Things to consider when buying a home during the Coronavirus crisis
It may sound crazy to even attempt to buy a home during a crisis such as this. In reality, people continue to need to move for various reasons, on both the buyer and seller end. So, sales continue. One thing is clear, it’s a wild new world for real estate. Here is what you need to know about buying a home during the Coronavirus crisis.
What’s the market like?
As of right now, half of real estate agents say there’s a decrease in homebuyer interest. That’s from a recent National Association of Realtors (NAR) survey in mid-March.
But, 45 percent of real estate agents say that the stock market plunge and the lower mortgage rates are equalizing each other with no significant change.
Others are reporting that inventory is still low and offers are still high. This may be because just before the Coronavirus crisis, the market was still tight. On the Brad Inman real estate Daily Dispatch, Ben Kinney reported that real estate agents are feeling like “25% of all pending sales will fall apart”.
Data provider ShowingTime is reporting that home buying activity has plummeted over the past week. This nosedive corresponds to the timeline for states restricting citizen activities in favor of social distancing.
How to view homes during social distancing?
Real estate agents have been embracing virtual showings for a while now. Many agents already offer comprehensive home tours online.
In cases of open houses, we are hearing that real estate agents are taking measures to reduce the spread of germs. One method is to open all the cabinets and closets so that people viewing a home don’t need to touch anything.
Another tactic is to only allow one person or one couple into a home at a time. Some agents may not be in the home at all during a walk through to protect themselves and others. The need for social distancing can pose major challenges when buying a home during the Coronavirus crisis.
How good are interest rates now?
The Federal Reserve cut interest rates to a historical low – as low as zero percent. While the mortgage rates are not lockstep with the Federal Reserve interest rates (more a factor of the 10 year Treasury note), mortgage rates are indeed very low right now.
What are some pitfalls of buying a home during the Coronavirus crisis?
During times of crisis, real estate prices can fluctuate quickly. This can result in unpredictable appraisals. So, if the market demand is up because of interest rates, but a lot of deals are falling through due to other factors, homes can sell for less than in the past six months. This affects appraisals. You might want to be prepared for an appraisal to come in low, which means you’d need to have the seller lower the price or come up with more money to bridge the gap between the appraisal amount and your mortgage loan amount.
Difficulty assessing a home
With social distancing, it may be trickier to schedule multiple visits to a property in order to thoroughly inspect a home before buying.
Swamped loan officers
Simultaneously, refinances are at an all-time high, due to low interest rates. This has completely overwhelmed loan officers, many of whom need to hire extra people just to get through the back log. This could cause a delay in getting a mortgage.
Hiring professionals, such as inspectors
With everyone trying to keep themselves safe, it may be trickier to engage specialists, such as really good inspectors, or to schedule more specialized inspections. These professionals may be trying to limit their own exposure, creating a challenge for buying a home during the Coronavirus crisis.
Risking your own health
You won’t really know what sort of situation you are walking into with viewing homes in person until you get there. Be sure to take precautions to protect your own health, such as, try to get as much info on homes up front to limit your exposure during a home hunt.
What are some advantages of buying a home during the Coronavirus crisis?
If the recent reports are correct, and the sentiment that a growing percentage of deals now will fall through, that points to less competition for you in the coming weeks. Interest rates are very low, which will lock you into a historically low rate for up to 30 years.
Unfortunately, the jobless rate is expected to increase, meaning that it is likely less folks will be able to afford to buy. And in coming weeks and months, this could spell a decline in home prices. Lower home prices and low mortgage rates means you could find some very good deals.
We are in a period of extreme uncertainty. No one knows how fast the economy will deteriorate or what the total the scope of the crisis will be. Expect home buying to be a bit choppy, with unexpected twists and turns. Stay flexible, and most of all, stay safe!
For help getting a mortgage during this tumultuous time, Homeownering provides a service and product geared towards getting all of your questions answered and getting you into the very best deal for you, in half the time. It’s called Instant Mortgage Genius, and is based on over 10 years of research.