Dr. Elliot Eisenberg, Consulting Economist
Realogy Title Group
December 2020 National Market Observations Q & A
Q: Fiscal stimulus – What happens if a new economic recovery package is not approved at the federal level? How will the housing market be impacted?
A: I am very optimistic that the folks in Washington will be able to pass a new fiscal recovery package by the end of January, and certainly hope they will be able to get one approved by the end of December before additional unemployment benefits expire. However, even if lawmakers are unable to agree on a fiscal stimulus package at all, we are likely to see little impact on housing markets. This economic recovery is very different than what we saw in 2008-2009 because in this COVID-19 recession, homeowners and potential home buyers are not as likely to be the population hoping for financial relief because they are more likely to have retained their jobs or found new ones. People who need relief are much less likely to be homebuyers, and, as a result, that will have less of an impact on the housing market.
Q: Are we likely to see a flood of homes on the market in early 2021 if the mortgage forbearance program ends December 31, 2020, as scheduled? Will that impact home prices?
A: This is a great question – mortgage forbearance was one of the key original provisions of the CARES act, and without legislative action, will presumably expire at the end of the year. However, even if it does lapse, I don’t think there will be a sudden impact on the level of homes available for sale. At peak enrollment in the program, there were almost 5 million homeowners involved; now there are just 2.7 million. While that’s still a staggering number, it is down considerably, and I’d be very suspect of a large jump in the near future. I think the number of homeowners in default may get a bit worse this winter but should improve as vaccination rates grow over the next several months and businesses start reopening. And, many states have already stepped in or will step in to provide relief, even if we don’t see it at the federal level. It also takes many months, sometimes years, before a foreclosure comes onto the market. For all of these reasons, we are unlikely to see a flood of foreclosed properties enter the market. Additionally, home sales are so brisk, and inventories are so low, there will be little meaningful impact on price even with added foreclosures.
Q: Dr. Eisenberg, it seems as if a lot of folks are working from home now. Do you think that will remain the same once we have a successful vaccine program and businesses are able to reopen at full capacity again?
A: I think we will settle into a hybrid model, where the percentage of us that work-from-home (WFH) will remain much higher than what we saw before COVID-19. Pre-pandemic, about 4% of all work was performed from home; after vaccinations and a return to the “New Normal," I suspect the rate of WFH will be about 20%. This is for a variety of reasons; there’s no longer any stigma to working-from-home, working-from-home turned out to be much successful than was expected, significant IT investments to enable working-from-home have been made, it’s become relatively commonplace, and older and high-income workers will demand it. However, while work-from-home has been generally successful, online or remote learning, especially K-12 has been less so. Therefore, while houses with designated spaces for home offices will still be in high demand, remote learning will likely taper off, returning us to more seasonal buying and selling patterns.