As restrictions have eased, we’ve seen an uptick in market activity, 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?
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.
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.
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?
How urgently do you need to complete your move?
How long do you plan to stay in your new home?
Can you meet today’s higher standards for securing a mortgage?
Is your income stable?
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.
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
- com –https://www.realtor.com/research/weekly-housing-trends-view-data-week-may-9-2020/
- 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/
