- Almost a third of renters were unable to make payments in April with calls for a federal pause on real estate liabilities, including rent and mortgage payments.
- Even if mortgage and rent payments are frozen, the ripple effects of missed payments will be long felt.
- The developing housing crisis draws eerily similarity to 2020 ‘s financial meltdown.
With 6.6 million now recently unemployed in the US and nearly a third of renters unable to make rent for this month, a federal pause on rent and mortgage has been widely proposed.
An estimated 25 million households could miss future payments if the economy continues to be closed off.
No matter how many rent or mortgage payments are foregone due to the coronavirus , those missing payments won’t go away quickly. They will have to be paid back at some point, and when that point comes – it will put a hefty strain on consumer’s finances.
CEO of RXR Reality, Scott Rechler, explains that we are watching this ensuing housing crisis unfold in slow motion across the real estate sector:
We know the bad part is coming, but we Don’t know how long it will last or how resilient we’ll be.
Not only are homeowners and renters unable to make rent, but
restaurants, retailers, and hotels are feeling the pressure, too
. Nearly every state has issued the closing of non-essential businesses. No customers mean no profit – which makes it a challenge to meet the rent. (all over again?
The effects of missed payments will ripple long after the fact. Look no further than the
In , people bought homes they couldn ‘ t afford, and most of these purchases were on borrowed money – mortgages. From there, those mortgages were turned into securities and sold off as investments.
Once the bubble burst and people couldn’t afford to make their mortgage payments , the value of those securities fell drastically. Once the banks couldn’t sell the mortgage-backed securities,
they ran out of money and either sank or got bailed out
.
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