In unprecedented times like these, it’s important to band together and support one another. At Arrive Real Estate Group, our team is committed to continuing to serve all your real estate needs while incorporating safety protocol to protect all of our loved ones. Let’s take a look at how the following news headlines are impacting the real estate market in our community:
JP Morgan Chase was the first of the big banks to report that they are tightening their lending standards. Borrowers now applying for a mortgage with Chase need a credit score of at least 700 and make a down payment of at least 20% of the home’s appraised value (this does not apply for existing mortgages or to low and moderate income borrowers who qualify for other loans). Although JP Morgan Chase does not disclose its mortgage lending standards, the Mortgage Bankers Association reports an average down payment of 10%. This change in standards could affect demand. In a market like ours where a median single family home costs almost $1 million in March, the difference between a 10% down payment and a 20% down payment is upwards of $100,000. Even in the most affluent areas, a $100,000 jump in immediate cash could price some buyers out of the market.
In April, unemployment claims in the United States reached record highs. Economists at the Federal Reserve’s St. Louis District project total employment reductions of 47 million, but they also predict the plunge to be short-lived.
To prevent a large number of properties from going into foreclosure, millions of homeowners, experiencing financial hardship, have requested mortgage forbearance. Forbearance is an agreement between a homeowner and their mortgage company to allow a reduction or delay in payments for a set time. The CARES Act, which went into law on March 27th, allows borrowers with loans backed by Fannie Mae, Freddie Mac, and Ginnie Mae to defer up to a year’s worth of monthly payments, which they are required to pay at a later date or in a payment plan. Mortgage forbearance, although not ideal, is far better than a wave of foreclosures and should help prevent the market from dropping drastically.
With all of the above dynamics playing out on a national and global stage, it’s fair to ask when we will see a semblance of normalcy. Health experts predict that peak COVID-19 hospital resources will drop to zero by mid-July, an encouraging trend indicating a reduction in the spread of the virus. However, the return to normal life could take significantly more time as we are likely still a year away from a vaccine in the most optimistic scenario.
For many, if not most of us, we have spent more time in our home than ever before. With the understanding that this could go on for a year or two, we believe that the housing market could see some significant positive impact. The global population likely deeply desires a home that they love.
Chief Economist of the California Association of Realtors, Leslie Appleton-Young, made the following statement on April 1st:
“Going into [the pandemic] the housing sector was in a very, very strong position . . . The latest data that we had pre-virus was the February sales data. [They were] the strongest numbers that we had in two years . . . The underwriting is really good, the credit scores are good . . . But you have to to keep people in their houses, keep people whole, keep people on payroll, so there can be a quick turn around when the light turns green again.”
During the last week of March, St. Louis Federal Reserve President James Bullard said that while economic estimates are grim, “the plunge should be short-lived.” Real estate restrictions are now starting to ease, and a large number of homes are starting to hit the market once again.
We want to assure you that of all investments you can make, real estate has historically proven to be the best asset you can own in the long-term. As we all navigate this together, please don’t hesitate to reach out to us with any questions or concerns. We’re here to support you.
Stay up to date on the latest real estate trends.
You’ve got questions and we can’t wait to answer them.