The full impacts of the coronavirus pandemic on real estate won’t be visible for a while.
“COVID-19 has undoubtedly created a special environment for home buyers”, said Susan Moguel, marketing director for Arden, a real estate developer in Palm Beach County, Florida. As quarantine has shut down many industries, the economic uncertainty caused by the pandemic has forced many people to shelve their home purchase plans. Even so, we are still in the early stages of the pandemic, and its full impact remains to be seen.
Mortgage Interest Rates Hit A Record Low
The Federal Reserve curtailed the federal funds rate by 0.5% in early March, ranging from 1% to 1.25%, in response to the pandemic’s impact on our economy. Although the Fed’s target interest rate has no direct effect on mortgage interest rates, there is a correlation between the two, and mortgage interest rates have fallen accordingly. Mortgage interest rates fell to the most reduced level in history in April, and the average interest rate for 30-year fixed-rate mortgages is currently hovering around 3.4%.
Andrea Woroch, who advises consumers on saving money, said that she only refinanced her current mortgage a few weeks ago. She cut interest rates by more than 1%, which means she would save more than $100,000 during the loan period. (Woroch is a former contributor to HuffPost.)
Woroch said: “Whether you are buying or refinancing, these low-interest rates can help you reduce your monthly repayment and save you thousands of dollars during the mortgage period. This is a good time to buy.”
Even so, historically low mortgage rates cannot solve a problem some potential homeowners have encountered: the lack of homes for sale. Voroch said: “Inventories have decreased because people don’t want to sell houses in this outbreak.” He added that housing prices might not have reached the lowest level.
Realtor.com’s April Housing Trends Report shows that the number of newly listed homes in April fell 44% compared to the same period last year.
In the week ending April 25, the average house consumption time on the market was nine days longer than in the same period in 2019.
Realtor.com chief economist Daniel Hale (Danielle Hale) said in the housing trend: “The good momentum we saw at the beginning of the year has isolated the housing market from the negative impact of the coronavirus on the confidence of US buyers and sellers.”. “Although we have seen a sharp decline in new listings, increased housing sales hours and flat prices in April, May may see some of these indicators deteriorate,”
The Most Significant Home-Buying Opportunities Are Yet to Come
TheClose.com chief real estate analyst and executive editor Emile L’Eplattenier believes that real estate value is considered a lagging indicator of market shocks. “Think of it as a tsunami after an earthquake: even if the stock market suffers huge damage and dozens of industries are almost collapsing, we will not start to see the impact of this impact on real estate prices for at least a few months,” he said.
L’Eplattenier said that, on the one hand, homeowners had been spoiled for the past few years due to tight inventory and over-gentrification. Therefore, unfortunately, those who had to sell their stocks during the pandemic will stubbornly stick to the pre-recession prices for several months.
Besides, the government has taken various measures to stimulate the economy and protect consumers who cannot afford to pay their bills. But this will not last forever. “In the next few months, the public authority will eventually stop the printing of money. In many markets, the ban on evictions and foreclosures will stop. We will start seeing thousands of businesses fail. This is when the real estate market started to be turbulent and down”, said Owen Dashner, owner and operator of Red Ladder Property Solutions, a home renovation company in Omaha, Nebraska.
The process of foreclosure takes a long time, so houses that quickly enter foreclosure will not appear at auction until at least a few months later. Foreclosure is like weeds in the garden.
But the truth is, if you’re going to buy, it’s better to wait until the price bottoms out instead of spending tens of thousands of dollars.
Would It Be Judicious for You to Buy A House During A Pandemic?
The lowest interest rate makes buying a home an attractive option. However, there are still many unknowns and challenges in assessing how the pandemic will affect the market and consumers’ financial lives. Some states have reopened businesses slowly, but it is unclear what knock-on effect the closure will have on employment in the coming months.
Peggy Zabakolas, a licensed real estate agent at Nest Seekers International, said, “No one can predict the market. I firmly believe that the right time to buy is when you are ready for your financial situation”.
The good news for potential home buyers with stable income and large amounts of cash on hand is that, if we continue to lay off large-scale employees, we may see a large amount of inventory sold at discounted prices in the next few months, thus becoming buyers’ market.