Economic pain caused by Covid-19 deepened this week as the unemployment numbers hit 30 million people. Expect next week’s April jobs report to hit 20%. With consumer spending down, and so many people out of work, it was no surprise that Q1 2020 GDP contracted by – 4.80% and will likely be followed up by a much larger drop in Q2 2020. The Fed and the federal government are implementing a “by any means necessary” approach, which is echoed by the European and Japanese central banks and governments as well. These trends continue to backstop our economy. It’s hoped that the approach will boost economic recovery once the U.S. economy is turned on again, as well as support asset prices. We sure hope this is the case but are also aware that consumer and business behavior has changed due to the pandemic and the recovery could take much longer than anticipated.
Regarding housing and lending, Covid-19 hit the spring buying season hard. However, interest rates remain low and may drop further over time, enticing more buyers into the market. There are also signs that the non-QM market is slowly reviving, which is a positive sign, especially for cities such as Los Angeles which have many self-employed borrowers. Big banks continue to pull back from the marketplace. Our office has received an unprecedented number of requests for financing the past few weeks as borrowers look for alternative financing options. We are happy to report that for the most part, our partner lenders remain committed to pulling out all the stops to help borrowers refinance or purchase homes. In our opinion, there has never been a better time to be a broker with long-term lending relationships and that is proving to be a great benefit for our clients during this very difficult time.