How the spread of COVID-19 is impacting the mortgage market

Francesca Ortegren, Clever Real Estate Data Scientist joins Yahoo Finance’s Alexis Christoforous and Brian Sozzi to discuss how the housing and mortgage market is being impacted by the coronavirus.

Video Transcript

BRIAN SOZZI: The coronavirus pandemic has triggered memories of the 2008 financial crisis and the Great Recession. But are these rising concerns even warranted? Joining us now to take a deep look into the housing and mortgage market is Francesca Ortegren, Clever Real Estate data scientist.

Good to see you here this morning. Obviously, the stock markets are under pressure. People are being quarantined. Do you think we're just on the precipice of seeing a another housing market meltdown here, potentially starting this spring?

FRANCESCA ORTEGREN: We could. There has been kind of a downturn in people putting their houses on the market or searching for homes with the fear of the coronavirus. We've seen some innovative ideas from agents, who are doing virtual tours in hopes to keep housing kind of moving. But my guess is that we'll see a little bit of a downturn that hopefully doesn't spur the same type of reaction from banks that we saw pre-2008.

ALEXIS CHRISTOFOROUS: Yeah, I want to talk about that. Because Francesca, the mortgage market is very different today than it was in 2008, right? And what is the subprime market, which we know is the big problem, what instigated the fall that we saw in '08-- how is that market doing today?

FRANCESCA ORTEGREN: It looks a lot better than it did pre-2008. So we are not giving out as many subprime loans and much fewer deep subprime loans, which is good. That means we're lending out more to lenders who are more likely to be able to pay back their mortgages.

But since about 2010, after the initial drop in all mortgage originations, we have seen a little bit of an uptick in those subprime lending originations. So it's a little concerning. We are not at pre-2008 levels quite yet. But with the economy kind of in a place that we are unsure of where it's going to go and the housing market questions that we have, we might see some questionable lending practices kind of increase in the next few months.

BRIAN SOZZI: How concerned are you about the state of the rental market?


BRIAN SOZZI: I mean, I imagine a lot of people-- they might have concerns. If they're not working for a couple of months, how are they going to pay their rent?

FRANCESCA ORTEGREN: Exactly. I know there are a lot of places, like St. Louis, Missouri, where we are located, are having a moratorium on eviction. So hopefully, that keeps people in a place where they're safe. But that also puts people in a position where, when this is all over, they might be evicted, or might not be able to afford rent.

So we might see a change in the rental market, depending on what we see in employment. My guess is that we're going to see a little bit of a decrease in employment, an increase in unemployment over the next few weeks. Depending on how long this lasts, that could get pretty bad. But hopefully, landlords are understanding and allow people to pay late without interest and things like that, so that people don't lose their home.