The nationwide real estate market started out relatively strong in 2020. Industry experts were forecasting a slightly slowing but steady housing market for the year. The U.S. economy was also humming along like a well-oiled machine, and lending rates remained very low. So many homebuyers were ready to take advantage of this seemingly ‘great time to buy’ and then the Covid19 pandemic turned the world upside down. Overnight, our strong and dependable economy was literally put on pause. We now live in a world of uncertainty. This uncertainty pertains to every aspect of our daily lives. The U.S. housing market is not immune to this uncertainty either.
Even in the midst of this global pandemic, there are those with needs and desires for buying or selling a home. The Covid19 pandemic has affected everyone, however, some still have a need or ability to buy or sell. With all of this uncertainty, it is vital to take all things into consideration when asking, “should I buy a house now?”
Let’s take a look at all the information and things to consider to help you make this decision.
Don’t underestimate your own reasons for buying a home. After all, this is what is driving you to consider buying now. Are you moving for work? Do you want to downsize to save money? Perhaps you see an opportunity to buy low and take advantage of low mortgage rates. If you aren’t completely sure about your decision or if you can pursue other options, it is probably a good idea to wait. If your motivation for buying now is part of a long-term plan, it may be a risk worth taking.
Health and Safety Concerns
The advancement of technology in recent years allows for the home buying process to be almost 100% virtual. Although this is the safest option during the Covid19 pandemic, most buyers will prefer a more traditional process. The good news for buyers is that Realtors are making the traditional process safe. The majority of agents are being extremely careful when showing homes to buyers in person. Don’t be surprised if you are asked to wear protective gear when you tour a home. The use of facemasks, gloves, shoe coverings, hand sanitizer, and disinfecting wipes has become common for in-person showings. Additionally, all other real estate vendors such as appraisers, home inspectors, and lenders are adapting their methods as well. With all these extra precautions and virtual options, buying a home can definitely be done safely.
When asking “should I buy a home now”, local and national economic conditions have to be factored into your decision. We are currently experiencing an economic situation that we have never seen before. Since the economy is pretty much on pause right now, we don’t quite know what is going to happen in the months ahead of us. There is just too much uncertainty regarding the U.S. economy. While things may not seem out of control at the moment, the dominos will most certainly begin to fall soon.
If you have a stable financial situation and are planning to own your home long term, you are well suited to buy now. This would allow you to weather an economic downturn financially and not be affected by a temporary drop in home values. Consider worst-case scenarios and how those could affect your home purchase.
Market Conditions and Buying Opportunities
In many ways, the housing market is directly tied to the economy. The general rules of supply and demand will determine what’s available and how much it will cost. We already know that many buyers and sellers have decided to “call a time-out” during the pandemic. The latest NAR Flash Survey: Economic Pulse, conducted on March 16 and 17, found 48% of real estate agents have noticed a decrease in buyer interest attributable to the coronavirus outbreak. 57% of agents noticed sellers are waiting to list their homes for sale as well. For now, that means supply vs demand has remained about the same as it was before things got crazy. This current supply/demand is most likely an artificial effect and will most likely tilt in favor of buyers. If this occurs, patient home buyers will be rewarded with a surplus of inventory and additional leverage when negotiating price.
Active buyers should recognize the fluid nature of our current economy and housing market. We will likely see home values dip, but probably not within the next 6 months. Once the economy and the housing market start to adjust, things will change quickly and aggressively. Do your homework, make a plan, and execute that plan as soon as you see an opportunity you like.
Mortgage Rates and Lending Options
Yes, rates are low. Unfortunately, the explanation doesn’t end there. Many lending experts predict that rates will remain low, but recent disruptions in the mortgage industry have affected the availability of many loan products. Buyers with excellent credit will have no problem securing conventional mortgages. In contrast, buyers with lower credit scores or those that are self-employed will have difficulty getting financed. Another factor is the availability of loans over the jumbo limit. Jumbo limits for most counties in California is $510,400. The jumbo limit in high-cost areas is currently $765,600 (as of 5/5/2020). Since the current landscape of the lending market is also facing uncertainty and mortgage rates are not forecasted to rise, there is no real advantage to financing a home at the moment.
The short answer to the question “should I buy a house now” is “probably not”. Waiting to buy a home is a good decision during such uncertain times. Keep your finger on the pulse of the economy and the housing market. It’s almost certain that we will experience several minor shifts and a slow decline in our markets. What we don’t know if how far the regression will go and how long it will last. As I mentioned previously, this is a fluid situation. Stay tuned!