Changes in the Mortgage Industry Could Effect the Housing Market

Last week I touched base on how the coronavirus could cause potential shifts in the market. Commercial Real Estate taking a large hit with businesses unable to run and many shutting down. The possible continued accelerated trend of people working from home, freeing up demand in office space needed by the American workforce. 

A new threat to the housing market as a result of the coronavirus could be due to the increase in forbearances in the mortgage industry. A forbearance is an agreement with your mortgage company that allows you to reduce or delay payments for a set time, at the end of which a balloon payment is due for all missed payments. Because many property owners are unable to pay their mortgages, the Coronavirus Aid or CARES act was passed, allowing impacted homeowners with federally backed loans to delay mortgage payments for up to 180 days. This resulted in a 1,896% increase in forbearances nationwide according to the Mortgage Bankers Association.  

This could be a problem if the deferred payments are to be made back in one lump sum at the end of the forbearance period. Many will not be able to make that payment. Hopefully, mortgage servicers allow individuals to pay a little extra each month until the deferred amount is repaid, or add the suspended payments to the end of the loan. The government may have to provide support in the form of a lending facility to mortgage servicer’s burdened by forbearances as they still need to forward principal and interest payments to investors.

What is going to happen to home prices?

At the end of last year, economists expected that 2020 would be a strong year for housing. Now a new report from Fannie Mae projects that home sales will fall by nearly 15% in 2020. Issues with both supply and demand are expected to contribute to the decline in home-buying activity. Many people who were looking to get into the market have had their buying power reduced or eliminated, and many who were looking to list their property have held off, worried about the spread of infection along with not receiving a sufficient offer. This is sure to place downward pressure on property sales prices. 

To what extent will home values be affected? I am not sure. I don’t know who is, nor have I came across anyone’s strong opinion on the matter. It sounds like median home sale values could be negatively affected more than what would be imagined in a typical downtime of the market due to this pandemic hitting the middle to lower class harder.

What I do believe is the market will adapt and people will work through this. Opportunities may arise for individuals who have positioned themselves accordingly prior to COVID-19. People who can strategically invest in Real Estate. There could be a rise in rental properties to hit the market. I know of a few. 

For anyone interested in entering the market, give me a call 971-285-0847. I would love to help you invest in a brighter future for you and your family.