In early 2020, the world was shaken up by the novel coronavirus pandemic. Not only did it pose a threat to people’s health, but it also endangered people’s financial situations due to layoffs and furloughs.
As a way to ease the burden on American citizens, President Donald Trump made an executive order that implemented a foreclosure and eviction moratorium for all single-family mortgages that are insured by the Federal Housing Administration. Prior to passing the CARES Act, there was already a 60-day foreclosure moratorium.
While this certainly comes as a relief to homeowners, we must consider the bigger impact this can have on the economy.
So can the market sustain the eviction and foreclosure moratorium? We’ll discuss this matter in detail in this article.
What Exactly Is the Eviction and Foreclosure Moratorium?
Before we discuss the impact this executive order has on the economy, let’s first take a brief look at what it entails. That way, you can better understand the potential impact.
This order will last until December 31, 2020. To be eligible, renters and homeowners must earn under $99,000 a year or $198,000 if they file joint tax returns. For renters, if they haven’t paid rent at any point during 2020, they’ll have to start making up for those missed payments in 2021.
To be protected under this order, renters and homeowners must fill out a declaration form. Each adult in the residence must fill it out to be eligible for exemption.
The Eviction Moratorium: Effects on Renters
It should be quite clear that the eviction moratorium comes as a relief to renters. This is especially true if they’ve had their shifts reduced or have been laid off altogether.
This gives them time to search for a new job. Without the worry about of being out on the streets or the stress of finding new housing, this allows them to stay at home and protect their families.
The Coronavirus Foreclosure Policy: Effects on Homeowners
In most cases, mortgage payments are much lower than monthly rent, so the cost of housing is less of a burden on homeowners. However, this privilege also comes with responsibilities, such as added costs for maintenance and repairs.
With all these costs, homeowners are feeling the financial pressure, just as renters are. So the foreclosure policy is also quite welcome for them.
The Coronavirus Eviction Policy: Effects on Landlords
In the US, there are over 10.6 million individual investor landlords, which is about 7.1% of all 1040 form filers. For these individuals, this eviction moratorium has really put a strain on their financial situations.
While many renters can still pay their rent, many aren’t able to as an effect of the pandemic. This can lower landlords’ incomes significantly, which can make it difficult for them to pay their own mortgages. While the mortgage moratorium may apply to some landlords, it won’t to all.
The Coronavirus Foreclosure Policy: Effects on the Market
Regardless of whether you’re looking at renters, landlords, or homeowners, these moratoriums will have a direct effect on the local economy. Those rent checks and mortgage payments don’t just go to landlords and lenders; that money also goes towards maintenance, management, insurance, utilities, and more.
Evidently, the eviction and foreclosure moratorium will have some negative effects on the local economy.
But what are the exact effects on the housing market itself? Let’s take a look.
There’s More Demand for Houses
2020 has been a record year for mortgage rates. In fact, they fell to 2.88% in August, which was the 8th time a record low happened this year.
Because the rates are so low, many people who previously found homeownership unattainable are now in a position to buy. As a result, the country’s seeing a huge demand for homes for purchase.
Houses Are More Expensive Than Usual
Because of the increased demand for houses, this means the median listing price has also gone up dramatically. This is compounded by the fact that renters are staying in houses that they’d normally be evicted from, under normal circumstances.
In addition, people who would normally sell are holding onto their homes. In such uncertain times, they need something to hold onto, especially when it comes to a roof over their heads.
On the other hand, people who are currently renting have realized how important housing really is, especially in a crisis. Because they see the extra security that comes with owning property, those who can afford it are now looking to buy.
With fewer properties going up for sale, it’s become quite a seller’s market.
Another important point is building costs are rising, due to increased lumber costs. This is also another factor in rising home prices.
Houses Are Selling Quicker
Not only are people selling their homes for handsome prices, but they’re also selling them much quicker. There are reports of home selling at an average of 15 months, which is much faster than the normal selling process. Again, this is due to the explosion of demand for homes to purchase.
This means that for those who want to sell their homes, it’s almost guaranteed that they’ll make a decent profit, and within a short period of time as well.
The Eviction and Foreclosure Moratorium Will Have an Impact on the Market
As you can see, the eviction and foreclosure moratorium will have a profound impact on the market, no matter if you’re a renter, homeowner, or landlord. The order most likely won’t be sustainable in the long run, but for the time being, it’s necessary to not only keep people safe and healthy, but to also keep a roof over their heads.
Would you like to sell your house fast to cash in on the demands of the market? Then get in touch with us now. We’ll give you cash in hand for your property!