (negative equity) in the fourth quarter of 2023. Nationwide, just over six percent of homeowners have a mortgage balance that exceeds their home’s value.
 
Nationally foreclosure rates remain relatively stable with just one in 1,503 homes in foreclosure. The highest concentration of foreclosures can be found in counties with a higher unemployment rate.  
 

Vulnerable Markets

 

The highest unemployment rates can be found in these central California agricultural counties. 
 
  • Tulare County, CA (10.2 percent)
  • Merced County, CA(8.5 percent) 
  • Kings County, CA (8 percent
  • Kern County (Bakersfield), CA (7.8 percent
  • Fresno County, CA (7.6 percent)
 
These are the 14 California counties at risk of a housing market decline/reset:
 
  • Butte County (Chico)
  • Sacramento County
  • El Dorado County
  • Solano County
  • Fresno County
  • Kern County (Bakersfield
  • Kings County (outside Fresno)
  • Madera County (outside Fresno)
  • Merced County (outside Fresno)
  • San Joaquin County (Stockton)
  • Stanislas County (Modesto)
  • Tulare County (outside Fresno)
  • Riverside County 
  • San Bernardino County
 

Additional Reading:

 
 

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Is Florida Going Bust?! What HECM pros need to know

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Has the Florida dream become a nightmare?

 

Our exclusive interview with Lorraine Geraci

 

Is Florida Getting Ready to Go Bust? Here’s what mortgage professionals should know.

 

A little less than four years ago Florida became a magnet state for Americans seeking lower taxes, more affordable housing, and a warmer climate. In the COVID and post-COVID era Florida was one of the nation’s most sought-after places to move. Fewer lock-down restrictions, a lower cost of living, and an improved quality of life for former city dwellers. In fact, Florida held 10 of U-Haul’s Top 25 Growth Cities of 2021. Florida’s population grew by over 200,000 residents from July 2020 to July 2021 and even more in 2022.

 

Today, Floridians are facing a host of challenges which in part include skyrocketing homeowners insurance premiums, surging property taxes, and record rent hikes. A dark cloud has begun to form over the Sunshine State. Will housing prices crash? How are retirees in the state being impacted? Will the homeowners’ insurance mess ever get sorted out?

 

For answers to these questions and to learn more about what’s happening we thought we’d get an update from the front lines. Please welcome Lorraine Geraci, a Florida resident reverse mortgage professional and corporate trainer. Thank you so much for joining us, Lorraine.

Leave your questions for Lorraine in the comments section below.

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Kiplingers: Six questions to ask before getting a reverse mortgage

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EPISODE #817

Six questions to ask before getting a reverse mortgage

[Kiplingers]

Six financial professionals from Kiplinger Advisor Collective submit questions homeowners should consider before getting a reverse mortgage. Spoiler alert- they’re actually fair-minded..  


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Killing Time

killing time procrastination

Are you killing time or is it killing you?

 

Killing time. We all do it. If I’m in a long check-out line I’ll clear a bunch of emails. Perhaps you kill time in the evening by watching your favorite show or for some going down the rabbit hole of binge-watching Netflix.

Killing time is usually harmless but there are times when it’s not.

Killing time becomes a liability when we use it to ignore our pending tasks. Perhaps it’s an unpleasant phone call to a homeowner about an appraisal, or God forbid, a second appraisal. Killing time is a space filler- filling the space where we could be more productive or accomplished.

Here are some strategies to avoid killing time that kills your productivity.

1. Time-block your calendar. If you have a typical workflow throughout the week time block it on your calendar. When do you typically call applicants to update them? What are the best days and times to call on prospective borrowers? Fill the time-space before something else fills it.

2. Eat the frog first. Mark Twain wrote, “If it’s your job to eat a frog, it’s best to do it first thing in the morning. And If it’s your job to eat two frogs, it’s best to eat the biggest one first”. He speaking to prioritizing both your time and energy. It’s best to tackle your most challenging tasks early in the day.

3. Make a list. Not necessarily a traditional to-do list but capture all of the things you need to do. Next prioritize them in categories. Perhaps it’s low, medium and high. You could also add categories such as in progress, completed, or discarded. Trello is a great tool to manage the myriad of things you have to do.

4. Take a short break. This isn’t wasting time but maximizing it! I’ll typically step out of my office and take a short walk for a few blocks near our downtown office. The important thing is to get out and get moving.

Time is our most precious resource. We spend time away from our families to earn a living to provide for our daily needs. We spend time with our loved ones because we know someday we may not have the opportunity. If you guard anything in your life or your daily schedule it’s time.

When the well runs dry

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Tapping a dry well?

According to the latest FHA Single Family Production Report, FHA case number assignments for new HECM applications fell in November and December.

In their latest newsletter, Reverse Market Insight aptly titled their February report ‘Dry Well’. 

For farmers or ranchers, the first signs of a nearly-depleted well are reduced water pressure, sputtering or inconsistent water flow, or sediment. In such situations, well-users may deepen the well, find another aquifer, or check for blockages. 

For reverse mortgage pros, several strategies may be employed to find a new source of applicants and potentially get the leads flowing again.

Know your marketing niche:


Where is it that you shine the brightest? Is it networking with local financial professionals, banks, or real estate agents? Look back to where you’ve been most effective and if those efforts have been set aside, make a plan to reengage.

Focus on referrals:

Are you consistently seeking and receiving referrals from your previous borrowers? One way to spur a referral is to ask for a review of their experience. Another key engagement that’s often overlooked is annual check-ins. Even better, call your borrowers who closed two months ago and go over their first loan statement, how to request credit line withdrawals, or answer any questions they may have.

Remember, superior service is fertile soil for referrals.

Use video email campaigns:

Did you know you can make a short custom video for a potential borrower and embed it in your email? Doing so vastly increases the odds they’ll click on the video and hear what you have to say. Loom or Bomb Bomb are great platforms for video marketing.

Show, don’t tell:

If you’re sending an email with a 48-page reverse mortgage loan proposal many of your prospective borrowers are prone to tune out or be overwhelmed. Instead, consider doing a short screencast using Loom to explain each page. 

Host virtual training sessions:

People want to help those who provide value. Consider hosting regular online sessions covering how reverse mortgages work or dispelling the common myths about the loan. Send out an email invitation with yes…a short video link so they’ll open your message and RSVP.

Work your database:

To put it simply, a reverse mortgage professional without a Customer Relationship Manager (CRM) is like a ship without a sail. 

Revisit your records in your CRM (such as Sales Engine CRM), and filter fields for the most likely prospects. Schedule an email drip campaign, or reminders to call them periodically. 

In conclusion:

Try some of these strategies to quench your thirst for new leads and closed loans. Find out which works best for you or tweak the methodology to suit your sales style.

If you’ve found some success in drumming up new business please share your ideas in the comment section below.

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Here’s how many Social Security recipients have their home paid off

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The Social Security Administration’s report provides a treasure trove of data

 

What do the vast majority of age-eligible potential homeowners have in common? Social Security and for most it’s the linchpin of their retirement security.

 

 

 

With The Senior Citizens League reporting over 40 percent of retirees rely solely on Social Security benefits to survive, it is no surprise that 62% of program recipients report they are dissatisfied with their 2024 3.2% cost-of-living adjustment. Next year’s cost-of-living-adjustment may be disappointing as well. The projected cost-of-living adjustment for 2025 will be only 1.75 percent, a significant decline from the 3.2 and 8.7 percent increase in 2024 and 2023.

 

 

 

While Social Security benefits are adjusted annually based on the percentage increase of the Consumer Price Index (CPI) the accumulated cost of living far exceeds any boost in monthly payouts. We covered some of this in last week’s episode which exposed the CPI lie.

 

 

 

A survey from Atticus found nearly two out of five respondents plan to return to work due to the modest 2024 COLA increase. One 65-year-old woman responded to the survey saying, “Utility, insurance, heating, and food costs have risen 8-14% in the last year. The 2024 COLA doesn’t offset these rising costs”.

 

 

 

A 75-year-old woman said, “My medical insurance supplement nullifies the Social Security increase. The spike in food prices hits hard, especially for those relying solely on Social Security.”

 

Nadia Vanderhall, a financial planner at The Brands and Bands Strategy Group, told Newsweek, “Even though people can be within retirement for over 30 years, Americans are living longer while things are becoming more expensive.”

 

 

 

In response to the pressures of inflation, older Americans are making financial changes to cope with the higher cost of living. 64% are cutting back on their discretionary spending. This typically means less dining out or shopping. However, even more painful are the 36% who are cutting back on daily essentials. Consequently, older Americans are cutting back on groceries, medications, or healthcare visits.

 

 

 

Could a reverse mortgage provide some much-needed cash flow? Could these cash-strapped Social Security beneficiaries find relief by tapping into their home’s value?

 

 

 

To answer that question we look at the 2021 bulletin Housing Expenditures of Social Security Beneficiaries from the Social Security Office of Retirement and Disability Policy. The report data comes from Census Bureau data that surveyed households with at least one person receiving Social Security. Here’s what they found as of 2018. Renters accounted for 32.5% of Social Security recipients. Homeowners with a mortgage balance represented a median share of 25% of households, and only 12% owned their homes free and clear.

 
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This Bay Area County modified ADU rules to ease senior housing crunch

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EPISODE #816

Bay Area lawmakers modify ADU rules to ease senior housing crunch

[Housing Wire]

One Bay Area county approved reduced fees for accessory dwelling units (ADUs) to help ease the housing crunch for those in transition, especially seniors.  


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      [Housing Wire]  Traditional mortgage demand drops to a record low.

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That’s One Small Leap!

How to leap ahead and dispel the illusion of disappointment

 

Every four years we recalibrate our calendar to better match the solar year with an extra day tagged onto the shortest month- February. Yes, that’s one small step. Julius Caesar began the practice in 46 BC with the Julian calendar. Pope Gregory used the same practice in the calendar we use today- the Gregorian calendar.

If you thought gaining an hour in the fall was great how about the extra day we had yesterday? Seriously, beyond the silly leap year tradition each of us can make micro-changes. One of those changes is to remove the illusion of disappointment. Many feel that gnawing sense of disappointment when they review their New Year’s resolutions made just two months ago.

Whether it’s our personal goals, loan production, or life in general here are 6 ways you can remove the illusion of disappointment and take a small leap forward.

 

1. Understand that negative moods have a silver lining. They push us to be more attentive and examine facts that we otherwise ignore when we’re feeling cheerful.  Ask yourself “What should have happened here?” or “Why am I feeling disappointed about this?”. 

 

2. Seeing where you have fallen short harness disappointment harness that energy to decide what choices you’ll make differently in the future.  

 

3. Question your expectations. Were they realistic? Were they dependent on circumstances outside of your control? Were my expectations flexible to adapt to changing conditions?

 

4. Find the teachable moments. What can you learn from the disappointing experience? What would you do differently next time? How should I set expectations in the future?

5. Take inventory. What skills do you need to develop? What tools do you need that would be helpful? What support should I seek to improve?

6. Step away. When you’re feeling especially disappointed take a step back. Or even better, take a few thousand steps and take a walk. Give yourself the time and space to clear your head.

Disappointment is that reliable passenger that accompanies us in our sales endeavors. Knowing how to better leverage it can help us rebound, regroup, and find the small wins despite setbacks. Before you go be sure to thank our sponsor

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Is a Reverse Mortgage a ‘crazy-butt idea’?

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Don’t explore those options!

Reverse mortgage professionals are well familiar with Dave Ramsey’s dim view of reverse mortgages. When Dina, a caller to The Ramsey Show said she and her husband have no heirs and were considering a reverse mortgage Ramsey and his cohost reacted dramatically as if she said she was planning to light her hair on fire. 

“We don’t have any heirs. Can I do a reverse mortgage?”, said Dina. 

“What are you saying?!” replied co-host Jade Warshaw. “Where is that woman who called and said she listened to the show? What did you do with her?” Ramsey quipped. 

A recent Yahoo Finance column recounts how the call to one of America’s most popular financial talk shows played out. “Quit entertaining these crazy-butt ideas”, said Ramsey. 

Dina is a 59-year-old teacher who mere months from retirement was looking into options to finance much-needed renovations on their home stated that she and her husband were considering a HELOC or a reverse mortgage. 

Their reported combined annual household income is $158,000. Dina says she could pay off the mortgage by August with her projected savings and a $28,000 tax-sheltered annuity. 

“I’m exploring options”, Dina said. “Don’t explore those”, replied co-host Warshaw. 

Don’t explore options? Why not? Because Dave doesn’t like reverse mortgages? 

What’s unknown is how much household income they will receive after Dina retires or if her husband’s income will remain the same. What we do know is Ramsey tends to paint with broad brush strokes giving advice that may not consider the unique circumstances of each caller.

Here are some questions Dina may want to weigh on how to pay for her home renovations.

 

  • What are the tax consequences of cashing out the tax-sheltered annuity?


  • Would spending down savings to finance renovations leave them forced to cash out other financial accounts that could lead to penalties?


  • Having no heirs what’s the advantage of leaving a home that’s paid off?


  • How much cash flow is preserved by either paying off the mortgage balance or refinancing into a reverse mortgage?


  • Does Dave Ramsey understand that unlike a HELOC a Home Equity Conversion Mortgage’s ‘line of credit’ cannot be frozen or reduced should home values drop?


  • With an annual household income of $158,000 and unable to pay cash for repairs and renovations, what other debts make self-funding the project unrealistic? 


  • What are the opportunity costs of not considering a reverse mortgage?


    • A reverse mortgage may not be their best option, or it could provide the flexibility for Dina and her husband to further safeguard or enhance their retirement. 

    The point is if an advisor makes the blanket statement to ‘not consider other options’ the client may want to consider advice from another financial professional.

    ________________________________________________

    Watch the Ramsey Show episode segment

    [Yahoo Finance] ‘Quit entertaining these crazy-butt ideas’

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