Credit Availability Drops Off Cliff:
The Mortgage Credit Availability Index measures on a monthly basis the availability of different types of mortgages to consumers. These include traditional mortgages such as conventional purchases as well as cash out refinances, jumbo loans, Non QM loans, and other exotic products. The index has dropped to its lowest level since 2014. Lenders are requiring higher credit scores and larger down payments. Jumbo and non-QM products are harder to find. Lenders have reduced the acceptable max Debt-To-Income for self-employed borrowers. And PMI companies are no longer insuring investment properties.
The Fed’s Somber Outlook:
Federal Reserve Chairman Powell spoke on Wednesday and cautioned that the path ahead is highly uncertain. He warned that there is significant downside risk if we do not get the economic relief and recovery right. Handling this wrong could result in a weak and prolonged economic recovery. The Fed warned that current corporate liquidity problems could result in corporate bankruptcies. However, the Fed promised to use all of its tools to stave off prevent a far worse economic down-cycle.
Revised 2020 Real Estate Forecast:
According to Realtor.com’s Chief Economist Danielle Hale, 2020 started with the potential to be the best year in real estate in more than a decade. Of course, this was before the Pandemic. However, home sales will rebound in the late summer and fall, driven by millennials eager to own their own home. While many buyers are anticipating prices falling, this is NOT likely to happen. Unlike the Great Recession where there was a glut of houses on the market from sellers and foreclosures, now there is still an inventory shortage which will keep home values steady.
Creative Ways to Open the Economy and Still Be Safe:
The longer our economy remains closed, the more permanent damage will be done and the harder it will be to recover. America leads the world in economic might and invention. Yet other countries have come up with creative ways to open while maintaining safety. A restaurant in Amsterdam created individual greenhouses for outdoor dining. A bookstore in Israel allows online browsing and curbside pick-up. Other small retailers are limiting the number of shoppers and employees allowed inside at any given time.
Why is outdoor construction on roads, infrastructure, hospitals and public housing still allowed, yet other outdoor construction is not? Why are consumers allowed to shop in supermarkets and Home Depot, yet stores like Macy’s, Kohl’s, and small local retail shops must remain closed? I propose there are ways to open the economy while keeping Americans safe. It need not be one or the other. It will require new practices and behaviors; but it can be done. I hope our leaders take heed.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.