Housing Bust is Not Likely in 2020

Lots of homeowners were or are concerned that we may be headed for another housing bust caused by the pandemic and slowed economy. However, the data does not seem to support this – thank goodness!

The world today is in a much different place than it was in 2009. Let’s take a look at some of the data.

2009 vs 2020

In 2009, one of the main reasons for the housing bust was little to no oversight in the mortgage industry. Appraisers were supporting outrageous pricing of homes and lenders were lending without regard as to their customer’s ability to repay.

The result was massive amounts of foreclosures when their customers were unable to pay and the housing bust.

In 2020, there are some significant differences.

• 42% of homeowners today own their homes free and clear.
• Of the 58% remaining, the average amount of equity in their home is $177,000
• 4 decade low in household Debt-to-Income Ratio
• Near 3 decade high in household equity in home

In addition, the majority of those homeowners who did take advantage of forbearance programs this year, are either staying current on their mortgage or are paying off their mortgage through a home sale or refinancing to take advantage of record low interest rates that lower their monthly payments.

At the height of those taking advantage of the forbearance program for government backed loans at the end of May, 2020, 4.76 million homeowners had applied. Many analysts were worried that number would continue to climb as the pandemic played out.

However, the active forbearance is decreasing! As of mid-August, it was down to 3.93 million.

The CARES Act

The CARES Act makes it so that homeowners who have lost the ability to pay their government backed home mortgage can get up to a year (360 days) of forbearance so they can get back on their feet.

The major problem is that homeowners are not aware of the program, a study by Fannie Mae has revealed. Options are there to help out homeowners and we need to get the word out!

These options will help prevent large spikes in foreclosures which is great for homeowners who need a little help and the overall housing market!

Here’s the Bottom Line

The pandemic is an outside influencer of the housing market in 2020. Unlike the housing bust of a decade ago, when the mortgage industry all but caused the crash.

As homeowners, we are in a much better position than we were back then. Regulations and oversight have been put into place to avoid a repeat of the crash and the Great Recession.

Cause and effect look way different today and for that, we are all thankful!