COVID 19 Impact on Real estate and the Mortgage market
The inability to reduce the impact and rage of the so-called new disease, COVID-19, resulted in a global
epidemic around the early months of 2020. To keep the numbers down the governments of each country
had to impose a lockdown on every individual in each country.
Due to this effect, home offices keep skyrocketing, empty shopping malls, abandoned office buildings,
closed cafeterias, silent bars as well as clubs become symbols of regulating the interactions among people
and signs of social distancing. However, the rules and regulations were effective in containing the rage of
the virus. The shutdowns also created a global economic crisis despite the levels of economic support and
funding from the different sectors but governmental and non-governmental. Likewise, many enterprises
like the real estate markets as well as mortgage markets are confronted with unprecedented challenges.
Introduction: The global economy was in good shape as of the beginning of 2020. Just three months
into the year(march) the economic activities went down totally, unemployment skyrocketed as a result
of lockdown rules. To reduce the negative effect on demand and supply of goods and services,
governments increase the use of monetary and fiscal policy as well as public debt. Programs like mortgage
forbearance, short time benefit, unemployment program, financial assistance programs, helicopter
money, rent moratoriums for tenants, and reductions in the federal funds rate. Despite these measures,
the global GDP growth will still be − 5.4% according to the OECD.
Furthermore, denoting the time frame or how long the impact of Covid -19 on the real estate world is
difficult. The certainty and fact remain the same which is the longer the shutdown orders, the more severe
will liquidity and capital risk in real estate markets become as disruptions in macroeconomic supply and
demand increase further.
COVID 19 Impact on Real estate and the Mortgage market
If you can recall, the point mentioned earlier, the lockdown also affected commercialreal estate sectors
on different levels or segments. Companies had to obey the order and stop their employees from coming
over to work but render remote services during the pandemic. However, remote work is a good
development that goes in hand with the mega-trends of increasing work flexibility. On the one hand, an
increase in home offices might result in less demand for office floor space.
Regardless, the virus still affects the mortgage market and housing market by increasing the unevenness
of wealth in the society at large. In contrast to all forms of work, low-income households will still be
affected by unemployment and pandemic uncertainty in the future. Without support for these people, an
increasing share of these households will not be able to fix their basic needs. Whereas the owner-occupied house will also face the same issues. Mortgages of high-income households take up more
mortgages for renovations, room extensions, and larger homes to accommodate a home office, while low-income households will be more likely to default.
However, the time frame of the lockdown would directly affect or cause depreciation in high-income
household revenue and an increase in consumption. Also, a high negative effect would directly affect or
make an impact on the mortgage market. In particular, the end of the credit for investors and rent
moratoriums for renters may lead to increased insolvencies of landlords, as too high debt coverage ratios
and loan-to-value ratios cannot be sustained. More empty space and income losses will be the result in
real estate asset markets. What can people afford and what their payments will be sometimes is not that clear to the new home buyer. Online Mortgage Calculators or amortisation schedules can help. According to the Wall Street Journal, Mortgage rates have risen to the highest level since March of 2020. It certainly helps if the buyer understands how the Mortgage works and what they can afford.
The Impact of COVID-19 on the Mortgage market
Despite several monetary easing plans by national banks, we still have a limited number of people examining the
situation of the mortgage market. This development is depicted in the USA, where the Federal Reserve
decreased the effective federal funds rate to its all-time low value of 0.05% at the beginning of the COVID19 pandemic. At the same time, the Federal Reserves pushes down the 30-year fixed mortgage rate to its
record low by purchasing MBS worth USD 200 billion in total. However, as shown as well, the decreasing
mortgage rates are compensated by mortgage lenders by charging higher fees and points.
Endnotes – Investors and companies that support or invest in real estate were also affected by the
pandemic. For example, home inspections were delayed while some were canceled and new rules were
added to closing contracts. Banks also experienced a rise in pandemic-related loans – while operating with
fewer staff – which has delayed mortgage processing. Lastly, the disruption resulted or cause an increase
in pending sales.
To crown it’s all, COVID -19 outbreak also has a bright side – it helps speed up digitization in the real estate
world. It catalyzes the own economy, real estate sector, and banking sector
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