The novel coronavirus — or COVID-19 — has ravaged the world since it first appeared at the end of 2019, leaving our economy devastated, our healthcare system holding on by a thread, and the jobs of millions in limbo or gone altogether.
The virus has infected well over 2 million people and killed more than 130,000 as of April 15. Unemployment is estimated at 15% — the highest level since 1940 and the Great Depression. Still yet, it’s entirely likely that number will continue to rise, taking years to recover.
Previous research by Clever showed that American already carried large amounts of debt prior to the pandemic — $14 trillion to be exact.
To find out how the virus affected homeowners and renters, Clever surveyed 1,000 people on March 31 and discovered how Americans’ finances have been impacted thus far.
Here are some of the key ways consumers in the U.S. are being impacted by COVID-19:
1] Homeowners Are Worried About Defaulting on Mortgages
As of 2019, 128 million people in the U.S. owned their home and of that, roughly 60% carry a mortgage. This means more than 76 million Americans have a monthly mortgage payment due each month. It’s no wonder there’s been lots of talk about mortgages in light of COVID-19 and the accompanying lost jobs or hours.
Clever found that prior to the pandemic, 30% of homeowners had less than $1,000 in an emergency fund, with 22% unable to pay one month of their mortgage payment with savings. 50% say that by the end of April, they will have exhausted their savings. Only 9% say their emergency funds will last the recommended three to six months.
These responses suggest many homeowners out of work will miss at least one month of their mortgage payment or more — which, under normal conditions, would mean they could be foreclosed on by their lender and at risk for losing their home.
The good news is that some lenders are offering forbearance for a set period of time — meaning homeowners could see some relief in the form of a temporary postponement of their payments. Usually, the life of the loan will simply be extended by the number of months the payment is postponed.
As of March 31, 16% of homeowners had worked with lenders to reduce or suspend mortgage payments. But, 12% are already behind on their mortgage because of the effects of the coronavirus. 25% of homeowners are worried about defaulting on their mortgages and losing their homes. A short reduction in hours or a couple weeks of furlough can be all it takes for homeowners to feel the heat.
2] Home Sellers Are Taking Homes Off the Market and Active Listings Are Down
Home sellers caught off guard by the pandemic are having to decide what to do next. 23% pulled their listing, while 27% dropped their price. 31% of those planning to sell their home over the next 12 months have decided to hold off. There were 15% less active listings in March 2020 than March 2019. And while not all of this lack of activity may be due to the pandemic, it has undeniably had an impact.
The 15% of sellers who haven’t changed their plans or those who may need to move cross-country for a new job as the economy starts to rebound may be looking for ways to save.
A word of advice for sellers pulling their listings: There’s no reason to not list your home for sale on the MLS. Yes, you might receive a few low-ball offers due to the COVID-19 scare, but you also might get an interest seller who’s serious. Even if you’re not comfortable showing the home, you can coordinate with the buyer to initiate the deal after the shelter-in-place restrictions are lifted.
Consider listing with an agent who’s willing to lower their fees in light of COVID-19. There’s always an opportunity to get a discount during a crisis.
3] Home Buyers Are Waiting to Buy or Lowering Offers
Home buyers are also having to adjust course during this time. A whopping 55 % of would-be buyers are putting off their purchase for now or no longer have plans to buy. 28% are still planning to buy but now looking for deals instead of paying full price. It seems as though the long-time seller’s market is beginning to shift the other direction and buyers staying in the game could benefit — as long as their income remains.
4] Renters Are Struggling to Pay
Renters are in a similar situation as homeowners and wondering how they will pay their bills. Nearly half of renters surveyed said they had less than $500 in a savings account prior to the pandemic. 36% said they never even had an emergency fund to begin with and 13% said they’d already spent it by the time they completed the survey at the end of March.
While a moratorium on evictions has been issued in the recently passed CARES Act, it generally only covers those renting from a landlord with a federal mortgage like Fannie Mae, Freddie Mac, or Federal Housing Authority (FHA.) Some states are making their own mandates banning evictions for a certain period of time, regardless of lender. While this may help tenants from immediately getting kicked out, it doesn’t solve the problem of them getting behind on payments, potentially racking up late fees, and facing eviction in the future.
5] Americans Are Already Taking on More Debt
The pandemic certainly hasn’t helped American’s heavy debt load. With many Americans already stretched thin and without savings, about a fourth have already taken on new debt as a result of COVID-19. This trend is expected to continue as more businesses remain closed and more employees are laid off in the coming months.
Outlook for the Future
It’s hard to predict what will happen in the near future and the full impact the coronavirus will have on the U.S. economy. But, it’s clear it will take some time for it to recover what’s already been lost.
Long after the virus hits its peak, Americans will feel its effects in the form of lost wages, dips in retirement accounts, newfound debt, and — perhaps most impactful — uncertainty for the future.
Not to mention the possibility of COVID-19 returning for a second wave in the fall. Until a vaccination has been approved and implemented, most Americans likely won’t fully set aside their fears and return to pre-pandemic spending habits.
Dr. Francesca Ortegren, Ph.D. is a Research Associate at Clever Real Estate where she focuses on helping people understand complex data, real estate, finances, business, and the economy by researching various topics, analyzing data, and reporting useful insights for general consumption.
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