In this Real Estate News Brief for the second week of March.. we have coronavirus repercussions, mortgage relief options, and something that might lift your spirits from Airbnb.
We begin with economic news from this past week and a half. So much has happened because of the coronavirus. The Fed cut interest rates to zero and launched a $700 billion stimulus program. President Trump acknowledged that the pandemic is “really bad” and issued guidelines to help prevent the spread of the virus. Cities across the nation are shutting down bars, restaurants, and public gatherings. Stores are dealing with panicked buyers. Officials are encouraging people to shelter in place.
There’s talk of shutting down our borders and postponing the Presidential election. The stock drop has now erased about 80% of the gains seen since the 2016 election, or what was previously called “The Trump Bump.” Companies will be reporting their first quarter earnings and many are expected to miss their forecasts. The second quarter will likely be worse. And, economists are saying the recession has begun.
Goldman Sachs is predicting a 5% drop in GDP for the second quarter, and a GDP of 1.25% for the year. Morgan Stanley’s prediction is worse. It’s expecting that annual growth will drop to .9%. Bloomberg News also gathered forecasts from several major financial firms. The predictions ranged from a 2% GDP all the way down to .1%. They say the debate is now focusing on how bad it will be and how long it will last. (1)
Some economists look at three possible scenarios for the shape of a downturn and recovery. The first can be visualized as a “V” for a quick bounceback with residual effects that are not long lasting. A more severe downturn might take the shape of a “U” with a glancing blow into recession territory and a longer recovery. The last is an “L” shape with the economy firmly into recession territory. That could happen if the virus causes massive lay-offs and shutdowns over an extended length of time. (3)
The economy is coming from a strong place, and we’re not scraping bottom yet. If we can limit the impact of the virus, we could see a faster return to normal. But, there is growing concern about the trajectory of this virus, and that’s having an impact on consumer behavior.
The University of Michigan consumer sentiment index shows it fell from about 101 to 96 in the last month. That’s not a big drop, but it shows where consumer sentiment may be headed next. Economists are expecting the index to fall lower in the coming months.
The latest report on inflation shows that consumer prices were up .1% in February, but again, that’s before the coronavirus started scaring consumers away from stores.
Mortgage rates bounced off all-time lows this last week. Freddie Mac says the average rate for a 30-year fixed-rate mortgage was up 7 basis points to 3.36%. We just did a podcast on mortgage rates, and why we could see them dip below 3%. That’s episode number 867, if you want to give it a listen.
In other news making headlines…
Mortgage Relief Options for Virus Victims
Federal housing officials are reminding lenders and mortgage service companies about a forbearance option for borrowers impacted by the coronavirus. By implementing that option, borrowers could postpone loan payments during a time of hardship, although interest would continue to accrue. (3)
Fannie Mae and Freddie Mac have also been letting borrowers know about forbearance opportunities to help them prevent foreclosure. Forbearance would be available to people who are sick from the virus and can’t work along with those who might not be sick, but are quarantined and unable to work. The FHFA is encouraging borrowers facing hardship to reach out to their mortgage service providers.
Sellers Cautious About Showing Homes
The virus is having an impact on the touring of for-sale homes. A survey by the National Association of Realtors says that sellers are cancelling open houses because they don’t want a lot of people coming into their homes. And, when interested buyers come for a home tour, sellers are asking them to wash their hands or use hand sanitizer, and take off their shoes or wear booties.
NAR says 1 in 4 sellers across the nation are adopting measures to prevent germs. Precautions are happening more often in Washington State and California where there are more coronavirus infections. Although there’s been a big change in home showings, the survey shows there’s been no change in buyer interest. There’s also been no impact on the number of homes on the market.
Average Commuting Costs
Commute times are growing in many of the larger U.S. cities. A new traffic scorecard by analytics company INRIX shows that Americans spent an average of 99 hours and $1,377 dealing with traffic jams last year. That’s two hours more per year than in 2017.
The city with the longest commute times is Boston. The scorecard says that commuters there lost an average of 149 hours per year sitting in traffic. Other cities at the top of the list for traffic congestion include Chicago, Philadelphia, New York, and Washington, D.C. Los Angeles isn’t on that list but some of its highways experience the worst gridlock.
Airbnb Search for Unique Homes
Airbnb is sponsoring a contest that will appeal to creative home designers. The home sharing company is asking people to “reimagine what a house can be” and submit their designs. The website says, “The wilder, the better. Your design should reflect a fresh perspective visible in every detail. A successful entry will be full of surprises, inside and out.” (4)
The unusual aspects can include shape, location, connected stories, immersive spaces… the sky is the limit. There will be ten winners who will each get $100,000 to make their unusual dream home a reality. The deadline for submissions is April 15th.
(3) Realtor Magazine: Forbearance Option – Corona Victims
(4) Airbnb Contest