{"id":937,"date":"2020-07-27T06:00:16","date_gmt":"2020-07-27T10:00:16","guid":{"rendered":"https:\/\/www.deeds.com\/articles\/?p=937"},"modified":"2024-04-25T23:20:30","modified_gmt":"2024-04-26T03:20:30","slug":"is-the-recovery-real-real-estate-in-the-summer-of-covid-19","status":"publish","type":"post","link":"https:\/\/www.deeds.com\/articles\/is-the-recovery-real-real-estate-in-the-summer-of-covid-19\/","title":{"rendered":"Is the Recovery Real? Real Estate in the Summer of Covid-19"},"content":{"rendered":"\n
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In early March, the pandemic placed U.S. real estate transactions\non hold. A few weeks later, Realtor.com<\/em> created its weekly Housing\nRecovery Index, to track changes since Covid-19 gained a foothold. The name of\nthe index itself suggests confidence in the market\u2019s rebound. <\/p>\n\n\n\n

According to the recovery index, home sales took a turn upward in May. Traditionally, we\u2019d expect a May home sales boost<\/a> for real estate markets across the United States \u2014 the time when homes sell more quickly than in any other month, and command the highest prices. What about June? The buyer interest continued, as noted in a widely cited, upbeat report from the U.S. Commerce Department<\/a> that focused on a rally in new home sales. Still, it wasn\u2019t a normal June. The rally has included an unusual kind of impetus: a desire for migration from cities to suburbs, as people seek shelter from the virus.<\/p>\n\n\n\n\n\n\n\n

By early July, USA Today reported<\/a><\/em> what we at Deeds.com <\/em>already knew<\/a>: among regular folks, including young people, hopeful home buyers are struggling to meet strict criteria presented to them by nervous lenders. <\/p>\n\n\n\n

U.S. workers have been unsettled by unemployment<\/a> \u2014 particularly so in California, Pennsylvania, and New York, as reported by MarketWatch<\/em>. In late July, the United States reported its 18th consecutive week with a million-plus initial jobless claims<\/a>. By this time nearly 32 million people were receiving unemployment payments. Most people in such circumstances cannot buy houses. In this context, CoreLogic forecasts a 6.6% decline in home values<\/a> from this spring to May 2021, as financial hardships inevitably unfold.<\/p>\n\n\n\n

Low-Interest Paradox<\/h2>\n\n\n\n

For now, the market looks strong for housing \u2014 although too\nmany people are still sidelined, as they were before the advent of Covid-19. <\/p>\n\n\n\n

And even with mortgage rates<\/a> down to enticing lows \u2014 30-year fixed rates can now be had for 3% \u2014 available homes are still limited, competitive, and pricey. Why this paradox? Low interest rates do help buyers, yet can also drive up home prices along with demand. <\/p>\n\n\n\n

And despite the rebound, we are seeing fewer homes overall being purchased this year. Consider the recent reports by Realtor.com <\/em>itself, which predicts existing home sales will be about 15% down in 2020<\/a>. Some of the toughest competition for the comparatively few homes on the market can be seen in the Boston, Dallas, and Washington, D.C. markets, where buyers must prepare to outbid others, pay above-market prices, and cover closing costs.<\/p>\n\n\n\n

In 2021, the plot could thicken. Lenders may find themselves\nsitting on inventories of default homes. For now, the government has bought\nmortgage borrowers time.<\/p>\n\n\n\n

Propping Up Homeownership: The Foreclosure Freeze<\/h2>\n\n\n\n

U.S. business slowdowns have led to some alarming predictions.\nFor example, we could see more than 20 million people evicted from their current homes\nthis year<\/a>. For those with federal mortgages, the government has stepped\nin with a tourniquet: current law has suspended foreclosure for homeowners with\nloans backed by Freddie Mac, Fannie Mae, the VA and the FHA, and other federal\nagencies. Non-federal foreclosure relief polices vary<\/a>. <\/p>\n\n\n\n

Forbearance under the federal Coronavirus Aid, Relief and Economic Security Act<\/a> doesn\u2019t hinge on being impacted directly by Covid-19 \u2014 if you need forbearance during the time of the pandemic, you are eligible. But homeowners must <\/em>take the time to communicate with their lenders to arrange for suspensions. It\u2019s not automatic. <\/p>\n\n\n\n

Be sure to find out how you\u2019ll need deal with the accumulated debt when the suspension is over. Lenders cannot force a single, lump-sum repayment<\/a> when the forbearance period runs out. Additionally, the CARES Act bars extra interest charges<\/a> on the accumulated debt. <\/p>\n\n\n\n

Still, your interest might change in certain situations \u2014 for example, if the term of the loan is extended. Ask if it is. Are you getting a full payment deferral? Be sure ask if you\u2019re expected to make interest payments during the suspension period, or contribute escrow advances. And be clear on how you\u2019re going to be dealing with the lender\u2019s catch-up provisions after forbearance ends. <\/p>\n\n\n\n

Forbearance involves amending your loan documents. Lenders\nmay agree to modify and extend the lifetime of loans, making repayment easier\nfor some, but homeowners need to take the time needed to understand their\nupdated rights and obligations. After digging into the details, some owners may\ndecide to use the mortgage forbearance period to get their homes ready for the\nmarket, or to embark on a short sale or a deed\nin lieu<\/a> of foreclosure.<\/p>\n\n\n\n

Commercial Real Estate Dramatically Cut \u2014 Impacting Home Buying, Too <\/h2>\n\n\n\n

In late July, Reuters reported<\/a><\/em> that U.S. office space will shrink dramatically as corporations seek ways to shave costs. Companies are already getting used to having many of their employees work from home.<\/p>\n\n\n\n

The flight from offices has yet to play out through the\ncommercial mortgaged-backed stocks. The Federal Reserve has assisted the\nsector, buying mortgage-backed securities. And most U.S. office leases span\nyears. <\/p>\n\n\n\n

But as time passes, commercial real estate will inevitably shrink. Energy corporations, financial services, furniture stores, and a host of other mainstays of the brick-and-mortar world are making a seismic shift to remote employment and ecommerce. Education, legal services, and even trial work<\/a> are following suit. <\/p>\n\n\n\n

Research from Green Street Advisors projects that some 15%\nof U.S. office workers will wind up keeping their remote positions for good \u2014\neven after the emergence of a vaccine for Covid-19. And Morgan Stanley has predicted\nthat work-from-home policies will mean:<\/p>\n\n\n\n