COVID-19 impact on foreclosures, commercial real estate, colleges

The COVID-19 shutdown is seriously impacting multiple facets of the economy, and there are no easy answers on how to recover.

Mortgage delinquencies rose in 1st Qtr 2020. However actual foreclosures won’t happen until the moratorium is over. Then there will almost certainly be a spike, when distressed homeowners have to come up with several months of mortgage payments.

According to Walsh, there may be a flattening in foreclosure starts in future quarterly surveys due to COVID-19-related foreclosure moratoria and borrower forbearance guidelines under the CARES Act. Almost 4 million homeowners are on forbearance plans as of May 3, but MBA’s survey asks servicers to report these loans as delinquent if the payment was not made based on the original terms of the mortgage – in the same manner that delinquency data is collected during natural disasters.

Commercial real estate is sharply down, with malls in particular getting whacked.

“The exact numbers are debatable, but property pricing is down about 10%,” said Peter Rothemund, Managing Director at Green Street Advisors, in the report. “Some property types, industrial for example, are probably faring better than that. Retail and lodging values are most likely doing worse.”

The sub-index of the CPPI for malls collapsed by 20% in April from March, and is down 33% over the past 12 months.

College and universities have relied too long on foreign student income, particularly Chinese. That income is going away, not just because of difficulties in travels and anti-Chinese sentiment but also because Chinese are wondering WTF is happening in America.

With qualifying exams postponed, travel bans spreading and anger rising among Chinese students and parents at the West’s permissive attitude toward public health, enrollment could plummet in the coming years, experts said, potentially leaving countries with multibillion- dollar holes in their universities’ budgets.

Also, US educational is just way too expensive now. Especially if classes will mostly be held online for quite a while to come.

Why should students and/or their parents be willing to pay full prices for a degraded product? They won’t get interaction with instructors. For science and engineering classes, they won’t get lab work. They won’t get to make connections and meet potential mates. They won’t get tips from other students on career and summer job strategies. They won’t get to participate in extracurricular activities, which is a low-stakes way to learn to work with other people. They won’t learn how to grow up in a somewhat protected environment.

There is the very real possibility that employers will downgrade the value of degrees conferred during the plague years.