Americans struggle to tap home equity amid coronavirus pandemic https://finance.yahoo.com/news/amer...uity-amid-coronavirus-pandemic-182046240.html With the jobless rate spiking into the double digits, more Americans may look to unlock the wealth tied up in their homes to get through the crisis. Problem is, banks won't give up the key. Lenders are increasingly turning away homeowners looking for equity lines of credit or a cash-out refinance, spooked by the surge in unemployment and the jump in requests by borrowers to skip mortgage payments. "This is a good lesson that home equity is a very illiquid asset,” said Matt Hylland, a partner at Arnold and Mote Wealth Management in Cedar Rapids, Iowa. “While home equity does make up the majority of many American's net worth, you should never count on being able to quickly or cheaply access that equity.” Forbearance: ‘Anyone who needs it can get it' As part of the coronavirus relief legislation called the CARES Act, homeowners with federally backed mortgages can request forbearance for up to a year, without fear of foreclosure. So far, forbearance requests have reached 3.8 million, according to the Mortgage Bankers Association. “It was very quickly done overnight and anyone who needs it can get it, opening up this huge unprecedented amount of people who could apply for forbearance,” said Brian Koss, executive vice president at Mortgage Network. Fannie Mae and Freddie Mac have promised to buy loans in forbearance from lenders to help keep the mortgage market working. But they refuse to purchase mortgages in forbearance that were cash-out refinances, making those types of loans riskier for lenders to originate and carry. As a result, lenders are upping their standards for these loans. Mortgage company PennyMac announced in late April that it won’t do any cash-out refinances that exceed 80% of the property’s market value. Cardinal Finance, a mortgage lender in North Carolina, recently said it would only accept borrowers for cash-out refinances whose total monthly expenses are 36% or less of their gross monthly income, a more conservative standard than before. ‘We may have declining real estate’ Lenders also worry about Americans’ ability to pay back loans at a time when an unprecedented number of workers have filed jobless claims in the last seven weeks. They also expect property values could dip, especially if the economy falls into a recession, increasing their risk on mortgages and other house-backed loans they hold. Lenders worry a borrower who becomes unemployed could default on the payments at the same time that home values are decreasing, eroding even more equity. If the lender is forced to foreclose and sell the home, it may not recoup what’s owed. “The lenders will have no profit,” said Kevin Leibowitz, founder of Grayton Mortgage. “The guy in the second position isn’t crazy to think that 10% can be wiped away.” Turning to other funds instead Financial planners often advise clients to tap their home equity when they run into financial trouble, instead of turning to other costlier types of debt such as credit cards or raiding their long-term retirement savings. “With HELOCs, at the end of the day, you’re drawing debt that is cheaper, a little above 4% interest rate, while credit cards are averaging 16%,” said Dan Slagle, founding partner at Fyooz financial planning. But as that well runs dry, Americans may have no choice but to liquidate or borrow from other assets such as their taxable investment accounts or their retirement funds. “Some of the clients we have, such as dentists, are getting crushed and so we start liquidating funds from their stock portfolios,” said Charles Failla, principal at Sovereign Financial Group. “We also take advantage of the CARES Act and consider withdrawing funds [from their 401(k)s] as long as they pay it back under three years to avoid the tax consequences.” But they may have no other choice in today’s home equity environment. “It is always a good idea to build up a sizable emergency savings before paying any extra payments on your mortgage to ensure you have savings available when you need it most,” Hylland said. “If you are dependent on debt to make ends meet you should be aware that at times you need it most, debt financing may not be there for you."
People are finding out who actually owns the home and it ain't them. Your home is worth whatever the bank decides it's worth and at this point it's worth nothing to them. They don't want to be stuck with a shitload of homes like they were in 2008. This tells me that the people who actually run this fucking country, the banks, are expecting a fucking economic disaster. You're as good as your credit, period.
Well to be fair you could own your home 100% outright...does not mean I have to let you borrow money from me with your home as collatteral. You are equating the two things but if I think houses are a risky asset right now I am not going to be the 2d creditor on your home via a HELOC. Could just be over cautious risk after the 2008 crisis. People always think they know better the second time and over react. Iam certainly not surprised that banks are loking to shore up assets and reduce liabilities during this time as it seems quite prudent. Also let us not forget that when people tap their HELOCs they often sue it for simply spending and more shit and over extending themselves. Maybe for 80% of the people they could use this little does of reality.
Hawaii's unemployment surges from 3% to 34% - one of the highest rates in America - amid fears it could get worse with tourism still on hold because of Covid-19 pandemic Businesses have seen startling effects of coronavirus on the Hawaiian economy Unemployment has shot up from three per cent to 34 per cent during lockdown The tourism-dependent state is home to 225,000 unemployed during Covid-19 Food service workers used to make up 13 per cent of all employees in the stat https://www.dailymail.co.uk/news/ar...nt-surges-3-34-one-highest-rates-America.html
Risk of reopening US economy too fast: A W-shaped recovery https://www.wral.com/risk-of-reopening-us-economy-too-fast-a-w-shaped-recovery/19093387/ When the coronavirus erupted in the United States, it triggered quarantines, travel curbs and business shutdowns. Many economists predicted a V-shaped journey for the economy: A sharp drop, then a quick bounce-back as the virus faded and the economy regained health. Others envisioned a slower, U-shaped course. Now, as President Donald Trump and many Republicans press to reopen the economy, some experts see an ominous risk: That a too-hasty relaxation of social distancing could ignite a resurgence of COVID-19 cases by fall, sending the economy back into lockdown. The result: a W-shaped disaster in which a tentative recovery would sink back into a “double-dip” recession before rebounding eventually. “The push to reopen the economy is making a W-shaped recovery very much more likely,” said Jeffrey Frankel, professor of capital formation and growth at the Harvard Kennedy School. In Frankel's view, any widespread reopening should wait for a sustained drop in death rates and the broad availability of tests. No one is completely safe until an effective treatment or vaccine can be produced and widely distributed — a scenario that's likely many months away. Frankel said he also worries that the government might prematurely withdraw financial aid to the economy, thereby weakening the pillars of any tentative recovery. “A W-shaped recovery is a distinct possibility,” said Yongseok Shin, an economist at Washington University in St. Louis and a research fellow at the Federal Reserve Bank of St. Louis. “Unless the reopening is carefully managed with extensive testing and voluntary social distancing, infections will rapidly rise in many localities. “People will then hunker down for fear of infection, and local governments will re-impose lockdowns, quashing any economic recovery we will have had to that point.’’ A double-dip recession would significantly heighten the risks for an already debilitated U.S. economy. Congress has provided roughly $3 trillion in aid — by far its largest rescue ever — to help households and companies survive the next few months. That short-term aid, though, assumes any recovery will last. If a second downturn were to flare up, it’s far from clear that Congress would be ready to offer trillions more to enable businesses to survive yet another round of months-long shutdowns. Nor do many companies have the cash reserves to cushion against a second recession. And just as threatening, a double-tip downturn would sap the confidence of individuals and businesses that is essential to an economic bounce-back. If consumers don’t trust that a recovery will last, many won’t resume spending, and the economy would struggle to rebound. On Monday, plastic spacing barriers and millions of masks appeared on the streets of Europe’s newly reopened cities as France and Belgium emerged from lockdowns, the Netherlands sent children back to school and Spain allowed people to eat outdoors. All faced the delicate balance of restarting battered economies without causing a second wave of coronavirus infections. In the United States, Federal Reserve Chair Jerome Powell has urged caution in reopening the economy. Powell has warned against taking “too much risk of second and third waves’’ of the virus. For now, the economy is essentially in free-fall. It shed a record 20.5 million jobs in April. The unemployment rate surged to 14.7%, the highest since the Great Depression. The gross domestic product — the broadest measure of output — shrank at a 4.8% annual rate from January through March and is expected to post an astounding 40% annual collapse in the current quarter. That would be, by far, the worst on record dating to 1947. Facing a catastrophe in an election year, Trump and many Republican allies are eager to ease restrictions and restart the economy. They say the use of masks and other protections should allow many businesses to safely reopen under certain guidelines. Trump has openly backed protests that are intended to compel governors to “liberate’’ their states from lockdowns. But The Associated Press reported last week that many U.S. governors are disregarding White House guidelines. Seventeen states didn't meet a key benchmark set by the White House for beginning to reopen businesses: A 14-day downward trajectory in new cases or positive test rates. Texas’ Republican lieutenant governor, Dan Patrick, has gone so far as to suggest that restarting the economy might be worth the risk of some additional deaths. “There are more important things than living,’’ Patrick said in an interview with Fox News. “I don’t want to die, nobody wants to die, but man, we got to take some risks and get back in the game and get this country back up and running.” Most Americans say they're wary of trying to return to business as normal now. A Pew Research Center survey found that 68% said they feared that state governments would lift restrictions too soon. Just 31% wanted restrictions lifted sooner. “The idea that you just turn the spigot back on is just ridiculous,” said Diane Swonk, chief economist at the consulting firm Grant Thornton. ”It’s still a COVID-tainted spigot. No one wants water from a poisoned well.’’ Many businesses are also tempering their optimism. The data firm Womply found that even in Texas and Florida, states that are being especially aggressive about reopening their economies, businesses are moving slowly. Womply found only a “small-to-negligible drop’’ in the share of Texas and Florida businesses that remain closed. “This could signal that previously closed businesses may have trouble figuring out how to open with new guidelines, attracting patrons, or may be closed indefinitely,” Womply concluded. At Big Buzz, a health care marketing consultancy in Denver, CEO Wendy Phillips is expecting “more a W-shaped than a V-shaped’’ rebound. Phillips has reduced her staff from eight to six, two of whom kept their full-time jobs only after the government delivered a $105,000 loan under a rescue program for small businesses. “There’s so much unknown looking forward,’’ Phillips said. “I think it’s going to be a good two or three years, at a minimum, of recession.’’ Frankel at the Harvard Kennedy School and others worry that state and local governments, hemorrhaging tax revenue, will be forced to make growth-stunting cuts just as a recovery might be straining to gain traction. Another threat is the prospect of bankruptcies and cash shortfalls for companies and households. Some have been able to defer rent and other payments but will eventually have to repay their landlords and other creditors in full. Likewise, U.S. authorities declared premature victory over the 1918 Spanish flu outbreak, only to see it return, deadlier than before. In the current pandemic, South Korea eased restrictions as cases dropped. But on Saturday, Seoul had to shut down nightclubs, bars and discos after dozens of infections were linked to club goers. Last week, researchers at the Columbia University Mailman School of Public Health warned that easing stay-at-home orders and allowing people to mingle more freely would mean that “new COVID-19 cases and deaths will rebound in late May.’’ The Columbia researchers predict a resurgence of cases two to four weeks after states begin to reopen. “The lag between infection acquisition and case confirmation, coupled with insufficient testing and contact tracing, will mask any rebound and exponential growth of COVID-19 until it is well underway,” said the lead researcher, Jeffrey Shaman. AP Business Writers Anne D’Innocenzio and Joyce M. Rosenberg in New York and Dee-Ann Durbin in Detroit contributed to this report
What is this double dip recession they speak of as if the one we're in has ended? Let's not confuse Wall Street with Main Street, the two have never been more disassociated. You're one article about Hawaii going from 3 to 34 percent unemployment tells the story. The "modeling experts" who are waiting for some pie in the sky it's all safe now number will have Hawaii going from 34 to 64 percent and at that point V shaped, W shaped, U shaped aren't in play. It's one very long L__________ at that point.
Yeah I was just thinking about that exact thing. You may be a cantankerous fuck sometimes... but tbh, you're usually right. Anybody buying a home now in a "hot" area is an idiot. "Land Scarlet, .... land." You can mark this post too. Buy land.
Just a reminder that the NYT has a great tracker for those curious about the risks you should be taking in your state: https://www.nytimes.com/interactive/2020/us/new-york-coronavirus-cases.html
Funny thing is that 2 real eatate agents I spoke with in my area said they are really busy and houses are receiving bids way over asking price. Interest rates are really low and our general area still has lots of people employed for the most part (except our poor fellow restaurant and service workers ) so the housing market has been well above average. With the fact that you can do virtual open houses or schedule tours with empty homes and avoid contact makes it easy to go out and about. Obviously real estate is based on location so will not be the same everywhere but people who were already planning to move/buy a home in teh Spring which is a popular time are doing it in large numbers in many areas.