Can you believe what’s happening in the housing market? During a worldwide pandemic, soaring unemployment and millions of businesses closed down, the housing market is humming along.
In fact, buyer demand is higher than it was pre-pandemic and inventory is still dinky. Oh, and “home prices are back on the rise,” according to Lily Katz, at Redfin.com.
Sounds a bit like the same-old, same-old real estate market we’ve grown to know and love/hate over the past few years, doesn’t it?
Sure, the pandemic has brought changes, both to how you, as a real estate agent, do business and to how buyers look at — and sellers show — homes.
Some of the news is going to hurt – especially buyers. So, let’s dive in.
Having trouble connecting with leads during the COVID-19 crisis? Here are some ways to stay engaged.
Lots of mortgage applications from buyers
Hey, it’s spring and, just like every year, homebuyers are flooding the market. According to CNBC.com, mortgage applications from buyers jump 11%. . .
The best part of this news? “We expect this positive purchase trend to continue — at varying rates across the country — as states gradually loosen social distancing measures, and some of the pent-up demand for housing returns in what is typically the final weeks of the spring homebuying season,” MBA economist Joel Kan tells CNBC.com.
States with the largest increase in mortgage applications include:
- California
- Florida
- Georgia
- Illinois
- New York
- North Carolina
But, will the mortgage applications be approved?
Calling the situation an “echo of 2008,” Bloomberg’s Joe Light claims these buyers will face “… the toughest loan-approval standards in years.”
Lenders are tightening down payment requirements and adding new demands for higher credit scores.
“In some cases,” Light says, lenders have “stopped issuing certain types of loans altogether, in effect shutting down a large swath of the mortgage market.”
The nation’s largest bank, JP Morgan Chase & Co., for instance, has raised its minimum credit score requirement to 700 and now requires a down payment of 20%.
Wells Fargo no longer buys government loans with credit scores below 680.
So, while demand is high, availability has plunged by more than 25% since the pandemic’s outbreak, according to Light.
The result? Your “riskier” buyers may be among those who “are just not going to get a mortgage,” Michael Neal, with the Urban Institute Housing Finance Policy Center, tells Light.
Now might be a great chance to communicate with your clients by helping to explain the mortgage process to them.
There’s more than one “F” word
The one that’s top-of-mind to some of your existing clients is “forbearance.” Sure, Congress came to the rescue with the CARES Act.
And, Section 4021 amends the Fair Credit Reporting Act to require lenders to report mortgages in forbearance as “current” to credit reporting companies.
Although missed payments won’t be reported to the credit bureaus, there will be a note in credit reports stating that the mortgage is in forbearance.
“Fannie Mae and Freddie Mac, which, along with the Federal Housing Administration and the Department of Veterans Affairs, do not allow borrowers with a loan in forbearance to either refinance or obtain a new loan until one year after the loan payments are up to date again,” according to Diana Olick at CNBC.com.
This may be a huge obstacle for your clients who had hoped to buy a home when the crisis passes, but needed to take advantage of mortgage payment options, such as forbearance.
What about sellers?
It appears that sellers have confidence in the spring real estate market, with 70,000 of them deciding to list their homes “during the week ending May 8,” according to Katz at Redfin.com.
Yes, listings are still down 30% from this time last year, but the numbers indicate a substantial improvement in new listing activity from April’s 50% plunge.
There is hope for the summer 2020 real estate market. Are you ready?