3 Housing Market Dynamics Affected by Covid-19

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Since this time last year, all areas of life have been somewhat impacted by the Covid-19 pandemic and the unforeseen disaster that has befallen many national economies because of lockdown restrictions, halted trade, and closed borders. This has resulted in a stalled economy in most countries which has led to many people losing jobs or being in unstable work situations with no way of knowing where they will be from one day to the next.

Many independent markets, such as commerce, trade, and housing have also been affected as a part of the larger whole with real estate figures at their worst since the 2008 financial crisis which was the worst in living memory. While news outlets are quick to point out the huge impact that Covid has had on commercial interests, there is little to no reporting on the state of the housing market.

The housing market has been greatly affected by Covid-19 but some of the more dynamic aspects of the crisis are:

  • Mortgage variables
  • Government assistance
  • Unkempt property

Despite defaulted payments on mortgages, lenders have increased the availability of new loans while government assistance hasn’t been nearly enough for many individuals and firms alike and the amount of foreclosures has resulted in a large increase in so-called Zombie properties. 

Mortgage Variables

Following regulation changes after the devastating 2008 financial crisis, mortgages became more difficult to obtain because of a change in the procedures that stipulated a comprehensive overview of one’s finances when applying for such a loan. Since then, and during the 2020 and 2021 distressed housing and real estate market, mortgages have been successfully loaned on a slower but more efficient scale as banks seek to cover themselves, but strangely, the rate of mortgage applications in the UK hit a record high in October 2020 while the pandemic was in full swing.

The sharp rise in applications has been attributed to the large number of people who are now working from home in response to social distancing and lockdown measures during the pandemic. As people need to work at home, they naturally require more space, perhaps a home with an extra room that can be used as an office, or maybe a larger office or floor altogether. Because of this, house prices have actually risen in the United Kingdom to an annual growth rate of 7.3% which is the fastest rise since 2016.

The housing market, in the UK at least, seems to be slowly regaining its composure following a year of heavy slumps and bleak uncertainty. However, some analysts have stated that this may be a temporary blip caused by temporary demand and a lowered stamp duty rate therefore the market is not likely to continue to be shielded from the effects of Covid 19. 

Government Assistance

Conversely, the story is a little different for Americans. For any homeowner, not being able to pay their mortgage is a nightmare and a frightening prospect since it could result in losing their property. The pandemic has caused millions of job losses, stalled business, or temporary leave with a very uncertain future for many, including the millions of homeowners who have fallen behind on their mortgages. The United States government’s payment suspension plan has been a Godsend for some property owners and still continues to help many.

Essentially, the federal government announced the emergency program in order to safeguard millions of people that potentially could be and indeed most were, affected by the dire economic situation that has been imposed on people during Covid-19. As the plan was meant to be temporary for 2020 and 2021, it now stands at over 2.5 million applicants and is now expected to continue until at least December 2021. What this means is that millions of people will be essentially protected from the looming threat of foreclosure until April 2022 when the CFPB 120 day delinquency period is taken into account.

This is great news for any homeowner who is currently struggling and while it might feel like a small reprieve it marks a huge victory against banks that will be eager to get back to business as usual by foreclosing properties and evicting well-meaning families with young children or elderly relatives from their own homes. Fortunately though, this now gives some people a little extra time to plan their finances and situation as the economy slowly recovers from Covid and things begin to get back to normal.

Unkempt Property

Although governments in developed nations including the US and the UK have tried as best they can to help citizens out of sticky financial situations brought on by the pandemic, some have fallen through the cracks and not been able to get enough assistance if any at all. Mortgage defaults are a serious matter and most people are aware of the terrible consequences of delinquency. As such, it isn’t uncommon for a homeowner to prematurely vacate a property when they have fallen behind on payments, believing the home to be automatically foreclosed and that they will need to leave.

While having to leave the home eventually is true should a satisfactory payment plan not be worked out, it isn’t always necessary and this misconception leads to homes becoming abandoned in fear of eviction leading to what has become known as “Zombie foreclosures”. Essentially, an occupant leaves a home on the assumption that the bank will come and take it anyway and this results in the property becoming unkempt, vandalized, and in disrepair, usually at the expense of the foreclosing bank.

To counteract this, following foreclosure proceedings, the property is usually placed up for auction where the burden of renovating the property falls to the new property owner who is all too happy to do the work since they will usually get the property at a bargain price owing to its state. However, recent analysis has shown that since the US government’s payment suspension program, zombie foreclosures have sharply declined as families feel more assured that they will be able to keep their home for a while longer, which may be long enough for them to reassess their situation and start repaying what they owe.

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