Unemployment is down from its coronavirus-era peak. Homes are selling in Calhoun County, and fetching higher prices. Foreclosures are few.
But some observers of the economy and the housing market say they're deeply worried about what's ahead, as federal unemployment benefits expire and landlords begin to lose money — and patience.
“We have not, since the Great Depression, had this number of people who cannot pay their rent or their mortgage,” said Kiernan “K.C.” Conway, director of research at the Alabama Center for Real Estate at the University of Alabama, or ACRE.
The center studies the housing market across the state, county by county. Four months into the coronavirus pandemic, the numbers seem pretty good. Home sales in Calhoun County in June were up 7 percent over June of 2019, according to the center’s numbers. House prices were up 5 percent.
Throughout the pandemic, housing sales have been surprisingly strong, with real estate experts attributing some of the strength to bargain-basement interest rates intended to shore up the economy. Foreclosures are almost nonexistent; federal rules, imposed after the pandemic, allow homeowners to ask for temporary forbearance if they can’t pay.
The bottom quartile
Conway says that’s not the whole picture.
The people buying homes, he says, are the people who can still afford to buy during the pandemic. They’re professionals who are still working and can work from home. The isolation of the pandemic may actually have them spending less, with more money to set aside.
“It's very bifurcated,” he said. “Those people who have jobs and can work remotely, people who have a second house on Lake Martin, that part of the economy is working fine.”
Conway is concerned about the other end of the market, the roughly one-fourth of people who are struggling to pay a mortgage or their rent because of job loss during the pandemic.
Early in the pandemic, the federal government began to pitch in an extra $600 per week in unemployment benefits for people put out of work by COVID-19. That tripled the size of the unemployment check in Alabama, which offers a meager benefit compared to some states, and it had some low-wage workers making more than they did on the job.
That $600-per-week benefit runs out at the end of this month, and it’s unclear whether Congress will approve any additional relief.
Alabama put evictions on hold at the beginning of the pandemic. But that protection expired in June, and eviction cases are beginning to show up again in the state's reopened courts.
“The loss of unemployment compensation is happening just as cases are also going back up, so it's not like businesses are necessarily going to be rehiring everybody,” said Michael Forton, director of advocacy for Legal Services Alabama, which offers legal help to low-income people.
Forton said he doesn’t expect a large wave of evictions in the next few weeks, in part because people will still have some money left over from the stimulus. But he does expect a wave of evictions come September.
Forton said the situation is also bad for small landlords — people who've rented out a single house to someone who now can't pay.
“The other side is that without the rents, they're also out of luck,” he said. “They’re still having to pay the mortgage.”
Maybe. Pandemic-era federal rules allow homeowners to ask their lenders for forbearance, putting off but not canceling mortgage payments for a few months.
Better than cutting grass
Shad Williams, president of Oxford-based Cheaha Bank, doesn't see too many problems with forbearance so far. After the 2008 mortgage crisis, he said, banks foreclosed on lots of houses — and were left with houses no one in a recession could afford to buy. This time, the federal government is urging a gentler approach.
“Forbearance is a better thing to do than to have bankers cutting grass and doing maintenance on houses they can't sell,” he said.
Williams said the idea is that perhaps the country can get to the other side of the pandemic before forbearance causes problems for banks.
“What I hope is that Washington comes up with another stimulus package to help those people who are in a bad place through no fault of their own,” he said.
Some observers say Alabama missed a chance to address one part of the rent-and-mortgage problem by not setting aside money from the CARES Act — the federal coronavirus assistance program — for rental assistance. Dev Wakeley, a spokesman for the group Alabama Arise, said a rental aid program could have helped renters and landlords by keeping rent payments coming. He said he hopes policymakers will consider aid in the future.
“We're really concerned that some people in public positions have decided that they're over coronavirus, but the virus is still there,” Wakeley said.
Conway, the real estate expert, said much will depend on how employment numbers look in coming weeks. If unemployment isn’t in decline, he said, that's a bad sign for fall. He said it’s also possible there will be a second wave of layoffs as companies that got federal assistance under the Paycheck Protection Program meet their requirements to see federal loans forgiven. The program offered loans to struggling businesses which could be forgiven if those businesses kept employees on payroll.
How long those employees have to be on payroll can vary, according to federal rules. Conway thinks many companies will be free to do layoffs again by September.
“All of these things we're doing, they're just muting what may lie ahead,” he said.