The COVID-19 crisis has affected Americans in many different ways. Some have lost family members, some have lost their jobs for the unforeseeable future, some have lost their sense of independence, and some may soon lose their housing. Like most things, it is hard to predict the exact path the real estate market will take over the next year, but it seems safe to say that the coronavirus is going to lead to an uptick in foreclosures once mortgage deferrals and utility bill cut-offs run out. Finding foreclosure help long-term as the coronavirus relief efforts continue to deplete the economy may become an impossible task.

Real Estate Market Before Coronavirus

Prior to the arrival of the coronavirus in late March, the real estate market was actually pretty stable. In fact, foreclosures for the month of February hit a new low. In a year-end comparison, foreclosure rates were actually 8% lower than in February of 2019. Unfortunately, that also means that the foreclosure rate will now have more room to drop as a result of the fallout from COVID-19. Most economists seem to agree that eventually, the foreclosure rate will spike because with every US recession mortgage defaults jump resulting in the real estate market flailing.

No Income Means No Source of Funding

Many of these foreclosures will come from families that appeared to be in reasonably sound financial health prior to the coronavirus. COVID-19 has hit everyone from low-income families who lost their own income stream to middle-class families who are watching their small businesses fall apart. Due to the complete shutdown of the country, every single industry is suffering from the effects of COVID-19. As business and the economy shifts many people will be laid off, face pay cuts, or lose their jobs altogether. One major issue is that social distancing has led many still operating businesses to reduce staff in order to remain safe- and that means fewer jobs are available overall at all levels.

Temporary COVID-19 Relief Has Limits

The end result is millions of people across the country will end up losing their income by the time the COVID-19 crisis starts to wind down, and since reductions are being made across industries there will not be new positions waiting for them. No income means no way to pay mortgages, utility bills, etc. At the start of the coronavirus, crisis funding was available to help many people make it through the initial months in the form of the stimulus packets, a temporary pause on utility shut-offs, and mortgage deferrals. Many states also made exceptions to traditional unemployment filing regulations.

What Happens When Mortgage Deferrals End?

However, at some point, the mortgage deferrals, unemployment payments, and utility deferments will have to end. The economy cannot afford to continue to help people who are struggling because of the coronavirus. When this happens, many people will find themselves drowning in debt. Most of these measures were temporary, not just acts of kindness. Utility companies will expect a full payment, mortgage payments will restart, and unemployment will run out. At this point, foreclosure rates will skyrocket because homeowners without income will not be able to find a way out of mounting debt.

A 2018 survey by Zillow found that the median mortgage payment for US homeowners made up 17.8% of their income, and low-income homeowners had mortgage payments that were nearly twice as high as high-income homeowners. This disparity will likely be evident when mortgage deferrals end and those without any assets or savings find themselves in trouble.

Help for Those Facing Foreclosure Because of COVID-19

If you need foreclosure help the first thing you should do is talk to your lender to find out if they have any mortgage deferral plans available. The second thing you can do is look up any state foreclosure moratoriums that may help you buy some time and look for new employment. Finally, look for a non-profit organization that can help you navigate foreclosures and COVID-19. There are many public sources of help that you may be able to take advantage of with the right aid and access to resources.