[REN #871] Real Estate News Brief: Economy at Risk, Tax Day Reprieve, Mortgage Moratoriums

Real Estate News Brief: Economy at Risk, Tax Day Reprieve, Mortgage Moratoriums, Real Estate News Podcast Episode #871

In this Real Estate News Brief for the week ending March 21st, 2020… we have economic news that’s contaminated by the coronavirus, a tax day reprieve, and mortgage moratoriums.

Economic News

We’re in an unprecedented situation right now as this microscopic virus threatens the health and safety of everyone in the world. It’s gotten to the point of statewide lockdowns in California and New York to help slow the spread of the virus. Other states are likely to follow. There are also bans on non-essential travel across the northern and southern borders, but President Trump says we’re not at the point of a national lockdown, just yet, although other nations have done so.

Meanwhile, health care facilities are scrambling to increase capacity, and get the appropriate equipment and supplies for what they expect to be an onslaught of coronavirus patients. There’s a dire shortage of things like hospital beds, masks, and breathing machines. (1) If we can slow the virus enough, we’ll have more time to prepare, but, there’s also talk that this pandemic could last months or repeat itself year after year, so this scramble could last a long time.

Along with the health threat, we are now facing a big economic threat in the form of recession, or according to some economists, a depression. Chief investment officer at Magellan Financial Group, Hamish Douglass, says the coronavirus could chop 20 to 30% off the global GDP and that we need a $26 trillion dollar stimulus worldwide to survive this pandemic. (2) A JP Morgan economist is predicting the U.S. GDP will shrink 4% this quarter and possibly 14% next quarter. The annual impact would be a 1.5% drop from where we are now.

So on to some of the latest economic news. 

The Commerce Department reported a decrease in home starts for February, but that’s before the coronavirus started impacting the U.S. They fell 1.5%, but that was still 39% higher than the previous year. Building permits also fell. They were down 5.5%, but were also higher than the previous year. Economists say warmer weather in December and January prompted more activity, so the February numbers are coming down from there. They also say we are likely to see a big change in the numbers ahead of us, because of the virus.

Home builders are still building homes, but the National Association of Home Builders say they are expecting a big drop in demand due to the economic chaos. (3) Builders are also concerned about supply chain disruptions and labor shortages that would interfere with their projects. 

One bright spot in today’s report: Demand for existing homes shot up in February. The National Association of Realtors says they jumped 6.5% and were the highest they’ve been since 2007. There’s currently a 3.1-month supply which is about half of what it should be for a balanced market.

While those reports are monthly, the unemployment report is weekly and shows that virus-related layoffs have begun. The Labor Department says there’s been a huge surge in the number of Americans filing for unemployment. They were up 33% from the week before to 281,000. MarketWatch economists are expecting the unemployment rate to rise quickly from the February level of 3.5%. (4) That prediction reportedly assumes that help from the Federal government will limit the damage.

Mortgage Rates

Given the drop in the 10-year Treasury, you might expect lower mortgage rates, but lenders are getting mobbed by people wanting to refinance so they are offering “higher” rates to slow demand. According to Freddie Mac, the 30-year fixed-rate mortgage was up 29 basis points to 3.65%.

In other news making headlines…

Tax Day Has Been Postponed

You don’t have to worry about paying your taxes on April 15th. Treasury Secretary Steven Mnuchin announced that tax day will be delayed three months, until July 15th. (5) That includes filing and payments for any taxes you owe. He said, “All taxpayers and businesses will have this additional time to file and make payments without interest or penalties. Taxpayers can also extend their tax filing date further, until October 15th, by filing form 4868.

Anyone expecting money from Uncle Sam might want to file now, however. Refunds will be issued.

Mortgage Moratorium

There’s a huge effort underway to help homeowners who might not be able to make their mortgage payments. The Department of Housing and Urban Development, the Federal Housing Finance Agency, Fannie Mae, Freddie Mac, and the Department of Agriculture have all announced a freeze on foreclosures and evictions along with options to postpone mortgage payments. More than half of the mortgages are backed by the government and the GSEs.

For people who don’t have this kind of loan, states are implementing forbearance options along with individual lenders. Bank of America is one of them. Homeowners can’t just stop paying their mortgage, however. They need to contact their lenders and request a break on their payments. Bank of America says payment deferral will be determined on a case-by-case basis, and will not affect credit scores.

Coronavirus Safe Homes

Some short-term rental hosts are trying to drum up business with the promise of a coronavirus-free stay. Inman News reports that “safe house” listings are showing up on Airbnb and Craigslist. The report cited one listing that encourages potential guests to “turn this frightening time into a family get-away in the country.” It also says that a “Harvard-educated surgeon” owns the property so guests are close to quality medical care. Some listings also promote “plenty of toilet paper.” 

If you live in a state with a lockdown order, you may not be able to travel to an Airbnb. And staying home is one of the wisest things to do right now to help keep the virus from spreading. I know some people don’t quite understand this or believe it yet, but the difference in deaths could be in the millions versus thousands if we stay home. The rate of infection, at least in California, is difficult to follow because we haven’t been testing, but Governor Newsom says it’s doubling every two to three days.

Links:

(1) New York Times Article

(2) Newsmax Article

(3) Wall Street Journal Article

(4) CNBC Article

(5) Fox News Article

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