BofA Securities' economist Michelle Meyer said the COVID-19 pandemic will deliver a big negative shock to the housing market. They expect an adjustment lower in home sales and housing starts over the next three months. However, they believe home prices will hold relatively steady.
Meyer sees existing home sales down a cumulative 37% from the peak in February and new home sales down 51% from the January peak. Housing starts should fall a similar 57% from the peak, she added.
On prices, they forecast home prices will be pushed lower, hitting a low of -2.3% on a YOY basis in April 2021. They said the home price outlook appears tame relative to the sharp correction in sales due to three reasons:
StreetInsider.com Fri, 24 Apr 2020 09:03:00 -0400
Source: Brueggeman and Fisher
As the coronavirus pandemic prompts unprecedented job losses across the country, one of the first problems for many households will be how to pay next month’s rent or mortgage. The poorest 20% of U.S. households—including many workers in low-wage industries such as retail and food service—were spending more than half their income on housing costs even during the economic boom. These families have little or no savings that can help them weather the sudden loss of income stemming from the pandemic.
To protect renters from losing their homes, a growing number of cities and states have put a temporary halt on evictions, meaning that landlords cannot evict tenants who fall behind on their rent. While this may buy renters more time, a moratorium on evictions could cause ripple effects that further hurt local economies. But there is a more effective way to help renters by giving them cash that replaces lost income, while also supporting small businesses and local governments.
Rent has important multiplier effects in the local economy
Rent checks don’t just line the pockets of fat cat landlords—they also contribute to essential government services and other workers’ wages. If many households are simultaneously unable to pay rent, the economic impacts will be felt throughout the local economy. (see Table 1 above)
The first entity that gets paid by a monthly rent check isn’t the landlord—it’s the local government. Property taxes have a higher priority even than mortgages; if a landlord falls behind on both property taxes and mortgage payments, the local government’s claim supersedes the lender’s.
Modelling from The Australian National University (ANU) is set to help policymakers respond to the economic costs in the face of a pandemic and as the virus evolves. The research paper, which models seven scenarios, is the first wide-ranging global economic assessment of the effects of Covid-19.
DOWNLOAD: PDF report
Health officials worry that Iran could be a sign of things to come in the much of the rest of the world — a deeply alarming prospect given a member of Iran's National Committee for Influenza and specialist in infectious diseases, Dr. Masoud Mardani, has issued a stark warning for the capital city of Tehran, brimming with 9 million people and 12 million in the greater metropolitan area. By comparison, Tehran metro population is equal to the size of Los Angeles county. Dr. Mardai said he expects 30 to 40 percent of Tehran's population to be infected with coronavirus within the next two weeks.
SOURCE: Middle East Monitor
State and local governments in the United States have not planned for financial assistance to landlords in the event of a pandemic. US landlords are expected to bear the burden of mass vacancies and mass defaults in rent payments. As such, maintenance and other recurring activities may be adversely affected during a US pandemic. However, in South Korea, the government announced Thursday that it will share the cost burden of landlords who voluntarily offer a rental discount to tenants amid the new coronavirus fallout, according to the top fiscal policymaker.
“For landlords who reduce the rental fees for their small business owner tenants during the first six months of this year, (the government) will reduce 50 percent of the (lease) reduction amount from (their) income tax or corporate tax, regardless of their total income or range of rent discount,” said Deputy Prime Minister and Finance Minister Hong Nam-ki in a meeting held at Seoul Government Complex.
Top earners, or Americans making $150,000 or more per year, are the fastest-growing renter segment, according to apartment search website RENTCafé. After analyzing recent U.S. Census data, the research team at the company found that more than 1.35 million high-income households became renters between 2007 and 2017, a 175% increase.
As of today, there are 43.3 million renters nationwide, with 2.1 million in the high-income category. In 2007, RENTCafé reports, only 774,000 people were represented in the demographic.