Spring is traditionally one of the busiest times of the year in the real estate sector. The coronavirus epidemic — and subsequent stay-at - home orders — however,
prompted many buyers and sellers to place their moving plans on hold. New listings dropped nearly 45 percent in April, and sales volume dropped 15 percent from last year.
Fortunately, we have seen an upturn in business activity as sanctions have eased.
And economists at Realtor.com expect a rebound as fears about the pandemic subside in July, August
& September, buyers return to the market with pent-up demand from a lost spring season2.
But is it prudent to jump back into the real estate market, given safety concerns and the current economic climate?
Before you decide, it's important to consider where the housing market is heading, how it might affect
your timeline and ability to buy a home, as well as your own individual needs and circumstances.
WHAT’S AHEAD FOR THE HOUSING MARKET?
The economic consequences of the coronavirus outbreak have been serious.
We've seen record numbers of unemployment and economists
believe the country is heading for a recession. But also, people need
a place to sleep. So what effect does that have on the housing market?
Home Values Projected to Remain Stable
Many Americans recall our last recession, and think we're going to see another decline in home prices.
But the real estate market crash of 2008 was the cause of the decline – not the result.
In fact, during the last five recessions, ATTOM Data Solutions analyzed real
estate prices and found that in most cases, home prices actually went up.
Only twice (in 1990 and 2008) did prices fall, and in 1990 it was by less than one percent.3
This time around many analysts expect home prices to remain fairly stable. And that was
the case, so far. By mid-May, the U.S. median listing price rose
1.4 per cent from last year's same period.4
Demand for Homes Will Exceed Available Supply
For years there has been a shortage of affordable homes on the market and the pandemic has further impeded availability.
In addition to sellers pulling back, new home starts dropped 22 percent in March.5 In fact,
before the end of 2021.6, Fannie Mae does not anticipate a return to pre-pandemic building rates
Despite recessionary pressures, this supply shortage is expected to prop up home prices.
Fannie Mae and the National Association of Realtors forecast house prices to rise marginally this year7, while Zillow expects them to
fall by 2-3 per cent.8 Still, it will be a far cry from the double-digit declines it occurred during the last recession.9
Government Intervention Will Help Stabilize the Market
Policymakers were quick to pass legislation to prevent a surge in foreclosures as we saw in 2008.
The Coronavirus Aid, Relief, and Economic Protection (CARES) Act passed by Congress offers up to one
year of reduced or overdue payments to government-backed mortgage holders who have been affected by the pandemic.
In addition , the Federal Reserve has taken steps to help stabilize
the housing market, reduce borrowing costs and inject liquidity into the mortgage sector.
Such measures have resulted in record low mortgage rates that will boost
demand from buyers and make home ownership more affordable for millions of Americans.
HOW HAS THE REAL ESTATE PROCESS CHANGED?
As the pandemic hit, domestic real estate and mortgage professionals revised
their processes to adapt to shifting safety standards and economic realities.
Although these modern ways of doing business may seem odd at first, bear in mind, military customers,
foreign buyers, and others have used many of these strategies to buy and sell homes for years.
New Safety Procedures
Our top priority is the health of our clients and the members of our team.
That is why we have developed a process that uses technology to reduce personal interaction for buyers and sellers.
We host online open houses for our listings, give virtual viewings and perform walk-through video tours.
Also we use video chat to qualify interested buyers before we book shows in-person.
This allows us to promote your property to a broad audience while limiting only serious buyers to the physical foot traffic.
Similarly, our buyer clients are able to view online properties and take
virtual video tours to minimize the number of homes they step inside.
Ready to visit a real estate in person? By asking the seller to turn on all the lights and open
doors and cabinets before your scheduled show, we can decrease surface contact.
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
These days the real estate process takes a little longer. When it comes to viewing and showing
homes, both buyers and sellers are more cautious. And with fewer house hunters and less inventory available, it may
take longer to match a buyer with the property that is right.
Also, 67 per cent of Realtors reported delays in the closing process in a recent survey.
Financing and buyer job loss were the main reasons, but appraisals
and home inspections also take longer because of shifting safety protocol.12
It may take longer to secure a mortgage, too. With demands for forbearance rising, lenders are becoming ever
more conservative when it comes to issuing new loans. Many are raising their standards — with
higher credit scores and higher down payments required. Prepare for more scrutiny, and build
shopping around in some extra time.13
IS IT THE RIGHT TIME FOR ME TO MAKE A MOVE?
The truth is, there is no "one size fits all" solution as to whether purchasing
or selling a home is a good time, since the circumstances of everyone are special.
But now that you know the state of the market and what
you should expect when shopping for real estate, consider the questions that follow:
Why do you want or need to move?
It is important to consider why you want to move, and whether your needs may change over the coming year.
For example, if your growing family needs a bigger home, your space constraints are not likely to go away.
They might potentially be exacerbated because you're spending more time at home.
If you're planning a move to get closer to your office though, consider whether your commute might change.
Some businesses are rethinking the dynamics of their offices and may encourage their employees to work permanently remotely.
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.
If your timeline is flexible, though, you might be well-positioned to score a deal.
We 're seeing more highly-encouraged sellers willing to negotiate terms and prices.
Talk to us about setting up a search, so we'll be able to keep an eye on any bargains that pop up.
And now get pre-qualified for a mortgage so you'll be ready to move soon.
If this year you 're eager to sell, now's the time to start preparing your home for the market.
A second wave of infections is expected for winter, which may mean another lockdown.14 If you wait, you may miss your chance window.
How long do you plan to stay in your new home?
Since 2012, the U.S. real estate market has enjoyed steady appreciation, making it fairly easy
for owners and investors to buy and sell properties in a short time for a profit.
However, with home prices predicted to stay fairly stable for the next year, the best decision
you can make is to buy a house that you can see holding for many years.
Fortunately, you can lock in a low interest rate at
today's rock-bottom mortgage rates, and start building equity right away.
Can you meet today’s higher standards for securing a mortgage?
In response to the growing number of mortgage forbearance requests, mortgage lenders are tightening up their standards.
Many have increased criteria for applicants for their minimum credit score and downpayment.
Even if you have been previously pre-qualified, you should contact your lender to find out if you are meeting their new, stricter standards
Is your income stable?
You may be better off waiting to buy a home if there's a good chance you could lose your job.
If you're planning to downsize, the exception would be
Moving to a cheaper home might allow you to tap into your home equity or cut back on your monthly expenses
WHEN YOU’RE READY TO MOVE—WE’RE READY TO HELP
Although some buyers and sellers can be slowed by volatile market conditions, they may
potentially provide an opportunity for those willing, able, and motivated to make a move.
They would flood your average spring season with real estate activity. But at the moment there are
only motivated players out on the market. That means you 're in a better position to
negotiate a great price, if you're looking to buy. And record-low mortgage rates today could
give your buying power a big boost. In reality, if you were priced off the market before, this could be the perfect time to look
If you are hoping to sell this year, there will be fewer listings in your neighborhood and price range to compete against.
But you're going to want swift action. Economists expect an increase in eager buyers to enter the market
in July — so now you should start preparing for your home. And remember, there could be a second
wave of cases of coronavirus coming this winter. Ask yourself how you'll feel when you've got to face another lockdown in your current home
To discuss your individual needs and circumstances, let's schedule a free virtual consultation.
We can help you assess your options and create a plan during these unprecedented times that will make you feel both comfortable and confident.
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.
Sources:
1. Forbes - https://www.forbes.com/sites/ellenparis/2020/05/08/latest-housing-market-update-from-realtorcom/#20bf7829113e
2. HousingWire -
https://www.housingwire.com/articles/realtor-com-housing-market-will-bounce-back-this-year-but-the-rebound-will-be-short-lived/
3. Curbed -
https://www.curbed.com/2019/1/10/18139601/recession-impact-housing-market-interest-rates
4. Realtor.com -
https://www.realtor.com/research/weekly-housing-trends-view-data-week-may-9-2020/
5. Money.com -
https://money.com/coronavirus-real-estate-home-prices/
6. Fannie Mae -
https://www.fanniemae.com/resources/file/research/emma/pdf/Housing_Forecast_051320.pdf
7. HousingWire -
https://www.housingwire.com/articles/pending-home-sales-tumble-on-covid-19-shock/
8. HousingWire -
https://www.housingwire.com/articles/zillow-predicts-small-home-price-drop-through-rest-of-2020/
9. Federal Reserve Bank of St. Louis -
https://fred.stlouisfed.org/series/CSUSHPINSA
10. Consumer Financial Protection Bureau -
https://www.consumerfinance.gov/coronavirus/cares-act-mortgage-forbearance-what-you-need-know/
11. Bankrate -
https://www.bankrate.com/mortgages/federal-reserve-and-mortgage-rates
12. National Association of Realtors -
https://www.nar.realtor/sites/default/files/documents/2020-05-11-nar-flash-survey-economic-pulse-05-14-2020.pdf
13. Forbes -
https://www.forbes.com/sites/alyyale/2020/04/17/buying-a-home-during-the-pandemic-dont-expect-your-everyday-home-purchase/#fadad3d33b0c
14. Washington Post -
https://www.washingtonpost.com/health/2020/04/21/coronavirus-secondwave-cdcdirector/