<p><strong>To the editor:</strong></p><p>A Response to “Local realtors say housing market is still booming”:</p><p>On observing the steady housing market, one may be quick to assume that COVID-19 has had no effect on housing. People may be buying and selling homes at a stable rate, but what about the ones who are not? As of April 23, 26.5 million Americans have filed for unemployment as a result of the pandemic.</p><p>Buying a house is likely to be one of the last things on the minds of those individuals. Debt, foreclosures and even homelessness are in our future. It is a painful truth we must face. In recognizing and understanding this threat, we can begin to devise a plan to lessen the blow of this inevitable economic crisis.</p><p>There is a multitude of factors that will contribute to the oncoming collapse, but the most blatant one is the lockdown. Businesses are either unable to operate at full capacity or not operating at all. The effect this will have on GDP growth is plain to see. Climbing unemployment means more tax dollars will be allocated to our welfare programs. Beyond this point, things may become a bit foggy.</p><p>Consider the country’s economic state before our lives were overrun by the coronavirus. Gas and oil prices had fallen dramatically amid COVID-19 fears, which threw the stock market into freefall. On March 9, Dow Jones experienced its worst day since the Great Recession when it fell more than 2,000 points. A few short weeks later, Gov. Eric Holcomb issued the stay-at-home order, which solidified our position in this strange limbo between prosperity and disaster. Let me be clear, Holcomb’s handling of this treacherous situation is admirable.</p><p>It is important to recognize that occasional recessions are signs of a functioning economy. A standard, healthy recession is simply a reaction to an excessive boom. They even have benefits such as price adjusting in consumers’ favor and increased productivity. Recessions are an economy’s natural way of correcting inflation and complacency.</p><p>Unfortunately, these painful declines are necessary to keep a country on track. Our situation is not a standard one, however. As previously mentioned, the lockdown, oil price war and absurd spike in unemployment are the primary triggers of this, which are anything but typical.</p><p>I believe we will see buying and selling slow down soon. As discussed in Emily Ketterer’s Daily Journal article, “Local realtors say housing market is still booming”, this has not happened, but it is too early to eliminate the possibility.</p><p>If the housing market collapses, it will likely be linked to a high mortgage default rate. Millions of people will soon struggle to meet their mortgage payments and many will face foreclosure. There will be more houses on the market than there are buyers. In economics, this is a classic example of basic supply and demand. Lower prices caused by this housing glut may sound desirable to buyers, but sellers will have to let their homes go for only a fraction of what they originally paid. Those who lose their homes will be hard-pressed to obtain a mortgage on a new home that does not include outrageous interest and principal payments.</p><p>I believe our safest path to minimizing the damage of this crisis on individuals is proactive planning. If you are in the market for a home, be aware of the mortgage lending field and take the time to compare rates from multiple lenders. Adjustable-rate mortgages should be avoided unless you are positive you will be able to afford the payments for the duration of the loan. As with any loan, read the contract thoroughly so you know exactly what you agree to. Consider purchasing homeowner’s insurance with adequate coverage.</p><p>Whether you are purchasing a home or not, maintaining an emergency savings fund could be a saving grace during this crisis. These times are uncertain and scary, but there are steps that can be taken to protect financial health.</p><p><p><strong>Emily Angle</strong></p><p><p><strong>Student</strong></p><p><p><strong>Ball State University</strong></p>
