The world continues to adjust to Covid-19 (coronavirus) and many people are asking Path & Post about the impact on real estate. We have put together these resources to help you understand all of the factors and options. Our goal is to provide you with information and strategies to make the best decisions for your unique situation.
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Can I buy or sell if my community issues a decree to Shelter In Place?
Yes. Real estate is considered an essential business activity and we will continue to provide services.
Path & Post has implemented safety & health precautions for Agents, Buyers, & Sellers. See Covid-19 Precautions
How is the local market?
Modern real estate operates much like a funnel. Online Clicks lead to Showings which lead to Offers and then Closings.
- Clicks are happening at about the same pace pre-Covid.
- Showings are slowing down. Path & Post offers Video Showings.
- Offers remain strong for the time being as low rates improve buying power.
- Closings are being moved forward to complete the process quicker.
Follow the local real-time market data.
What is forbearance?
Forbearance is when you and your mortgage company agree to temporarily suspend or reduce your monthly mortgage payments for a specific period of time. This option lets you deal with your short-term financial problems by giving you time to get back on your feet and bring your mortgage current. Learn more at KnowYourOptions.com
If coronavirus has caused job loss, income reduction, sickness, or other issues that impact your ability to make your monthly mortgage payment, relief options are available.
- Homeowners impacted by this national emergency are eligible for a forbearance plan to reduce or suspend their mortgage payments for up to 12 months
- Homeowners in a forbearance plan will not incur late fees
- Credit bureau reporting of past due payments of borrowers in a forbearance plan as a result of hardships attributable to this national emergency is suspended
- After forbearance, a servicer must work with the borrower on a permanent workout option to help maintain or reduce monthly payment amounts as necessary, including a loan modification
- Foreclosure sales and evictions of borrowers are suspended for 60 days
Homeowners may request mortgage assistance by contacting their mortgage servicer.
Helpful Forms
Should I refinance?
One of the best signs that it’s a good time to refinance is that interest rates have dropped or that you now qualify for lower interest rates based on your improved credit score or credit history. A two-point interest rate deduction on a $100,000 home alone could save you tens of thousands of dollars over the life of a 30-year, fixed-rate loan. Typically, a full point or two is necessary to make refinancing worth your while. The savings from a half-point or less may take years to offset expenses, depending on the terms of your loan.
What is a cash out refinance?
The cash out option involves taking out a loan for more than the original loan amount — assuming you have built up some home equity — and taking out the difference from the amount you still owe on your mortgage in cash.
You can use the cash out money for other purposes in life.
Should I get a HELOC?
A home equity line of credit (HELOC) is a second mortgage that gives you access to cash based on the value of your home. You can draw from a home equity line of credit and repay all or some of it monthly, somewhat like a credit card.
With a HELOC, you borrow against your equity, which is the home’s value minus the amount you owe on the primary mortgage.
- You could lose the home to foreclosure if you don’t make the payments because you use the home as collateral.
- You have to have plenty of equity to get a HELOC. Typically, a HELOC lets you borrow up to 85% of the home’s value minus the amount you owe on the loans.
How will this be different than the 2008-2011 housing collapse?
3 specific reasons housing will not be impacted the same way as the last recession.
1. Prices are not soaring out of control.
Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.
2. We don’t have a surplus of homes on the market. We have a shortage.
The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory which is causing an acceleration in home values.
3. Houses are more affordable today.
The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here’s a graph showing that difference:
