The Supreme Court has blocked President Joe Biden’s eviction moratorium, allowing property owners to begin the process of evicting tenants who are behind on rent. The court ruled that Congress has the authority to pass an act, but Congress’s eviction moratorium ended in July 2020. After that, it was extended by the Centers for Disease Control and Prevention (CDC), which the Supreme Court ruled was an overreach of its authority.

More than 3.5 million people said they are likely to face eviction in the next two months, according to the U.S. Census Bureau. This could materially impact the housing market as new rentals come up for sale and other properties are available for rent. What actually happens, however, remains very much up in the air as there are a number of conditions, including rising wages, lower unemployment, and a very limited housing supply that could dampen the impact of millions of homes flooding the for sale and rental markets.

It does remain possible, albeit unlikely, that Congress decided to take action, but that ship has probably sailed. Matt Cochrane joined the August 27 “7investing Now” to discuss the Supreme Court decision. Maxx Chatso, a renter who would like to own a home someday, also weighed in on this developing topic.

A full transcript follows the video.

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A full transcript follows the video.

But I want to talk about the Supreme Court striking down the moratorium eviction. Matt, this is your topic what happened and what should we be looking at?

Matt Cochrane  26:56  Yeah, so yesterday, the Supreme Court ruled that they blocked President Biden’s eviction moratorium, allowing property owners to begin the process of evicting tenants who are behind on rent. The Supreme Court ruled that Congress has the authority to pass such an act. But Congress’s eviction moratorium ended in July 2020. And after that it was extended by the CDC, the Center for Disease Control and Prevention. And we have a Supreme Court quote JT, if we can throw that up, from the ruling. “It would be one thing if Congress had specifically authorized the action that the CDC has taken, but that has not happened. Instead, the CDC has imposed a nationwide moratorium on evictions and reliance on a decades-old statute that authorizes it to implement measures like fumigation and pest extermination and strange credulity to believe that this statute grants the CDC the sweeping authority that it is theirs”.

So, look, right now, according to the US Census Bureau, more than three and a half million people said they are likely to face eviction in the next two months. And I guess the million-dollar question is, with eviction processes beginning will this lead to residential real estate prices dropping? I don’t think so. I think while one this can affect this, all this affects renters and their landlords, tenants in their landlords, but can also affect like people who are behind on their mortgage and owe money to their bank. But with so much home equity that has been gained over the last year and a half, I don’t personally see too many homeowners that are going to walk away from their homes with that. Interest rates are still low. Unemployment is getting lower rapidly. And there’s a lot of job openings out there. And institutional investors are investing in US residential real estate now, so I don’t think it’s gonna affect home prices too much.

Dan Kline  28:51  Let me jump in here. Do you think banks are actually going to step in and be more willing to negotiate? Because banks have a vested interest in home prices staying high. If they’ve made, say, home equity loans at your house being worth $500,000. They don’t want to see it dropped to $350,000. Because then they either have to call that loan, or they have much more exposure on that loan. Is it fair to say that I think the banks are actually going to prop this up where if it looks like you will be able to pay, there’s much more likely to be forbearance and other deals here.

Matt Cochrane  29:23  I have no idea of what banks are going to do. So I don’t even want to opine on that. Yes, I do think banks have a vested interest to like work something out with homeowners. I also think though, was so much home equity. Like right now if you were going to kick someone out and evict them, like I don’t think they would be hurting too much because there’s so much home equity has been gained in the last year and a half.

Dan Kline  29:47  So there’s two issues here, and Maxx you can jump in in a second. There is the person hanging on by a thread who is a renter, who will then have trouble finding another place to live. That is obviously, homelessness is an issue. Then there is the person who owns their home, is behind in the mortgage, they get kicked out, the home gets sold, they get a check minus whatever they owe, and they likely move into a rental property.

Now, it makes sense to not have that to make a deal with your bank, where you sell it or they sell it. So you don’t have that black mark, on your credit record. I do think that we learned from the 2008 housing crisis, that if you appear to have the ability to pay back your loan, or at some point soon would, that banks are really good about doing things like pushing payments to the end. You have to ask, you have to you have to open those letters, you have to deal with the uncomfortable. But I think the reality is, is banks don’t want to be in the business of repossessing homes. It’s not good publicity, it can lower values. There’s a lot that could go wrong. Maxx, I know you thought this might lead to you getting a deal on a home. But probably that’s not the case. What did you want to add to this topic?

Maxx Chatsko  30:53  Well, yeah, just two comments. I mean, we don’t know like the numbers of the three and a half million, how many homes might be on the market, because of this, right? If you can evict people who are behind on their mortgage, but this would potentially increase the supply. There’s a lot of first-time homebuyers out there who are interested in buying a home potentially. So that just kind of changed the equation a little bit. I mean, Millennials like me, are young and beautiful and awesome. But we’re also the largest generation now. And we’re at peak home-buying age.

So anything that can help increase supply would actually be a good thing. And additionally, I think it’s important and Matt this is way more your area. But banks are sitting on a ton of money in cash, and they have really few productive uses for it. So I think they actually, we talked about the vested interest they have been working out a deal. Isn’t there a vested interest in increasing the number of mortgages that they can actually sign up? Like, isn’t that better for them?

Matt Cochrane  31:46  Yeah, to an extent, there’s also though, banks don’t want to be seen as the bad guys, too. I mean, they already faced a ton of regulation. And out of the great financial crisis, they were hit with more regulation. They don’t want that again. And I think they are conscious about their image. Also, Maxx, another important point, your beauty is all on the inside.

Dan Kline  32:08  So we would love your questions and comments. Doesn’t have to be about this at the end of the show. If you have questions about the market broadly, companies you want to ask us about, we will do our best if you want to say hello, just say hello, but let me speak about this personally, anecdotally. And I’ve talked about this on-air before I think I talked about in our Spaces yesterday. In 2007 I got a no income verification loan, basically, they run a credit check. You tell them how much money you make, and they give you a loan, that type of loan doesn’t exist right now. Right now, though, I am looking at, my wife and I are looking at, buying a house. And I did what’s called a bank account loan when they actually look at one year of the deposits into my bank account. And they determine my creditworthiness. They also look at your credit and how much I could, I could borrow. That is a more secure version of a no documentation loan.

So they’re getting some documentation. They’re seeing my income, they’re seeing my credit, and they’re making a decision. So money is out there. And it’s certainly not like 2006-2007 where people who are not really worthy of loans can get loans. But people like me who have an interesting financial situation, can get loans, you pay a little more for it, the upfront fees are a little bit higher. So I do think banks and sort of nontraditional lenders are looking to put money into the market.

And Maxx I do think the home builders are struggling to figure out how quickly can we build homes. I don’t know what it’s like in Pittsburgh, I will tell you in Central Florida, the sheer amount of empty land getting turned into like massive, townhome and single-family home communities is at the fastest pace I’ve ever seen in the seven or eight years I’ve had a place or at least visited that area.

So I do think we are seeing a population shift. I don’t know if that will benefit Pittsburgh, it’s certainly benefiting Florida, we’re having a lot of people move here it’s warm and we have pools and there’s lots of fun stuff to do that’s pretty close by. But it’s also benefiting say Austin, Texas or Colorado or other places that have you know technology centers so this is a story that’s just starting.

Matt excellent job doing a story with the word Supreme Court in it that in no way wet political so I am happy that we still have our jobs and we’ll be back Monday at 1 p.m. Eastern. JT Street points out to me that it is important to say Eastern because as we have noticed we have people watching all over the world.

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