Traditionally, spring is one of the busiest
times of the year for real estate. However, the coronavirus outbreak—and
subsequent stay-at-home orders—led many buyers and sellers to put their moving
plans on hold. In April, new listings fell nearly 45%, and sales volume fell
15% compared to last year.
Fortunately, as restrictions have eased, we’ve
seen an uptick in market activity. And economists at Realtor.com expect a
rebound in July, August, and September, as fears about the pandemic subside,
and buyers return to the market with pent-up demand from a lost spring season.
But given safety concerns and the current
economic climate, is it prudent to jump back into the real estate market?
Before you decide, it’s important to consider
where the housing market is headed, how it could impact your timeline and
ability to buy a home, and your own individual needs and circumstances.
WHAT’S
AHEAD FOR THE HOUSING MARKET?
The economic aftermath of the coronavirus
outbreak has been severe. We’ve seen record
unemployment numbers, and economists believe the country is headed
toward a recession. But people still need a place to live. So what effect will
these factors have on the housing market?
Home Values Projected to Remain Stable
Many Americans recall our last recession and
assume we will see another drop in home values. But the 2008 real estate market
crash was the cause—not the result—of that downturn. In fact, ATTOM Data
Solutions analyzed real estate prices during the last five recessions and found
that home prices actually went up in most cases. Only twice (in 1990 and 2008)
did prices fall, and in 1990 it was by less than one percent.
Many economists expect home values to remain
relatively steady this time around. And so far, that’s been the case. As of mid-May,
the median listing price in the U.S. was up 1.4% from the same period last
year.
Demand for Homes Will Exceed Available Supply
There’s been a shortage of affordable homes on
the market for years, and the pandemic has further hindered supply. In addition
to sellers pulling back, new home starts fell 22% in March. In
fact, Fannie Mae doesn’t foresee a return to pre-pandemic construction levels
before the end of 2021.
This supply shortage is expected to prop up
home prices, despite recessionary pressures. Fannie Mae and the National
Association of Realtors predict housing prices will rise slightly this year,
while Zillow expects them to fall between 2-3%. Still, that would
be a far cry from the double-digit declines that occurred during the last recession.
Government Intervention Will Help Stabilize the Market
Policymakers have been quick to pass
legislation aimed at preventing a surge in foreclosures like we saw in 2008.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by
Congress gives government-backed mortgage holders who were impacted by the
pandemic up to a year of reduced or delayed payments.
The Federal Reserve has also taken measures to
help stabilize the housing market, lower borrowing costs, and inject liquidity
into the mortgage industry. These steps have led to record-low mortgage rates
that should help drive buyer demand and make homeownership more affordable for
millions of Americans.
HOW HAS
THE REAL ESTATE PROCESS CHANGED?
As the pandemic hit, real estate and mortgage
professionals across the country revised their processes to adapt to shifting
safety standards and economic realities. While these new ways of conducting
business may seem strange at first, keep in mind, military clients,
international buyers, and others have utilized many of these methods to buy and
sell homes for years.
New Safety Procedures
The safety of our clients and our team members
is our top priority. That’s why we’ve developed a process for buyers and
sellers that utilizes technology to minimize personal contact.
For our listings, we’re holding online open
houses, offering virtual viewings, and conducting walk-through video tours.
We’re also using video chat to qualify interested buyers before we book in-person showings. This enables us to promote your
property to a broad audience while limiting physical foot traffic to only
serious buyers.
Likewise, our buyer clients can view
properties online and take virtual video tours to minimize the number of homes
they step inside. Ready to visit a property in person? We can decrease surface
contact by asking the seller to turn on all the lights and open doors and
cabinets before your scheduled showing.
The majority of our “paperwork” is also
digital. In fact, many of the legal and financial documents involved in buying
and selling a home went online years ago. You can safely view and eSign
contracts from your smartphone or computer.
Longer Timelines and Higher Mortgage Standards
The real estate process is taking a little
longer these days. Both buyers and sellers are more cautious when it comes to
viewing and showing homes. And with fewer house hunters and less available
inventory, it can take more time to match a buyer with the right property.
In a recent survey, 67% of Realtors also
reported delays in the closing process. The top reasons were financing and
buyer job loss, but appraisals and home inspections are also taking more time
due to shifting safety protocol.
Securing a mortgage may take longer, too. With
forbearance requests rising, lenders are getting increasingly conservative when
it comes to issuing new loans. Many are raising their standards—requiring
higher credit scores and larger down payments. Prepare for greater scrutiny, and
build in some extra time to shop around.
IS IT
THE RIGHT TIME FOR ME TO MAKE A MOVE?
The reality is, there’s no “one size fits all”
answer as to whether it’s a good time to buy or sell a home because everyone’s
circumstances are unique. But now that you know the state of the market and
what you can expect as you shop for real estate, consider the following
questions:
Why do you want or need to move?
It’s important to consider why you want to move and if your needs
may shift over the next year. For example, if you need a larger home for your
growing family, your space constraints aren’t likely to go away. In fact, they
could be amplified as you spend more time at home.
However, if you’re planning a move to be
closer to your office, consider whether your commute could change. Some
companies are rethinking their office dynamics and may encourage their
employees to work remotely on a permanent basis.
How urgently do you need to complete your move?
If you have a new baby on the way or want to
be settled before schools open in the fall, we recommend that you begin
aggressively searching as soon as possible. With fewer homes on the market and
a lengthier closing process, it’s taking longer than usual for clients to find
and purchase a home.
However, if your timeline is flexible, you may
be well-positioned to score a deal. We’re seeing more highly-incentivized
sellers who are willing to negotiate on terms and price. Talk to us about
setting up a search so we can keep an eye out for any bargains that pop up. And
get pre-qualified for a mortgage now so you’ll be ready to act quickly.
If you’re eager to sell this year, now is the
time to begin prepping your home for the market. A second wave of infections is
predicted for the winter, which could mean another lockdown. If
you wait, you might miss your window of opportunity.
How long do you plan to stay in your new home?
The U.S. real estate market has enjoyed steady
appreciation since 2012, which made it fairly easy for owners and investors to
buy and sell properties for a profit in a short period of time. However, with
home values expected to remain relatively flat over the next year, your best
bet is to buy a home you can envision yourself keeping for several years.
Fortunately, at today’s rock-bottom mortgage rates, you can lock in a low
interest rate and start building equity right away.
Can you meet today’s higher standards for securing a mortgage?
Mortgage lenders are tightening their
standards in response to the growing number of mortgage forbearance requests.
Many have raised their minimum credit score and downpayment requirements for
applicants. Even if you’ve been pre-qualified in the past, you should contact
your lender to find out if you meet their new, more stringent standards.
Is your income stable?
If there’s a good chance you could lose your
job, you may be better off waiting to buy a home. The exception would be if
you’re planning to downsize. Moving to a less expensive home could allow you to
tap into your home equity or cut down on your monthly expenses.
WHEN
YOU’RE READY TO MOVE—WE’RE READY TO HELP
While uncertain market conditions may give
pause to some buyers and sellers, they can actually present an opportunity for
those who are willing, able, and motivated to make a move.
Your average spring season would be flooded
with real estate activity. But right now, only motivated players are out in the
market. That means that if you’re looking to buy, you’re in a better position
to negotiate a great price. And today’s record-low mortgage rates could give a
big boost to your purchasing power. In fact, if you’ve been priced out of the
market before, this may be the perfect time to look.
If you’re hoping to sell this year, you’ll
have fewer listings to compete against in your neighborhood and price range.
But you’ll want to act quickly. Economists expect a surge of eager buyers to
enter the market in July—so you should start prepping your home now. And keep
in mind, a second wave of coronavirus cases could be coming in this winter. Ask
yourself how you will feel if you have to face another lockdown in your current
home.
Let’s schedule a free virtual consultation to
discuss your individual needs and circumstances. We can help you assess your
options and create a plan that makes you feel both comfortable and confident
during these unprecedented times.
The above references an opinion and is
for informational purposes only. It is not intended to be financial advice.
Consult a financial professional for advice regarding your individual needs.
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