20 WESTERN PALLET
ncertainty and mandatory stay-at-home orders brought huge portions of the economy to a crashing halt and prevented many home shoppers and sellers from participating in the market.”
Speakman continued, “… it’s clear that as the country begins to slowly reopen, buyer demand for homes remains sturdy and many are eager to take advantage of record low interest rates to get in on the action. It appears the worst may now be behind us and that home sales are at least at the start of the road to recovery.”
Realtors’ beloved catchphrase (location, location, location) may prove even more fitting as the pandemic’s aftermath plays out. While large urban centers and sprawling metropolitan areas were the destination of choice in previous housing upturns, the widening adoption of remote work policies (as well as recent civil unrest in large metro areas) could spawn a reshuffling that boosts sales volumes above pre-pandemic levels in suburbs and smaller, less-expensive cities.
Remote workers may not “cut the cord entirely from their cities, but that they may opt for an ‘extension cord’ into the suburbs where they can get more space, more outdoor areas and, of course, a home office,” said Zillow’s Svenja Gudell.
Mortgage application activity increased by 9.3 percent for the week ending June 5, suggesting demand for both for new and existing homes may have already bottomed and is setting the stage for subsequent recovery across the broader economy. Nevertheless, mortgage credit availability could prove to be a near-term headwind as the housing market attempts to rebound.
Over the past month, lenders have effectively shut down a large swath of the mortgage market by instituting higher credit-score and down-payment requirements, and in some cases stopping issuance of certain types of loans altogether. The Mortgage Bankers Association estimates that mortgage credit availability has plunged by more than 25 percent since the US outbreak of the virus—even as applications trend higher.
The triggers, industry executives say, include lenders becoming risk-averse during the coronavirus crisis, knock-on effects of Congress allowing millions of borrowers (projected to peak at 15 percent of homeowners) to delay their monthly payments, and the decision by mortgage giants Fannie Mae and Freddie Mac to purchase mortgages where the borrower had already entered forbearance; at the end of May 8.53 percent of mortgage loan portfolio volume was in forbearance, up from 0.25 percent in early March 2020.
Though May’s housing starts appear lackluster on the surface, we did see an end to the two-month freefall. Some progress is still progress, even though we have a long way to go.