A housing market backed by low interest rates, government support and strong demand has remained intact despite expectations, even with the economy under siege from the coronavirus pandemic.
Indeed, real estate managers took the COVID-19 outbreak better prepared than in the global financial crisis of 2008, according to DoubleLine Capital portfolio manager Ken Shinoda, thanks to mortgage services and policy makers who were proactive about homeowners’ relief.
Shinoda told Yahoo Finance on Friday that a consumer safety net of the Federal Housing Finance Agency (FHFA) – which governs mortgage giants Fannie Mae and Freddie Mac – has been “aggressive” in allowing homeowners to use foreclosure.
“So, if you’re a borrower and you’ve had problems with your job because of COVID, you can call your mortgage lender. You can tell them, ‘Hey, I’m having trouble paying my mortgage,’ ‘he said.
“You can now miss a maximum of 12 payments, and your FICO score will not be affected, and the service can actually – if you’re a Fannie / Freddie loan – move these missed payments to the back of your loan, interesting as a balloon, said Shinoda, who oversees a team at DoubleLine that invests in non-agency-backed securities.
The portfolio manager said this relief for affected homeowners is the equivalent of a one-year grace to heal the economy, and provide breathing space for those lenders to find another job.
“[This] is something we did not have during the [2008] global financial crisis. There was embrace, but not the large scale we deployed with the help of the Fannie, Freddie, Ginnie Mae [GNMA], “Added Shinoda.
Woman handing over the keys to a new house inside empty room.
Throughout the COVID-19 and its economic crisis, the housing market has not only been resilient, but it has remained one of the areas of strength. On Friday, data showed that existing home sales skyrocketed by a record 24.7%, helped by rock interest rates.
According to Shinoda, among the factors driving the housing market are the favorable supply / demand techniques, with a low inventory of homes already for sale supported by demographics. Millennials, the second largest generation behind the baby boomers, are starting to buy homes as they get deeper into their 30s.
The age group has “saved some money. They are starting to have children. They will want to be in a house, ”Shinoda explained.
‘Living in a one-bedroom apartment in Manhattan does not sound as good as having two small children. That, that migration had already begun, “he added.
Another reason why foundations for homes have remained healthy is the improved affordability.
“Affordability is really driven by two things – it’s income, which has increased, and then interest rates, which drive mortgage rates. Those are on historical lows. That, in COVID, things have looked pretty good,” he stated.
To be sure, the concerns around the peak were unemployment during the pandemic and its impact on the housing market, especially among hourly workers. However, the portfolio manager said white-collar workers with higher-paying jobs have not been hit “so far”.
While the bulk of this job loss hit lower-income households the hardest, DoubleLine Capital CEO Jeffrey Gundlach recently made a case that eliminates “another wave” of layoffs for employees. Back in July, he told Yahoo Finance that people in the $ 100,000 to $ 150,000 bracket “might also be at risk in another wave of layoffs because these people actually have no savings.”
Shinoda agreed that professional job losses could occur if there was continued economic malaise, but the satisfaction could solve those difficulties in repaying mortgages.
