China threats to Housing Market with MBS holdings

 Happy Spring!

With Spring Break and busy workload, I've neglected posting for a while, but nice to be back on a normal schedule and having time to write a bit. 

Every once in a while, I learn things that absolutely blow my mind (for better or worse). A recent article on CNBC certainly got my attention to that end. 

Below is a link to the Article related to Chinese owned mortgage-backed securities and the potential risks they pose to the US Mortgage and housing markets. 

CNBC Article

As usual, I'm provide what I see as the important highlights and give my overall take at the conclusion: 

1) At the end of January, Foreign Countries owned 15% of all Mortgage-Backed Securities in the US according to Ginnie Mae;

2) If China were to sell, it would likely spook the market and send mortgage rates higher; 

3) The Fed Reserve is currently letting the MBS foll off of its portfolio in an effort to shrink its balance sheet. 

Weitz - Call me ignorant, but I had no idea foreign countries owned such a large share of our MBS market. Furthermore, I can't fathom why the fed would be reducing its portfolio with obvious weakness in the market at the moment. This is just more fuel to the fire that i) rates will likely remain high for the indefinite future; 2) this coupled with increasing inventory poses trouble for many areas of the country. 

It sure feels like a house of cards to me at the moment. Time will certainly tell. 

For information related to Snohomish County Commercial Real Estate or Snohomish County Real Estate Investments, feel free to reach out any time. 

Scott Weitz

Scott@WeitzCommercial.com

T: 206-306-4034

108 Union St

Snohomish, WA 98258

FHA delinquencies rise dramatically and inventory increasing across the nation

 

Recent CNBC updates on national housing statistics and delinquency levels. 

First off, we have big news on FHA delinquencies which rose to 11.3% of ALL LOAN ARE IN DEFAULT. To be fair, the total mortgage delinquency rate is 3.98%. That said, the FHA rate in my eyes is clearly a leading indicator and will obviously be a higher number as the down payment requirement is only 3.5%. If/ when  those properties go into foreclosure, that will lead to more distressed sales....more price cuts and the negative cycle continues from there. 

Another video on pending home sales which fell to the LOWEST LEVEL EVER (since they starting tracking the stats at least in 2001.  

That said, inventory levels up 27.38% YOY from last year. It doesn't take a Ivy League economist to see that supply/ demand 101 would indicate that we have some troubles ahead. As I've been saying for months, this market simply doesn't pencil with interest rates at current levels especially if you look at the layoffs we are seeing in various industries. 

NWMLS February Market Stats

 

Below are the recent stats of the NWMLS for February 2025 ...

Active Listings

• The number of homes for sale increased 39.4% year-over-year throughout the NWMLS service area. There were 10,448 active listings on the market at the end of February 2025, with 24 out of 26 counties seeing a double-digit increase compared to February 2024. When compared to the previous month, active inventory increased by 207 listings (+2%), up from 10,241 in January 2025.
• The six counties with the highest increases in active inventory were Kittitas (+76.7%), Snohomish (+65.3%), Grant (+54.2%), King (+52%), Whatcom (+48.2%) and Chelan (+42.7%).

Closed Sales

• There were 4,268 closed sales of residential homes and condominium units in February 2025, an increase of 1.9% when compared to February 2024 (4,189). When compared to the previous month, the number of closed sales increased by 14.5%, up from 3,727 sales in January 2025.
• The total dollar value of closed sales in February 2025 for residential homes was $2,856,599,410 and $463,877,754 for condominiums ($3,320,477,164 in total), an increase of 5% when compared to February 2024.

Median Sales Price

• Overall, the median price for residential homes and condominiums sold in February 2025 was $630,000, an increase of 3.6% when compared to February 2024 ($608,111).
• The three counties with the highest median sale prices were San Juan ($880,000), King ($820,000) and Snohomish ($734,975), and the three counties with the lowest median sale prices were Columbia ($224,000), Pacific $292,500) and Okanogan ($322,500).

New Construction

• NWMLS brokers reported 745 closed sales of new construction units in February 2025. This was a year-over-year decrease of 12.1% when compared to February 2024 (848 units).
• The median sales price for new construction units sold in February 2025 was $773,420, an increase of 5.9% from the February 2024 price of $730,000.

Weitz Take: 

YOY price increase of 3.6% would seemingly be good thing (and unto itself it is), but the real takeaway here for me are the massive inventory hikes..... Supply and Demand 101 would say that we will likely start to see some price drops in the near future. Interest rates are falling but will that be enough to buoy the market?...I question it. As I've said for a long time, INVENTORY is the key as to where we predict the market to go. 

For more information, consider contacting a Snohomish County Commercial Real Estate Broker. 

Scott Weitz

t: 206-306-4034

Scott@weitzcommercial.com

FHA Delinquency Report

Below numbers from FHA.... this is direct cut and paste from the report I read. As I've been saying for months.... buckle up. 

FHA Report on Delinquencies

The FHA’s latest report showed that 30-day mortgage delinquencies rose to 6.0% in November 2024, which is up 2.1% from the beginning of 2022.

Serious delinquencies, or those 90+ days delinquent, have also begun to rise. Within the report consumers shared the reason for not being able to make mortgage payments.

Consumers saying that they cannot make a payment due to being unemployed has risen significantly. The share reporting this back in Q4 2020 was 1.8%, which then rose to 7.7% in Q4 2023, and more recently rose to 12.1% in Q4 2024! That is a huge increase, potentially showing that the labor market may not be as strong as the published figures are showing.

Additionally, those not able to pay because of excessive obligations, or too much debt, has risen from 2.71% in Q4 2020 to 20.1% in Q4 2024.

Another sign that consumers are stretched and overloaded with debt.

Wells Fargo CFO take on CRE

 

A recent article in the Puget Sound Business Journal highlighted the CFO of Wells Fargo. 

Since the article is behind a pay wall, I will outline the highlights/ lowlights and give my take as usual. 

CFO Mike Santomassimo had the following takes on the state of the CRE market: 

"Commercial Real Estate Office fundamentals have not changed and remain weak". 

"We expect CRE office losses to be "lumpy" as we continue to actively work with our clients. We are 18 months into seeing the losses materialize...we have 'quarters' to go. 

Weitz - I'm laughing as I expected this article to be so much more (more terrific journalism these days), but since we've gone this far, I won't waste the quotes as as the premise is still material for our purposes. 

When Bank CFOs are telling listeners on a earnings call where they typically will paint as rosy picture as possible to maintain or boost stock prices, its worth listening. Obviously, all CRE is local and some markets will fair better than others, but this general opinion matches my thoughts in that both owners and lenders and 'kicking the can' and praying for miracle to save them. At some point, they will have to take losses barring a dramatic shift. That could be very, very....very.....ugly. 

As our new President takes office, I commend his pro-business mentality, but I don't see him have the power to turn the ship around for better or worse. 

For more information on Snohomish Commercial Real Estate, follow this blog or shoot me an email. 

Have a great weekend, 

Scott Weitz

Weitz Commercial

www.weitzcommercial.com

t: 206.306.4034

NWMLS Release - 2024 December Stats

 

NWMLS December Release

December 2024 Key Takeaways

Active Listings

• The number of homes for sale increased 25% year-over-year throughout the NWMLS coverage area, with 21 out of 26 counties seeing a double-digit increase compared to December 2023.
• The five counties with the highest increases in active inventory for sale were Snohomish (+46.1%), Douglas (+43.3%), Cowlitz (40.8%), Grant (+39.9%) and Skagit (+38.2%).

Closed Sales

• There were 4,812 closed sales of residential homes and condominium units, an increase of 19.8% when compared to December 2023 (4,018).
• The total dollar value of closed sales in December 2024 for residential homes was $3,284,574,394 and $409,740,278 for condominiums ($3,694,314,671 in total), an increase of 24.8% when compared to December 2023.

 Median Sales Price

• The median price for residential homes and condominiums increased by 4.3% year-over-year from $597,975 in December 2023 to $623,500 in December 2024. Prices decreased month-over-month by 3.33% when compared to November 2024 ($645,000).
• The three counties with the highest median sale prices were San Juan ($849,500), King ($800,000), and Snohomish ($744,995), and the three counties with the lowest median sale prices were Ferry ($125,000), Adams ($292,300) and Pacific ($320,000).

WEITZ - I just posted the national stats and not surprising to see Washington numbers worse. These are NOT good for the market. I'm shocked I'm the only one talking about this right now, but you can't escape reality indefinitely. I will double down on my take that we reached the top of the Washington housing market for the indefinite future, and I predict this unwinding will take years. Stay tuned. 

My Contact: 

Scott Weitz

Scott@dcseattle.com

t: 206.306.4034

CNBC: "Worrying supply trend" in housing market

CNBC recently posted an article on a "worrying supply trend" in the housing market. We will explore in more detailed below. 

 Click for CNBC Article Here

Key takeaways

The Housing Market is heading into 2025 with a worrying supply trend:

Active Listings in November were 12.1% higher than they were in November 2023 and hit the highest level since 2020.

More than half of those homes stayed on the market for at least 60 days without going under contract.

The latest report from S&P Case Shiller showed prices up nationally 3.6% compared to October 2023.

Weitz Take: For those that follow this blog, this is not a surprise whatsoever. We expect to see more distressed sales, increasing inventory and eventually more price drops. This will be especially interesting when the new ADU laws (I'll be posting an overview in the coming days/ week) are put in place in cities around the State (Washington State).

As I’ve mentioned in previous blogs, I believe we have seen the highest of pricing in general and expect more pressure on prices as we move deeper into 2025. The only thing that would change that would be a fairly steep reduction in interest rates (or inventory goes down dramatically again) but for now, that doesn’t seem to be in the works.

For more information on Snohomish Commercial Real Estate, consider contacting a Snohomish Real Estate Investment Broker. 

My Contact

Scott Weitz

Scott@WeitzCommercial.com

T: 206.306.4034. 

www.weitzcommercial.com