For Sale! Maybe: The Moratorium’s Effect on the Real Estate Market

Last week, The Consumer Financial Protection Bureau (the “CFPB”) issued an interim final rule, scheduled to take effect on May 3rd, in support of the Centers for Disease Control and Prevention (the “CDC”)’s eviction moratorium. According to the CDC, the purpose of the eviction moratorium is to protect the public health and reduce the spread of COVID-19. Courts, however, are split on whether the CDC’s nationwide eviction moratorium is unconstitutional, with three federal judges thus far ruling against it and two ruling in favor.

In general, the Courts voting against the moratorium hold that the CDC has exceeded the authority granted to it by Congress under 42 U.S.C. Section 264(a), which gives the agency the power to “make and enforce such regulations as in [its] judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases from foreign countries into the States or possessions, or from one State or possession into any other State or possession” and “[f]or purposes of carrying out and enforcing such regulations, [it] may provide for such inspection, fumigation, disinfection, sanitation, pest extermination, destruction of animals or articles found to be so infected or contaminated as to be sources of dangerous infection to human beings, and other measures, as in [its] judgment may be necessary.”

The statute authorizes the CDC to undertake certain specifically enumerated acts “and other measures, as in [the CDC’s] judgment may be necessary.” The question then becomes whether the CDC is, in fact, overreaching in regulating real estate leasing activities as a way to prevent the introduction, transmission, or spread of COVID-19, or whether it’s acting within its realm of authority in taking “other measures…as in [its] judgment may be necessary.”

While the answer to this question appears to be divided along ideological lines, there is no question as to the affect the moratorium is having on the real estate market itself. As the moratorium continues to make it difficult, if not impossible, for prospective sellers to release homes onto the market due to an inability to clear the property of non-paying tenants, the gap between supply and demand continues to widen.

According to a new analysis by Freddie Mac, the U.S. housing market is 3.8 million single-family homes short of what is needed to meet the country’s demand. The median price of a home is currently at the highest level in history, hovering around $353,000 — a 17% increase from a year ago – and two-thirds of homes are drawing multiple offers. This leaves buyers taking unprecedented measures to secure real estate, even going as far as to offer above-asking to secure a contract. The market is red hot for sellers right now; but, if you are a buyer, being prepared to walk away may be one of the most important things you can do because when the moratorium eventually lifts and the market begins to correct itself (and it most certainly will), many buyers may find themselves upside down in their property – owing more than the property is worth.

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