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.1
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.2
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.3
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.4
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.5 In fact, Fannie Mae
doesn’t foresee a return to pre-pandemic construction levels before the end of
2021.6
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 year7, while Zillow expects them to fall between
2-3%.8 Still, that would be a far cry from the double-digit
declines that occurred during the last recession.9
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.10
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.11
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.12
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.13
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.14 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?
Some 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. I can help you assess your options and create a plan that makes
you feel both comfortable and confident during these unprecedented times. 801.997.1770
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:
- Forbes
– https://www.forbes.com/sites/ellenparis/2020/05/08/latest-housing-market-update-from-realtorcom/#20bf7829113e
- HousingWire
–
https://www.housingwire.com/articles/realtor-com-housing-market-will-bounce-back-this-year-but-the-rebound-will-be-short-lived/ - Curbed
–
https://www.curbed.com/2019/1/10/18139601/recession-impact-housing-market-interest-rates - Realtor.com
–
https://www.realtor.com/research/weekly-housing-trends-view-data-week-may-9-2020/ - Money.com
–
https://money.com/coronavirus-real-estate-home-prices/ - Fannie
Mae –
https://www.fanniemae.com/resources/file/research/emma/pdf/Housing_Forecast_051320.pdf - HousingWire
–
https://www.housingwire.com/articles/pending-home-sales-tumble-on-covid-19-shock/ - HousingWire
–
https://www.housingwire.com/articles/zillow-predicts-small-home-price-drop-through-rest-of-2020/ - Federal
Reserve Bank of St. Louis –
https://fred.stlouisfed.org/series/CSUSHPINSA - Consumer
Financial Protection Bureau –
https://www.consumerfinance.gov/coronavirus/cares-act-mortgage-forbearance-what-you-need-know/ - Bankrate
–
https://www.bankrate.com/mortgages/federal-reserve-and-mortgage-rates - National
Association of Realtors –
https://www.nar.realtor/sites/default/files/documents/2020-05-11-nar-flash-survey-economic-pulse-05-14-2020.pdf - Forbes
–
https://www.forbes.com/sites/alyyale/2020/04/17/buying-a-home-during-the-pandemic-dont-expect-your-everyday-home-purchase/#fadad3d33b0c - Washington
Post –
https://www.washingtonpost.com/health/2020/04/21/coronavirus-secondwave-cdcdirector/
Comments
Post a Comment