COVID-19 impact continues
OKLAHOMA CITY – The COVID-19 pandemic has spared few Americans in some way or another, but renters, minorities, and lower-income households have been disproportionately more severely impacted.
According to the third quarter National Housing Survey provided by the Federal National Mortgage Association, commonly known as Fannie Mae, broad financial and employment repercussions due to the virus have impacted many households across the country.
The survey, conducted beginning in the second quarter, collected data regarding financial, job, and life experiences due to the sudden and dramatic effects of the COVID-19 pandemic. Their work continued into the third quarter, and indicated consistent trends regarding financial and job impacts. Despite the significant impact of the pandemic on consumers’ daily lifestyles, housing preferences and mobility generally remained consistent with what was observed in 2019.
Nearly one-third of survey respondents indicated they have experienced nonvoluntary employment changes, including reduced working hours, layoffs, furloughs, pay cuts, or their employers going out of business. Households experiencing job loss or furloughs were 5% higher for those under the Area Median Income, or AMI, than for those above it. Among those still employed, 31% of respondents below the AMI were concerned about losing their job, versus just 15% for those above the AMI. And a full 36% were concerned over their ability to pay bills this month, when surveyed, against just 10% of those earning more.
While it is common knowledge that the crisis spurred a jump in remote work and employees working from home, the report found that those above the AMI were far more likely to experience work from home opportunities, at 38% compared to just 22% for lower income earners. With widespread disruptions to childcare and virtual schooling, this imbalance was more financially impactful toward lower-income households. A full 29% of Hispanic Americans have experienced a disruption in childcare in the third quarter, compared to just 19% of white, non-Hispanic Americans.
Moratoriums on evictions have helped keep most Americans protected, but 11% of respondents indicated that they had family or friends move into their home who didn’t usually live there in the second and third quarters of 2020. Black
Americans were twice as likely to have had friends or family move in compared to white, non-Hispanic Americans. It can be expected that these trends will rise precipitously in 2021 as evictions are expected to begin in the first quarter, assuming no action by the incoming Biden administration.
Generally, respondents indicated that the pandemic has not greatly impacted their mobility, accelerated moving plans, or changed their housing preferences compared to 2019, prior to the pandemic. When asked about plans to delay or accelerate moving due to the outbreak of the coronavirus, the net change is to delay moves, although the change was not significant. Preferences on the location, price, and size of their next home have remained mostly unchanged since 2019.
Despite record low mortgage loan rates, the negative financial impacts on lower-income households, renters, and minorities have put the aspirations of taking advantage of those low rates out of reach. Credit scores and savings for upfront housing costs such as the down payment or rental deposit, which are a key to obtaining a home, may be more difficult to maintain and achieve especially for lower-income households, as COVID-related employment changes may make paying bills and saving money more challenging as the pandemic continues.
Smaller landlords (who tend to provide more affordable, unsubsidized rental housing) will also be challenged to sustain their own mortgage payments if their tenants fall behind on their rent. They may need to consider selling their properties to those who may be less interested in preserving affordable rents.
Mortgage lenders reported in Fannie Mae’s Mortgage Lender Sentiment Survey a tightening of credit standards during the pandemic, despite an expected loan origination volume of $4.1 trillion in 2020, the highest on record since 2003. While consumer demand remains strong for the purchasing and refinancing of mortgages, industry experts expect a plateau in early 2021.