Ralph DiBugnara

President of Home Qualified

April 8th, 2020


First time Home Buyers Have the Same needs & Qualifications 

The peak of home ownership before 2008 crash was at 69% rate and fell to 63% after. Home ownership for the last quarter of 2019 was 65%. I believe that this shows we are not at an inflated ownership rate like we were before for a few reasons. A big part of the pre-market of crash was subprime lending which had much looser lending criteria. So, when that went away a huge portion of home buyers did not qualify anymore. From 2008 to current day over 90% of loans are funded through Fannie Mae, Freddie Mac and FHA. Those guidelines for the most part have gone unchanged. Meaning all the loans the qualified for before they will still qualify for. What may be an issue is gaps in employment because of work stoppages. It will be more important than before that all buyers are pre-approved whether you are buyer or listing agent on deal. I also do believe at some point the lending institutions will have to make specific guideline exceptions to the unemployment of so many, but nothing has been discussed thus far.

Investors will Need to Concentrate on Rentals with More Certainties & less Financing available

The average rate of return on Residential rental properties was 10.6% in 2019. That number will take a hit in 2020 because of increase in vacancy rates due to missed rental payments during crisis. These stats will alarm some once they come to light. But this does not mean rental properties are a bad idea going forward. What we will need to do is educate our landlords on the long-term benefits and show them rental income that comes with some certainties. I believe section 8 rentals and is a strategy that will be more popular because of the certainty of payment. Here are the issues they will be facing. Financing outside of agency (Fannie Mae & Freddie Mac) has completely come to a halt. Which means they are going to have proven income again and personally guarantee the loans. The loans most investors were taking over the last couple of years were not requiring them to show income and they were able to close under an LLC. These loans didn’t not take into account their personal debt or personal tax returns, so they were much easier to qualify for. The bad news is less will qualify, the good news is you will see a higher quality investor and with the sudden shift in this sector of real estate. We will see more inventory available for those experienced investors and or home buyers in general. I believe single and multifamily rentals will continue to have a great value as they did post-crash of 2008. But second home vacation rentals and Airbnb will take a significant hit in the short term