It should not come as a surprise to learn that many real estate agents have been negatively affected by COVID-19. On March 19, 2020, in the state of California, real estate agents and the services they provide were deemed “non-essential” and our offices and agents were ordered close and to stay and work from home.
No more showing homes. No open houses. No face-to-face meetings.
In that 10-day period, many buyers backed out of their transactions for various reasons and now we are struggling to pick up the pieces.
In addition to our real estate shutdown, the mortgage markets also took a direct hit. While the term subprime was deleted from our vocabulary after the last housing recession, a new term was created called “non-QM” to describe those borrowers that needed loans that were not backed by the government. Although non-QM loans were not as risky as the subprime loans, they didn’t have the government backing them, therefore they were considered a risky investment for lenders.
As the Coronavirus spread throughout the world and descended upon the U.S., the Wall Street investors that provided non-QM loans stopped providing them. In a matter of one week, all non-QM loans were gone. Any loans that were not already closed were, in most cases, eliminated on the spot. Escrows were canceled as buyers could not close on their homes. This group of buyers has been eliminated from the market.
On Friday of last week, it was also announced that the minimum credit score needed for government loans (FHA, VA, etc.) was being increased. Because of this move, yet another group of buyers, most of them first-time buyers, has been eliminated.
Finally, the firms that buy Mortgage Backed Securities have also stopped buying the loans that were already in process for fear they would either be quickly refinanced with the expected fall in interest rates or that they would go into default because of rising unemployment claims. So interest rates have increased due to perceived risk and the government has stepped in to buy these loans from mortgage originators (think Quicken Loans, Banks, etc…). Rising rates eliminate another group of buyers.
All that to say that we are in for a tough patch in real estate. Thankfully we have been deemed “essential” and can again show homes and appraisers can do their jobs so loans close, but the dominoes are already falling and the outcome has yet to be determined.
Advice for buyers and sellers?
For those that need to sell a home during this time, price it correctly from the start. For those that are looking to buy, you’ll discover that there are still buyers you’ll be competing with on well-priced homes. So make a great offer and lock in a great rate for your loan. Right now, your home is the safest place to be, so get to the finish line quickly, move in, and stay safe.
Advice for REALTORS?
Reach out to everyone you know, especially past clients, and make sure they are ok. Offer to point them in the direction of help if they need it. Many of my clients have already reached out to me to ask about mortgage forbearance and other assistance programs. I don’t have all the answers but can point them in the right direction so they can save time and money. On a personal level, REALTORS need to see if any of the Stimulus plans can help them as well.
We will get through this. We are stronger together.
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