This ARTICLE On Will Coronavirus Pandemic Keep Buyers From Home Purchase In 2020 Was PUBLISHED On April 13th, 2020
The 2020 housing market forecast was stronger than ever before the coronavirus pandemic.
- The pandemic not only devastated the US economy but has turned the housing and mortgage market upside down
- Many homebuyers with solid pre-approval letters shopping for homes have halted the home buying process until further notice
- Many homeowners thinking of refinancing their home loans have stopped the process due to high mortgage rates
- Mortgage rates are at historic lows
- However, due to the coronavirus economic crisis, there are many changes in the secondary mortgage bond market
- Investors of mortgage-backed securities do not want to invest in mortgage bonds of borrowers with lower credit scores
- Borrowers with higher credit scores and no loan level pricing adjustments (LLPA) can get great rates
- However, borrowers with credit scores under 680 FICO will get charged high rates plus discount points
- The mortgage market is in chaos currently which is affecting the housing markets
- Mortgage applications on purchases are down over 24% from the same period last year
- Most homebuyers are scared of losing their jobs
- Others have lost their jobs
- Unemployment claims for the past three weeks came in at 16 million Americans
- Analysts expect the economy will get worse before getting better
- Many Americans are worried about a housing market crash and another Great Recession in the coming weeks and months
- Many Americans who still have jobs are worried about buying a home now or wait until the coronavirus pandemic has stabilized
In this article, we will discuss whether Will Coronavirus Pandemic Keep Buyers From Home Purchase in 2020.
Will Coronavirus Pandemic Keep Buyers From Home Purchase This Spring?
The housing market has been booming for the past few years.
- Home prices have been increasing due to the booming economy
- Many homebuyers have been saving money for the past few years to be able to purchase a home in 2020
- Both HUD and the Federal Housing Finance Agency (FHFA) have raised FHA and Conventional Loan Limits for the past four years due to rising home prices
- The demand for homes far exceeded the inventory of homes
- Most homes sold at list prices or higher with multiple bidding becoming the norm
- Prior to the pandemic, there was no sign of a housing correction and/or recession
- Then the coronavirus pandemic shut the US economy including damaging the housing market
- Spring is the busiest season for homebuyers
- Many homeowners have been preparing fixing up their homes and window dressing to list their homes in the spring
- However, a large percentage of homebuyers have put their search on hold until the security of their jobs
- The stock market entered bear market territory after dropping more than 30% of its value
- The drop in the stock market wiped out most worker’s hefty gains in the past few years
Homebuyers who are still interested in buying a home can purchase them. However, there are changes in the home buying process during the coronavirus pandemic crisis.
Will Coronavirus Pandemic Keep Buyers From Home Purchase: Financial Security And Job Stability
Most homebuyers who have halted the homebuying process are those who are concerned about their job security. The vast amount of restaurant and hospitality workers have already been laid off and/or fired from their jobs. Many are facing financial hardships and are behind on their bills. Many businesses that have closed are not expected to reopen after the coronavirus pandemic crisis is over. President Trump passed phase three of the coronavirus stimulus economic bill which will help Americans with a one-time payment of $1,200 for each individual taxpayer. However, how long will the $1,200 last? Not long. The stimulus law offers government-guaranteed loans to businesses with under 500 workers. However, the amount offered through the stimulus plan is not a fraction for the economy and the housing market to be back to normal. The Federal Reserve Board has cut interest rates to zero percent in a move to do damage control.
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Social distancing rules were implemented. Many states had their state governors declare a state of emergency shutting down all non-essential businesses and gatherings. Open houses are nearly obsolete nationwide. Many realtors who were extremely busy prior to the pandemic outbreak are now on standby. Shaking hands and touching objects such as doorknobs are prohibited. Sellers are hesitant in showing homes for potential buyers. Many sellers have taken their homes off the market until the coronavirus pandemic crisis has been stabilized. A flood of open house cancelations is making it difficult for potential homebuyers to make an informed decision.
Turmoil In The Mortgage Markets
The coronavirus pandemic has turned the US mortgage markets upside down. Prime borrowers are not affected on getting par rates. A prime borrower is a mortgage applicant with over 740 FICO, 30% equity in purchase and/or refinance transaction, and no loan level pricing adjustment (LLPA). LLPAs are pricing hits for credit, debt to income ratios, loan to value and other risk factors. However, pricing hits are huge for borrowers with under 700 credit scores. Most lenders have increased their minimum credit score requirements on government and conventional loans. Borrowers with under 680 credit scores are getting quoted high mortgage rates and are being charged discount points. This is due to chaos in the secondary mortgage bond markets. Investors have no interest in buying mortgages with under 680 credit scores on the secondary mortgage bond market. This is affecting borrowers with lower credit scores from qualifying for mortgages during the coronavirus pandemic economic crisis. Many lenders have discontinued doing loans under 640 FICO, manual underwriting, higher debt to income ratios, and implemented countless lender overlays. Non-QM lenders have suspended originating and funding non-QM loans until further notice and/or the secondary bond market has been stabilized. Although mortgage rates are at historic lows, borrowers with lower credit scores are getting quoted all-time high mortgage rates due to chaos on the secondary mortgage bond markets.
Analysts expect the secondary mortgage markets to stabilize. Once the secondary markets have stabilized, mortgage rates should adjust where borrowers can get realistic pricing on rates.
In the meantime, many experts are forecasting real estate prices will fall. However, the correction is due to be minor due to the heavy demand for homes versus inventory. President Trump is talking about reopening the economy in the coming weeks. Due to the proactive actions of the Trump Administration, many housing and lending experts are forecasting a quick recovery from the coronavirus pandemic.
