By Jim Perskie
Freddie Mac CEO David Brickman said Thursday the housing market is “facing its greatest challenge in more than a decade” and that the impact of the coronavirus will be felt over the next year, at least.
Brickman expected home sales – and perhaps home prices – to fall significantly in the second quarter before beginning to recover.
“While home prices increased in the first quarter, the future effect of the COVID-19 pandemic is highly uncertain and dependent on the pace of economic recovery,” he said in discussing Freddie Mac’s first quarter financial results. “The decline in home prices could be significant if forbearance and foreclosure mitigation do not limit the effect on home prices.”
The Labor Department announced another 3.8 million Americans applied for unemployment benefits last week, bringing the total since the start of the pandemic to more than 30 million.
The impact of the job losses is being felt throughout the economy. Freddie Mac announced quarterly earnings were down significantly after the pandemic took hold in mid-March. Home sales took a beating in March. Credit is tightening considerably.
Meanwhile, millions of Americans are pushing pause on their mortgage payments as they cope with economic stress of the pandemic.
The latest data released Monday by the Mortgage Bankers Association shows 6.99 percent of mortgage borrowers – or 3.5 million – were in forbearance as of April 19. That’s up from 5.95 percent a week earlier. On March 2, roughly 0.25 percent of loans were in forbearance.
Those numbers are expected to climb as monthly mortgage payments come due Friday and more and more Americans are out of work.
“We expect serious delinquency rates and the volume of loss mitigation activity to increase significantly in the near-term due to the pandemic,” Brickman said. “And while we believe the forbearance programs that we announced represent effective loss mitigation in the short term, we will likely see higher delinquencies and defaults in the future as the underlying forbearance agreements end.”