The pandemic has caused a number of drastic shifts to our economy and we likely will not see the implications until later.
Zillow conducted a study on housing during previous pandemics. In the study, they concluded that while home sales dropped dramatically during an outbreak, home prices stayed about the same or suffered a slight decrease. This makes sense because it’s harder for prices to change when there are few transactions. Therefore it is safe to say that the pandemic will cause the housing market to pause as it has done previously.
The federal government has implemented a moratorium on foreclosures and directed mortgage servicers to offer forbearance or reduced payments on any mortgage backed by Freddie Mac, Fannie Mae, or the Federal Housing Administration (FHA). As happened in 2008 the bottom fell out of the housing market, but it could have the unintended consequence of bankrupting mortgage servicers who would suddenly be on the hook for the missing mortgage payments. It’s hard to know what damage might bring to the mortgage industry and thus the housing market, but the hopes are that we can learn from the past and apply these lessons to be proactive during this challenging time.
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