The corona crisis has created some uncertainty in the global market. This was particularly noticeable when stock prices slumped. But the real estate industry is not left untouched either. The “Home Purchase Sentiment Index” shows that both home buyers and sellers in the United States are currently increasingly pessimistic.
The Home Purchase Sentiment Index (HPSI) of the US company Fannie Mae is intended to reflect the current buying mood on the housing market. It is based on the results of the “National Housing Survey” (NHS) and carried out the information gathered in just one number. The survey is composed of six questions that deal with the conditions on the property market and consumer buying decisions. A total of 1,000 Americans give their opinions and their outlook. The answers are then used to determine whether, according to the respondents’ estimates, the time to buy or sell a house is good, and whether prices and mortgage rates will rise or fall in the future. In addition, the survey also deals with job security and income development.
Americans fear for their jobs
In March, the HPSI fell by 11.7 points to a value of 80.8, the lowest level since December 2016. It was 9.0 points lower than in the previous year. Five of the six index components declined over the months. Only 52 percent of homeowners now think that now is a good time to put their property on the market. A month earlier, 81 percent of homeowners had believed that. A decline can also be seen on the buyer side, but it was not quite as pronounced. According to the NHS, only 56 percent of Americans think that now is a good time to buy a house. That is seven percent less than in the previous month.
The fear of a possible loss of job has also increased particularly clearly. Doug Duncan, senior vice president and chief economist, said in a Fannie Mae publication that American concerns about job security are currently greater than at any point in the past six years. In addition, opinions about the conditions of sale on the housing market have deteriorated significantly. As the primary answer to the question of why it is currently not a good time to sell a house, 47 percent of the participants stated that the economic conditions were unfavorable. The optimism about the development of the economy seems to be waning. Seven percent of respondents see COVID-19 as the main reason for the deterioration. The NHS did not, however, stipulate this answer as standard and was freely chosen by consumers. The percentage of an unspecified answer has never been so high.
Protective measures complicate house sales
As a result, the corona virus has become a key economic factor in the minds of citizens. According to Javier Vivas, “Director of Economic Research” at realtor.com, the full extent of the impact will only become apparent in the coming time. The United States is still at the beginning of the consequences. Social distancing to protect health makes it almost impossible for property sellers to organize sales events and visits. This is unlikely to change in the foreseeable future. Since buyers are now unable to view houses and apartments themselves, brokers fear a significant drop in sales. In addition, potential buyers are lost because they have been dismissed due to the crisis or are nervous due to the risk to their jobs and are very economical.
Is the Corona Crisis Causing a New Mortgage Crisis?
Just over a decade ago, a sharp rise in mortgage defaults caused the subprime crisis in the United States. Due to a domino effect, this subsequently led to the collapse of several banks and finally ended in the global financial crisis. The fear of large-scale loan defaults is likely to have flared up again in the wake of the corona pandemic.
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The virus rages particularly badly in the USA. Experts predict that layoffs will continue to increase as a result of the lockdown. According to the ARD, almost 17 million Americans have lost their jobs within three weeks. According to estimates by the Swiss bank UBS, rising unemployment could make loans worth around USD 1.1 trillion non-performing. Much of the sum is made up of the mortgage market. Even if the banks are better able to prepare for the possible payment defaults in the current situation than in the subprime crisis at the time, the institutions can still get into trouble. The government should therefore prevent the system from collapsing.
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