Due to the coronavirus pandemic, America is facing a new unique challenge.
One that is trying our economic and healthcare systems, while also testing, but certainly not breaking, our national resolve. Like any challenge, America is once again showing resilience and unity, and things are starting to look more positive with every passing day.
It would be great if this pandemic had never occurred. People have lost loved ones, and millions of American have lost work in an effort to slow the spread and reduce the burden on our healthcare system. Countless industries have been impacted, including the real estate business.
But there appears to be one silver lining, however insignificant it might be next to the consequences of this pandemic. Because of the coronavirus pandemic, it may actually be a good time to buy a house, especially for younger first-time buyers. With lower prices and rock-bottom interest rates balancing a variety of downsides, now could be the time for you to buy a home.
Coronavirus Pandemic Creates Opportunity for Homebuyers
Factor 1: Fewer Buyers
The first factor that you need to understand about buying a home during the coronavirus or COVID-19 pandemic is that there will be far fewer buyers. For obvious reasons, people are staying away from house shopping for the time being. Instead, they are waiting things out, hoping that we will return to some sort of normalcy in the near future.
Because there are fewer buyers, there is far less demand for all homes on the market. This means that competion among buyers is lower, so you don’t have to be as aggressive as before; you can take your time, offer a lower (but reasonable) bid and wait for their reply. This is far better, from the buyer’s perspective, than getting into a bidding war with another shopper.
While pricing continues to grow across the country, home prices in many major cities, areas where young and first-time buyers often live, have steadied or even softened. The prices have softened to a level that buyers with limited incomes may be able to afford homes in generally-high-priced cities.
Factor 2: Interest Rates
The other factor is interest rates. As the housing market continues to stay slower than normal, interest rates have been lowered to encourage continued economic activity. Interest rates are an important component for economic health and vibrancy; generally speaking, conventional wisdom holds that low interest rates are a good tool for encouraging more economic activity, while high interest rates can be used to create a slow-and-steady platform, slowing economic activity but providing less chance for a bubble burst.
With the goal of helping the economy stay strong and weather the temporary COVID-19 crisis, the Federal Reserve has cut interest rates to zero. These interest rates provide the foundation for which mortgage lenders offer their loans, so now that the foundation is zero, homebuyers can get loans for extremely low rates. This is one of the most dramatic financial moves since the massive economic measures following the 2008 recession.
Note: Interest rates are always changing, and offered rates depend on available options from lenders as well as buyers’ risk factors. For interest rates, please contact your lending agent.
Should You Buy a Home Now?
Now comes the big question: should you buy a home right now, during the COVID-19 crisis? The answer, of course, is complex and personal. There is no way to universally say that the time is right or wrong for all people to buy a home, as personal factors need to be considered before making a decision.
But perhaps not right away, not tomorrow, not even next week, but in the very near future you should consider making a purchase in the real estate market. The truth is, we may be approaching one of the best times in recent memory to buy a home. Prices could begin to decline, and when the future recovery comes (whether it comes sooner or later), some buyers may regret not purchasing when the market was down.
During the 2008 economic tumble, it took years for the home prices to reach their lowest level; but the bottom-level of the market fell in pricing by the highest percentage. Basically, the moderately-priced homes were the ones that declined. We could see a similar situation during this crisis.
There are, of course, real differences between the “Great Recession” of 2008 and the COVID-19 crisis 2020; namely, the 2008 recession occurred because of structural flaws in the economy while the 2020 slowdown has occurred because of a dangerous virus; recovering from one vs the other will clearly be different.
Either way, purchasing a home when the market is down, as long as you are personally prepared, could be an ideal choice.
Buying a Home During the Pandemic: What will Be Different?
If you are personally ready to buy a home, if your job is secure, your income strong, and you know where you want to live for the foreseeable future, then it may be time to buy- even during a virus scare.
But you can expect a different experience than before. Virtual showings, for one, are making home shopping safer and more convenient; as people try to slow the viral spread, you can expect more virtual showings during your home search. You certainly won’t be going to a Sunday-afternoon showing and walk through a house with five other families at the same time.
Specifics will vary, as each market deals with the crisis in a manner that suits them best. For the buyer, however, preliminary online research will be more important than ever.
Of course, competition will be lower, so individual showings may be more available. However, available inventory could be lower as well, which may slightly counteract the advantages of reduced buyer competition. (There are fewer buyers, but the remaining buyers will be going after a smaller group of homes.)
Outstanding Support for Your Mortgage Application, Even During the Coronavirus Crisis
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