Coronavirus and the Real Estate Market
By Jenny Alejandro
The real estate industry is being hit by the coronavirus. And as a consequence of COVID-19 many other industries such as supermarkets, shopping centers, restaurants, airlines, hotels, airports are suspending their workers and / or cutting working hours. Many homeowners are wondering how they will pay their mortgages, and others are wondering if we will experience a new real estate market crash, pointing to a wave of foreclosures.
Unlike in the Great Recession, once the virus is contained and immunity begins to take over the population. There will be a return at some point of the accumulated demand of people who were unable during the confinement to go out and buy furniture for their home, paint or repair their house or, on the industrial side, build structures and install the necessary equipment for the business. And the vacations that were put on hold will finally happen, boosting hotels and theme parks.
Today. Steps are being taken quickly
Despite the fact that the coronavirus has had an economic impact on the homes of millions of United States citizens, there are actually many reasons why we will not see an increase in the number of foreclosures as we did during the collapse of the home more than ten years ago. During the previous collapse of housing, the government was slow to recognize the challenges homeowners faced and waited too long to grant aid.
Today, steps are being taken quickly. This week alone, the Federal Housing Administration said it is enacting an "immediate moratorium on foreclosure and eviction for single-family homeowners with FHA-insured mortgages" for the next 60 days. The Federal Housing Finance Agency announced that it is ordering Fannie Mae and Freddie Mac to suspend foreclosures and evictions for "at least 60 days."
When the real estate market strengthened in the early 2000s, homeowners gained a large amount of capital from their homes. Many began to take advantage of that equity. Some started using their homes as ATMs to buy luxury items like cars, vacations, and more. When prices fell, many found themselves in a negative equity situation (where the mortgage was greater than the value of their homes). Some simply walked away, leaving banks with no choice but to foreclose on their properties.
Today, the housing equity situation in the United States is very different. Between 2005-2007, homeowners collected $ 824 billion in home value through refinancing. In the past three years, they have collected just $ 232 billion, less than a third of that amount. This has led to:
The Government and Americans have learned from the latest mortgage collapse of properties, and are better prepared to face a financial storm. Help will be available for individuals and small businesses. The government is aware of the financial pain that this virus has caused and will continue to cause. The Senate approved $ 2 TRILLION intended for the economic damage caused by the spread of the coronavirus. The amounts would depend on the income and size of the family. The plan also recommends $ 300 billion for small businesses.
So, even if prices go down (and most experts don't predict they will), most homeowners will still have large amounts of value in their homes and won't stray away from that money. There always will be qualified residents to occupy rental properties owned by investors. Just like in any other downtimes, we will have to put more efforts to sustain. All this means nothing more than just fun when you have reliable team and partners.
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