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Equity Matters: How the COVID-19 Pandemic is Affecting the Housing Market

In the not so distant past, Hawaii open houses were packed with Home Buyers eagerly poking their heads in closets, perusing home listings, munching on snacks and offering bids above asking price in this ultra-competitive market. Then on March 13, the Federal government declared a national emergency and issued guidance surrounding social distancing and minimal human contact just a few days later.

As businesses and organizations adjust their procedures to safeguard the health and safety of their customers, employees and community, these actions have greatly affected the housing market and how homes are sold as well as the Buyer’s ability to gain financing. Many real estate and mortgage offices have closed their office doors in the hopes of re-opening after the 15 day social distancing guidance – but that remains to be seen depending on how widespread the virus occurs in their communities.

So the question is, what can we expect from the housing market in response to the COVID-19 pandemic?

1. We are seeing more home-buyers pulling out of the market and sellers are delaying their listings. Open houses are now significantly more guarded, and some have been canceled outright. Attendance at the open houses that are still taking place have been noticeably lighter, and less interactive, with most visitors clenching an antiseptic wipe. Many sellers have decided to not continue with public open houses and will show their property by appointment only.

2. There is a retraction in lending programs, loan to value ratios and home equity lines of credit as the financial industry braces for the imminent recession. Lenders are expecting that people may begin to lose their jobs and homes will lose value, as well as families may default on their loans. Fannie Mae and Freddie Mac (the largest investors in conventional mortgages in America) instructed loan servicers to offer 12 month moratoriums on mortgage payments if borrowers suffer hardship. Further, the mortgage process to take a borrower’s application to a recorded loan is a team effort involving different agencies, companies and service providers. The restructuring of the workforce and workspace in many institutions has already resulted in key services for the processing of loans to be delayed or unavailable. These restrictions have started to decelerate and complicate loan closings.

3. Inspections for home purchases and refinances are slowing and some orders are being suspended. Counties across the nation are all experiencing a commonality for vendors such as home inspectors and home appraisers – they don’t want to enter people’s homes for fear of infection. The Appraisal Foundation has issued precautions for inspectors to take when interacting with their clients.

First, talk with the clients about the coronavirus and learn if they have any protocols they would like you to follow.

Second, ask them if they have any symptoms or risk to infection and allow the client the opportunity to also screen the inspector to assure them that you are not ill. Be sure to ask the following questions:

1. Is anyone in your household currently sick with a fever or cough?

2. Has anyone in your household been exposed to a person who has or is suspected of having the coronavirus?

Third, let the client know that the inspector will be wearing gloves and not shaking hands. All parties should request that the social distancing guideline of 6 feet of distance be recognized.

4. Interest rates are currently on the rise. Although we had an intense dip in the interest rates a couple weeks ago, the market has rebounded with a vengeance. Further, you can’t get that new 0% mortgage rate you heard about – it doesn’t exist. That’s the Feds Funds Rate for overnight, short-term loans between the biggest financial institutions in the U.S. If you are one of those institutions and you need money for less than a day, then this applies to you; otherwise… it doesn’t. Could mortgage rates go lower? Yes, and they probably will settle back down, but not by 1.00%, and not in a day. They could also go higher because the Feds are artificially stimulating the market by introducing their own funds. One place they are not going though is 0%. Your best asset in this situation is to align yourself with a trusted, knowledgeable mortgage expert that can help you navigate the turbulent unknowns yet to come.

Questions for Judy Meredith, “The Mortgage Professor” Branch Manager
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