Why COVID-19 Is Not Hitting Housing Prices

a woman sits at kitchen table looking at her laptop screen to learn more about the impact COVID has had on housing A few weeks ago, I blogged about why we are not seeing more foreclosures despite our severe recession and a huge number of delinquent borrowers.

The reasons include: (1) borrowers have more equity and won’t abandon it; (2) lending guidelines have been much stronger since 2008; and (3) the housing market is on fire, making it easy for borrowers in trouble to sell.

Barry Habib, of MBS Highway fame, was on The National Real Estate Post recently discussing the housing market again as well as interest rates.

Mr. Habib still loves housing overall because inventories are lower than ever for two reasons: (1) boomers are staying put in their single-family homes because of COVID (they don’t want to be in group-living situations); and (2) builders got whacked by COVID too and were unable to build more homes, further exacerbating inventory shortages.

Here is my most recent blog where I set out all the reasons why housing should remain strong.

ONE MORE REASON WHY COVID’S NOT WHACKING HOUSING – IT’S RENTERS WHO ARE LOSING THEIR JOBS

A final reason that the housing market is not getting hit by COVID is the fact that it is primarily renters, or people who are not in the housing market at all, who are losing their jobs.

This is still tragic obviously and not something anyone should celebrate, but it is one more factor behind a surprisingly strong market.

INTEREST RATES; FANNIE’S NEW 1/2 POINT FEE; INFLATION

Mr. Habib also opined in regard to interest rates, Fannie Mae and inflation.

He thinks rates will stay low for some time and reminded all of us to move quickly to take advantage of the opportunities these rates provide, and to not get bogged down with high maintenance clients (great advice for all us in sales).

He expressed a very strong disapproval of Fannie’s and Freddie’s new half point fee for refinance loans, saying that it will result in 1/4 higher rates for most refinancing borrowers. (Update: About a week after this blog was published, in response to industry pressure, Fannie Mae announced that it is deferring the implementation of the 1/2 point fee until December of this year.)

He also does not seem to think inflation will be an issue – at least in the near term.

This, however, is just another indication that nobody really knows what will happen, as numerous other market-watchers are predicting inflation.

WSJ Columnist, Andy Kessler, is just one of many examples, with inflation predictions in his WSJ column today.

Inflation matters so much because it will drive up interest rates quickly and potentially dampen the housing market… until people realize that housing is an inflation hedge and then hopefully jump back in.