Housing Economist Says Eviction Wave Could Become Mortgage Meltdown
Aug. 3, 2020 (EIRNS)—CNBC reported July 31 that Tendayi Kapfidze, chief economist at LendingTree, warned that the looming mass-eviction wave could cause financial companies to crash. “This really could be catastrophic, and it extends beyond just the rental industry,” Kapfidze said. “It could actually affect the single-family housing market and the economy as a whole” as in 2007.
Another report, from an investment firm called Stout Risius Ross, in the same article, found that more than 40% of tenants across the country are in rent delinquency and in danger of being served eviction notices. This is the study that forecast 2 million evictions in August and 2 million more in September, as the Briefing has reported. But its survey finds a much larger number of households unable to pay rent and therefore at risk of eviction, namely 17.3 million; their total shortfall of rent, $21.55 billion; and the potential for eviction filings, 11.7 million by Thanksgiving. This depends in part, they report, on state eviction moratoria, of which 30 have expired, as has the Federal forbearance mandate.
This is a survey, and therefore “soft” data. It is differentiated by race; half of white renter households report they are able to keep rent current, but only one-quarter of black renter households say so.
Kapfidze thinks this will cause a decline in existing home values, which, as we know from 2006-07, is serious in a banking environment of speculative securitization of debts, of which mortgage debt is the largest category. Thus far, a home-price decline has not started, although the rate of increase of home prices has been cut by half already in May, reduced to 2-3% per year for existing homes.