Is It Actually a Good Time to Buy a House?
Various logistic and economic pressures have contorted the housing market in unprecedented ways, making it easier (or harder) to buy a home.
A strong economy with low interest rates fueled expectations for a hot housing market in the spring and summer of 2020. Then the COVID-19 virus reached the United States, and things changed.
Stay-at-home orders, virus transmission concerns, and mass layoffs not seen in nearly a century turned the economy upside down. Conditions were primed for a recurrence of a housing collapse resembling the Great Recession, but surprisingly, that didn’t happen.
The Federal Reserve acted quickly to ensure the availability of credit to institutions and private borrowers. Some corners of the economy actually grew during crisis conditions. Most of all, people got creative about marketing homes.
In the new environment, some find house-buying easier, and some find it more difficult. We asked experts to help us sort out the pros and cons of the current market conditions. Make sure to also check out the 35 things every homeowner needs to know.
Pro: Even lower rates
As the effects of the virus-prevention tactics became clear, the Fed quickly dropped the prime interest rate to 0 percent. This made an already low rate even lower and has motivated buyers to take advantage of the potential for lower payments.
However, Andrew Helling, a Nebraska-licensed real estate agent and owner of REthority.com, a resource for consumers and professionals, says rushing to capitalize on the low rates may not be necessary. “Because many workers are losing their jobs and companies are effectively shut down for an unforeseeable time frame, it’s likely that rates will continue to remain low indefinitely,” he says.
Con: Tighter credit
Although interest rates have dropped, the instability in employment has banks proceeding cautiously, according to real estate investor Rick Maningas of Best Choice Home Buyers in Milwaukee, Wis. “Some lenders are asking for a higher credit score, checking employment the day before closing or asking for a higher down payment,” he says. These requirements may make things less comfortable for some potential buyers, or even squeeze some out of the market.
Pro: Less competition
Particularly for first-time buyers, if you qualify for a mortgage to purchase a home, it’s a good time to buy. James McGrath, co-founder of the real-estate brokerage firm Yoreevo in New York City, says that to keep up with population growth, about 1.5 million new homes must be built each year. Since the Great Recession, developers have not met that rate, and now demand for entry-level homes far exceeds supply. But now, many potential buyers are sidelined by unemployment or tightened credit requirements. “It’s a great time for buyers to make offers and snag a home before the market fully recovers,” McGrath says.
Con: Limited supply
On top of the factors that may keep some buyers out of the market, there are other factors keeping some homes off the market. Kate Ziegler, a Realtor with Arborview Realty in Boston, Mass., says that sellers may be hesitant to have strangers walking through their homes, or to prep for listing while also trying to live, work and educate from home. “In this way, the market still favors sellers,” she says.
Pro: Virtual tours
“3D, virtual tours have definitely seen a surge in popularity,” says Caleb Liu, a landlord and home buyer for House Simply Sold in Southern California. The availability of online home-viewing not only solves the virus-transmission issue, but also saves buyers a lot of time. Rather than setting up multiple appointments and driving from location to location, the prevalence of video tours allows buyers to review many properties from one location in a short amount of time. Once serious interest is established, in-person tours are set up with the most qualified buyers.
Con: Less buyer support
Liu also notes that support professionals beyond agents who are involved in the process of completing a home sale transaction can affect the terms of an offer. Appraisers and inspectors, for example, many not willing to enter homes during the pandemic, offer their services via a desktop or exterior visit only. “In some cases, this has led to more conservative appraisal values, which forces the buyer to come up with extra funds or the seller to lower their price,” he says.
Pro: Developers need cash flow
Checking out local home builders and developers may yield a bargain. With fewer qualified buyers during the pandemic downturn, large operations need sales to keep their engines running, McGrath says. “So even if they know they could sell a property for more [at a later date], they may be offering incentives now which can make a big difference—especially on closing costs.” Next, check out these secrets your real estate agent isn’t telling you.