Housing market predictions that take Covid-19 into account have already come out. Capital Economics is estimating four million homes will be sold in 2020. This would be the lowest rate since 1991. For comparison, roughly 5.3 million homes sold in 2019.
The trade war with China threatened international trade, creating a cloud that deferred business investment. Now we’re looking at a certain economic downturn due to the government’s choice to close the vast majority of businesses, nearly killing the service economy.
Experts think that the economic cost we’ve paid to try to contain the virus will weigh down the economy into 2021. That is why home sales are expected to be jump to around six million in 2021.
The federal government has dropped interest rates in an attempt to stimulate the economy. We can expect a wave of mortgage refinances in order to save money. Fannie Mae predicts 40% more mortgage refinances in 2020 than 2019.
The federal government has dropped interest rates in an attempt to stimulate the economy. We can expect a wave of mortgage refinances to save money. Fannie Mae predicts 40% more mortgage refinances in 2020 than 2019. To help borrowers and renters who are at risk of losing their home due to the coronavirus national emergency, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) are extending their moratorium on foreclosures and evictions until at least June 30, 2020.
The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The current moratorium was set to expire on May 17th. Interest rates are already at an all-time low, which allows homebuyers who qualify. That gives potential home sellers hope, though it will take time for these low-interest rates to offset the spike in unemployment and general economic malaise.
According to the Bureau of Economic Analysis (BEA), the real gross domestic product (GDP) decreased 4.8 percent in the first quarter of 2020, according to the “advance” estimate released by the Bureau of Economic Analysis. In the fourth quarter of 2019, real GDP increased by 2.1 percent. Economic activity dropped at the largest annual rate since the Great Recession of 2008 in Q1, with consumers cutting back their spending on necessities.
Most of the loss occurred in the last three weeks of the quarter, as quarantine orders took effect, which underscores the severity of the pandemic’s impact. The decline in the first-quarter GDP was, in part, due to the response to the spread of COVID-19, as governments issued “stay-at-home” orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.
Personal saving was $1.60 trillion in the first quarter, compared with $1.27 trillion in the fourth quarter. The personal saving rate – Personal saving as a percentage of disposable personal income-was 9.6 percent in the first quarter, compared with 7.6 percent in the fourth quarter.
Disposable personal income increased $76.7 billion, or 1.9 percent, in the first quarter, compared with an increase of $123.7 billion, or 3.0 percent, in the fourth quarter. Real disposable personal income increased 0.5 percent, compared with an increase of 1.6 percent.
The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the first quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified. For more information, see the Technical Note on BEA’s Web site
According to the U.S. Bureau of Labor Statistics, the total nonfarm payroll employment rose by 4.8 million in June, and the unemployment rate fell to 11.1 percent. These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic.
What will 2020 be like for buyers? As states continue to open up, mortgage rates trend at historic lows, and jobs recover. If you qualify for a mortgage, you have a more limited selection and prices close to what they were before the coronavirus hit, but you have relatively little competition. In response to the COVID-19 national emergency, borrowers with financial hardship due to the pandemic have been able to receive forbearance, which is a pause or reduction in their monthly mortgage payment. Borrowers can request an additional six months if needed. FHA does not require lump sum repayment at the end of the forbearance.
What will 2020 & 2021 be like for sellers? Expect homes to be slow to sell, and you may have to market it down to move it. Or you may need to wait a few months to see things shift from a buyer’s market to a balanced market. The only exception would be the “affordable” homes that are in short supply. In this case, you face a seller’s market as soon as people are allowed to go out shopping.