Here’s why we won’t see a housing crisis after COVID-19

August is upon us, and the growth in the rate of new infections appears to be slowing. Vaccine development is progressing with some promising early results. The time has come to start thinking about what life will be like on the other side of this crisis. What can we expect post COVID-19?

Logan Mohtashami
Logan Mohtashami
Lead Analyst

Some things will not have changed. I already hear murmurs from the fear-mongering housing bears that once the forbearance plans expire, we can expect to see a collapse of the housing market in America like we haven’t seen since the bubble years. This is the same sorry song the bubble boys have been singing for the last eight years, with just a new verse.

But there are several economic conditions today that were not present before the previous housing collapse that almost ensure that a catastrophic failure will not happen.

First and most importantly, the loan profiles in the previous record-breaking expansion from 2010 to 2020 were excellent. Borrowers had good FICO scores, and the lack of exotic loan products means that most borrowers began their loans with the capacity to own the debt. Plus, 20%-30% of all homes were bought with cash in the last 10 years. We didn’t have a boom in cash-out loans either, so the equity has not been whittled down like what we saw from 2003-2006. 

The rest of this content is for HW+ members. Join today with an HW+ Membership! Already a member? log in

The post Here’s why we won’t see a housing crisis after COVID-19 appeared first on HousingWire.