Our Firm
Resi Wrap - Memento Moratorium
September 2021

Aaaaaaaand we’re back.

Friends of ResiShares -

You may remember us from such Resi Wraps as “Polar Vortex” and “Ship of Theseus.” Unsurprisingly our distribution cadence has dropped very quickly from weekly to monthly to “we’re lucky if we get out 2 per year” as our day jobs have progressed from talking about buying homes to actually buying them.

We’re resurrecting the note today to jar everyone out of their housing news-cycle fatigue with a reminder that 10 million people are being evicted right now all at once literally as we speak!!!!

Except not really.

Despite all the dire predictions, so far we have not seen any news stories suggesting mass evictions. At least not yet. Perhaps, it’s because the various state governments and federal regulatory agencies have spent the last year getting ready for this eventuality, and they have successfully engineered a soft landing as we unwind the intervention. Here’s a pretty comprehensive ant’s-eye view of what that regulatory patchwork looks like, and it indeed suggests that this will be a fairly orderly process of clearing out the eviction backlog.

The other reason, however, is that most people are actually current on their rent. Despite various census surveys that drive the sense of doom in news articles above, the landlords are still getting paid. This phenomenon is not exclusive to us, with our privileged perch in the SFR world. The apartment landlords are getting paid too, according to the National Multifamily Housing Council.

Memento Mortgage

What of mortgage forbearance, then? With the foreclosure moratorium behind us and the final deadline for forbearance requests ending in two weeks (September 30th), will we see a wave of delayed foreclosures overtake the booming housing market with distressed inventory?

This, too, seems unlikely. While forbearance was heavily utilized at the beginning of the pandemic, lenders and borrowers have both made significant strides in righting the ship. Even if all 1.6 MM borrowers were to sell or be foreclosed upon in the next twelve months (which is not how any of this works), total housing inventory would STILL be below the ‘06 peak, all against a backdrop of both millennial first-time homebuyers and institutional investors readying dry powder for attractive opportunities.

Anyway, here’s a paper from the Fed about how restricting supply with forbearance while printing money at the same time propped up the housing market (ya think?). We wrote about one year ago that in the long run, homes would invariably change hands between housing longs (current homeowners, who tend to be older and wealthier) and housing shorts (current renters, who tend to be younger and less wealthy). The only effect of monetary policy and forbearance on this trade was to determine the price level at which it occurred, which directly transfers wealth from one of those groups to the other.

Policy makers in a crisis have to appeal to a variety of constituencies, all while finding a way to minimize permanent damage to people or institutions, so it’s probably unfair to be so reductive in our analysis. Besides, it’s not like the Fed has any particular reason to favor higher asset prices.

Rest of Resi

Have a great weekend,

Michael Greene

Co-Founder and CEO

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