Will real estate decline in this 2020 mortgage crisis?

Jun 24, 2020

Will real estate decline in this 2020 mortgage crisis?

Many people who have purchased real estate are wondering if prices will drop, stay the same or there will be new opportunities. So the big question: What do I do?

Generally, house prices are on the rise, although with cycles of increases and small decreases in times of crisis. As examples of this we have the crisis of 2000 called “crisis .com” or the “mortgage crisis of 2008” where the stock market was more affected than real estate.

So in order to know whether or not we should acquire a property, it is important to know the causes that gave rise to them. So we explain briefly each of them, in order to understand the current moment.

In 2000 with the digital era, online companies called .com appeared, and people eager to make a quick profit invested their money in these companies, causing the stock market to skyrocket. Competition made many of them disappear which brought a fall in the stock market due to the loss of value of the shares, causing only a few to become established in the market.

Similarly, in 2008 the government cut the interest rate to revive the economy so that banks could lend more money to people to buy a house. However, the banks did not check if people really had the income described, so without these restrictions, they lent money to everyone. By disseminating the information, they bought up to two or three properties. At the same time, interest rates rose as a result of a group of investors buying these debts from the banks (some of them unpayable) and many people fell into foreclosure, losing their homes.

That is why banks are currently asking for a large number of collections, verifying that people really have the capacity to pay. With the appearance of the COVID19, everything is frozen because of confinement, despite coming with a healthy economy with the lowest unemployment rate in a long time.

With the emergence of the virus, it has been observed that people are cautious about investing. In addition, difficulty in paying mortgages has been observed. That is why the government is trying to provide a number of aids so that people do not lose their homes. In fact, almost all banks have banned foreclosures for non-payment, freezing mortgage payments for three to six months. This “frozen” amount is added to the end of the credit.

So if you have a problem, you should call your bank and discuss your situation. Neither the government nor the banks are interested in taking houses, it’s not business, since banks earn is by the interest that people pay.

On the other hand, there is a freeze between supply and demand, as few people want to buy because of uncertainty and, on the other hand, few people want to sell because they need their house to live. So as long as this remains the case, the price of real estate will be relatively stable. It all depends on how long this situation lasts and the economy opens up again as everything returns to normal.


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