When people ask me how to best handle the present crisis, I offer up three suggestions: “Don’t step on the scale,” I begin, “and don’t check the balance of your 401(k).”
“And finally,” I add, “Don’t go to Zillow and see what your house is worth. Sit this one out. Even if it doesn’t show it yet, Zillow will be a bloodbath soon.” I know, not because I’m some sort of “real estate insider,” but because I’m a rational person, that the last of these three acts could and probably would make you spiral into a deep depression and really, at this point who needs more depression?
When I Google search “real estate” and up pops an endless stream of apocalyptic headlines, I’m not denying the facts by not reading; I’m accepting them. Yes, New York Times, this spring buying season will be “catastrophic.” Yes, CNBC, the impact of this will be “far worse than the subprime crisis.” And duh, MarketWatch; the market is “showing the first signs of trouble.” Of course it is.
Not panicking is not the same as hiding your head in the sand; it’s admitting the rough road ahead. As we discussed last time, the coming months are going to present unprecedented challenges for buyers, sellers and industry professionals. The federal government recently declared residential real estate an “essential” business, which might help keep the engines running except that the MLS simultaneously declared off-limits all showings, be they open houses or individual tours. Given the degree of difficulty that presents, it doesn’t leave much room for anyone but the most desperate buyers and sellers, those whom circumstance has demanded be okay with virtual tours, drive-by inspections and drive-through signings. No buyers and sellers means agents are free to spend all of their time, one told me last week, “trying to figure out a way to pay our employees.”
This week’s best (only?) real estate good news came March 27, via the Coronavirus Aid, Relief and Economic Security (CARES) Act, and it’s not designed to jump start the business of buying and selling residential real estate. Instead, it’s designed to keep people in the homes they already own or rent.
The magic happens in Title IV of the CARES Act, and I’ll spare you the inside baseball jargon. In short, Title IV will allow financially-stressed homeowners (both single-family and multi-unit) and renters to skip mortgage and rent payments for up to six months, to avoid being evicted and to keep any potentially damaging information about either situation off of credit reports.
There is plenty of fine print but as governmental documents go, this one is pretty streamlined. They’re not asking for much in the way of documentation, save for the initial letter and, for multi-unit property owners, a revisit every month to see if the non-payment period can be extended. Foreclosures of occupied properties, per Section 4022 of Title IV, will not happen between March 18 and May 18. Evictions of properties with Federally-backed or subsidized loans? Those are out too, for 120 days starting March 25. Six months from now, when it comes time to report all of this to credit agencies, creditors are obliged to report “current” regardless of how many payments have been made during that time.
If this sounds great, it’s because it is. However, like all good news, it comes with a few caveats. The first is obvious, a reminder that this is a forbearance, not a forgiveness. Not paying your mortgage for three months means not paying your mortgage for three months. Those months aren’t lopped off of your loan; they’re just postponed. And finally, this program seems like it might be ripe for abuse. If you can pay your mortgage, pay your mortgage. Leave the relief for those who can’t.
In the coming weeks and months it’s going to be difficult to come in here and write about “normal” real estate things like market trends and exciting new developments. Better to focus on the “new normal” and not try to compare it to past normals. Trying to contextualize 2020 real estate with the real estate world we knew as recently as January is a fool’s errand whose rewards are more anxiety and concern than we already have. Better to sit back, wait it out and watch some Tiger King instead.
This doesn’t mean that eventually local real estate, like our 401(k) balances and what we see when we step on our bathroom scales won’t return to normal. Like everything, this will someday become something we remember, another piece of the mosaic of history.
Well, maybe not the scales. That part is up to us.
The Market Musings real estate column appears every other Wednesday. Larry Rosen is a San Francisco-based writer, editor, podcaster and recovering former Realtor. He is a guest columnist and his viewpoint is not necessarily that of the Examiner.