LendingTree Chief Economist Tendayi Kapfidze joins Yahoo Finance’s On The Move to discuss how COVID-19 is leaving a drastic impact on the housing industry.

Video Transcript

ADAM SHAPIRO: One of the things we're paying attention to is this order in New York state, essentially 100% of the workforce told to stay indoors. Governor Cuomo saying this will be enforced by law enforcement. We also have to talk about what's going to happen with housing and with this economy as we go forward. Tendayi Kapfidze is the chief economist at LendingTree. We appreciate your being here. The numbers we got on existing home sales, that was essentially pre-crisis. What are you expecting as we move into this crisis, Tendayi?

TENDAYI KAPFIDZE: Yeah, so very strong existing home sales number. It was kind of the world before the crisis, as you just said. And so what we're seeing now in the housing market is that, you know, people basically are not going to go and see houses, right? One, you do want to be out there-- you know, even without the orders from state officials, you don't want to be out there, you know, mixing it up with people you don't know, for one.

And two, more importantly, the people who have homes to sell, they don't want people walking through their houses touching everything. So we're going to have a shutdown in the housing market because people are out there seeing the houses and also because generally, economic activity is contracting in almost every sector of the economy.

JULIE HYMAN: Hi, Tendayi, it's Julie. So obviously, we've heard a lot about various stimulus, either proposals or actual actions on the part of the Federal Reserve, at least, and on the part of Congress, does any of this-- is there any way we avoid a recession or even a depression at this point? I think it was Goldman Sachs-- I'm just looking at the numbers-- earlier today said, we could even see a contraction in the economy for the full year of 3.8%, which seems pretty alarming. Does any of this stimulus make that not happen?

TENDAYI KAPFIDZE: No, I think we are guaranteed to have a recession at this point. I think a lot of what the Fed, in particular, is trying to do is they're trying to one, sustain the system, which means sustain the financial system and make sure we don't have a lot of institutions falter during this crisis period and then also kind of set it up for recovery once we solve the public health crisis that we're having.

I, initially, was very kind of, you know, not too impressed with the Fed cutting interest rates, some of their first moves. I think the things that they're doing now-- extending lines of credit to foreign central banks, extending lines of credit in terms of munis, purchasing different types of securities-- I think this is much more important than the actual interest rate. You know, this is the moment-- you know, one of the short hands, we call it the lender of last resort. This is it, lender of last resort, they have to lend to everybody who needs liquidity.

BRIAN CHEUNG: Hey, it's Brian Chung here. So I want to ask about just the mortgage market. It seems like a lot of homebuilders probably might not have the capital right now to continue to build supply, even though-- even before the coronavirus, supply was already a concern, right? So what are you seeing in terms of pricing pressures? We know that interest rates are at record lows, right? But for the capital value of the homes that are out there because of the shortage, would you expect that to provide some pressure on the mortgage market?

TENDAYI KAPFIDZE: I don't think in terms of-- like, home prices I think are kind of just going to get frozen into place. And then once the public health crisis is over, the housing market will kind of restart. So I don't know that the capital value of a lot of these hard assets are actually going to get damaged the way that we're seeing the value of financial assets get damaged. Financial assets, you know, kind of move much more rapidly. They're much more liquid. So actually, if you have an illiquid asset at this point in time, it's somewhat of an advantage.

ADAM SHAPIRO: Tendayi, in New York state, the governor ordered a kind of mortgage moratorium for people who are out of work or don't have income. Bank of America has said it will allow a deferral for mortgage payments over the next 90 days, again, for people who don't have an income. Is this sufficient, or do we need to have some kind of national mortgage holiday, and what would that look like?

TENDAYI KAPFIDZE: Yeah, so it's important, and it's not sufficient. The reason it's important is for a lot of people, their housing costs are the highest cost that they face each month, whether that's rent or mortgage. And so if you-- by putting this moratorium on mortgages, you help out a lot of people who are having, you know, interruptions in their stream of income and you allow them maybe just use that money for other purposes.

I think certainly a national mortgage moratorium would be much more effective. One of the ways the system-- these programs are working right now is that you have to call up and say, hey, I want the forbearance. You know, there's a question about capacity, right? Do these lenders have enough people working to even just take all these calls and just check the box that this person has forbearance?

So I think a national moratorium, especially on federally-guaranteed mortgages, could work. And the way that would work is to protect the financial markets, you still want those payments to flow to investors. I think you could establish a line of credit for Fannie and Freddie so that they continue to make the investor remittance and therefore not impact that part of the market.

ADAM SHAPIRO: Tendayi Kapfidze, thank you very much for joining us.