The coronavirus has managed to infiltrate all facets of the global economy and it looks like nothing will escape its financial wrath. Over the past two weeks, the unemployment rate has skyrocketed in the United States; analysts, economists and wealth managers have warned of another subprime mortgage crisis. Most of these observers believe that there is no doubt that the housing market will collapse again, as economists understand that the loss of jobs, wages and the severe reduction in business activity have devastated the country. American economy.
The real estate industry will suffer from jobless landlords who cannot pay loans and tenants who cannot pay landlords
There are a number of people and organizations that to predict the covid-19 economy will destroy the US real estate market and it could be a lot worse than the 2008 subprime crisis. One of the main reasons people think the real estate economy is about to be hit hard affected is the number of US citizens who are currently unemployed. This caused mortgage borrowers to stop repaying their loans because they had no funds. Debtors who are homeowners also suffer as tenants cannot find the money to pay monthly rent expenses because they are out of work. At the time of publication, estimates Note that about 40% of renters in New York City may not be able to pay their rent this month, which hurts the landlord paying the mortgage.
Estimates by Moody’s Analytics chief economist Mark Zandi indicate that 30% of Americans with mortgages may not be able to repay their loans. Zandi says that figure is around 15 million US households and it could get worse if the economy is shut down during the summer months. Landlords and tenants are concerned about the unpredictable economy and a large majority of employees see lower wages thanks to fewer shifts, hours and layoffs at all levels.
US government safety nets do not work and those that are only available cover a fraction of the owners. Many Americans are unhappy that government-guaranteed home loans through the FHA, Freddie Mac, Fannie Mae, and the VA allow deferred payments for mortgages. In some cases, these lenders allow up to a year of deferred payments. But government guaranteed loans only cover 60% of the nation, and the remaining 40% have traditional home loans from banks.
What is the lease termination policy right now if they don’t offer a rent reduction? If we can’t pay the rent anymore, do we just say to our real estate agent like… “here’s my sorry review? »I am 5 months in a 1 year lease.
– Michael Beveridge (@ mickyb273) April 3, 2020
The Airbnb bubble: some super Airbnb hosts have more than 10 mortgages
Likewise, landlords who rent may not receive monthly payments for a very long time. As people in the United States find themselves out of work, they cannot pay rent to their landlords. Some tenants and politicians in various states are calling for an emergency rent freeze and a moratorium on evictions until the threat of Covid-19 is behind us.
Homeowners with mortgages could be crushed as the Rental Housing Finance Survey (RHFS) estimates that there are more than 22.5 million rental properties nationwide. Some economists think that Airbnb superhosts could also explode the housing market, thanks to the unwinding of Airbnb’s rental economy. Mega or “super hosts” are Airbnb owners who have mortgaged several homes in order to take advantage of the platform’s rental market.
“Look at the real estate market, my neighbor is a great Airbnb host,” tweeted Spencer Noon. She is on forums with other hosts [and] many of them have more than 10 mortgages. 0 guests reserve their properties [and] they lack money.
From the prediction of a “booming spring real estate market” to a “catastrophic buying season”
Even small banks and real estate lenders are being told by the government that they have no idea how long the industry shutdown will last. “No one has any idea how long this could last,” said Andrew Jakabovics, an executive with Enterprise Community Partners, a non-profit affordable housing group. “The forbearance program allows everyone to pause on their current situation and take a deep breath. Then we can look at what the world might look like six or 12 months from now and plan that. “
March 21, news.Bitcoin.com reported on how Lendingtree’s chief economist, Tendayi Kapfidze, predicted a “complete shutdown of the housing market”. Today, Kapfidze says that with the government in “everyone’s rescue mode” they will likely try to stop the massive foreclosures. “I expect policymakers to do all they can to stay the course on a financial crisis,” Kapfidze told reporters. “And that means preventing seizures by any means necessary,” he added.
In addition to the looming subprime mortgage crisis; office, retail, industrial and multi-family owners have invested a lot of upfront money expecting a good spring season. “If the pandemic has taught us anything, it’s how quickly everything can change. Just a few weeks ago, mortgage lenders were forecasting the biggest spring in years for home sales and mortgage refinances, ”said Bloomberg’s recent real estate coverage. Meanwhile, on April 2, financial publications wrote: “The spring buying season in real estate could be catastrophic.”
Even the president is looking for a loan deferral
Throughout the Covid-19 economy, wealth managers and economists are curious about which safe-haven asset society will trust during the financial crisis. While many predict that precious metals will be the avenue, history shows that during the 2007-2008 subprime mortgage crisis gold markets have been manipulated by central banks.
The current black swan event, covid-19, may require a black swan asset like bitcoin because it is not handled as easily as real estate and precious metals. Traditionally, investing in real estate outperforms a myriad of other investment assets, but crypto-currencies have eclipsed real estate investing by far. Indeed, unlike real estate investment which has gained 70-100% in ten years, BTC won 8.9 million percent over the past decade.
Additionally, analysts can clearly see that office, retail, industrial and multi-family investors will take a big hit from the economy from Covid-19. Even US President Donald Trump struggles to find funds to pay for his Florida properties and administration demand Deutsche Bank and Palm Beach County to grant him clemency.
What do you think of the difficulties of the real estate sector in the near future? Let us know what you think in the comments below.
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