There is good news for many buyers and investors
As of this writing, there is pretty much one topic at the forefront of everyone’s mind—COVID-19 and the widespread shutdown of businesses and facilities, and the encouragement to practice social distancing. Understandably, the COVID-19 crisis is having a profound effect on nearly every aspect of how we live and how we do business. Not the least affected is how we approach the real estate market today.
Individual experiences may vary, but for the most part, the COVID-19 crisis is leading to lower home prices in many areas and less competition from other potential purchasers. If a first time home buyer can navigate social distancing issues, there’s no reason they can’t take advantage of lower prices and lower mortgage rates.
To help with the whole process, the Federal Housing Finance Agency (FHFA) recently announced a number of loan processing flexibilities from Fannie May and Freddie Mac to help customers. FHFA Director Mark Calabria explains, “These loan processing flexibilities will expedite loan closings and help keep homebuyers, sellers, and appraisers safe during this national emergency.”
With lowered interest rates, investing in real estate is getting cheaper, and, because the crisis will eventually pass, a savvy investor should be able to take advantage of decreased home prices and turn those around later for resale profit or rental opportunities. It may take some patience, but with banks so dependent on consumer loans, they are incentivized right now to shift their focus more toward real estate loans.
There are a few reasonably steady trends we can identify in the middle of growing pandemic concerns.
While building permits were on the rise in 2019, most builders now are pressing pause on any new home construction. Many are pausing current projects to protect workers and comply with local shutdown orders.
There is also the issue of building supplies. According to the National Association of Home Builders, nearly a third of all building supplies come from China. Given their problems in combating the virus, and associated issues with maintaining the supply chain, materials needed for home building may be in short supply for a while.
Social distancing has made open house events more challenging. Some sellers are not enthusiastic about having strangers wandering about their homes right now. If the home is empty, there are still safety concerns. Concerns with spreading COVID-19 are the same whether or not it’s just a few people on a scheduled showing, or dozens traipsing in and out during an open house.
All the more reason to have plenty of photos of properties included with your current listings online. Those potential buyers who are thinking for the future are still going to be scouring the web listings so that when the dust clears, they can hit the ground running.
With the jittery market, uncertain employment prospects, and general uncertainty, there is a high likelihood of seeing purchasing contacts getting canceled. A lot depends on how mortgage pricing and the market behave in the coming months, but be prepared to see some in-progress sales get put on hold until conditions stabilize.
Are things a bit challenging right now? Yes. But it’s not all bad news.
During the 2008 recession, there was a tidal wave of foreclosures that affected the housing market and extended the amount of time it took to recover fully. With the current federal moratorium on foreclosures and the directive to mortgage service providers to work with clients, the harm experienced by the market 12 years ago should be less.
While international pandemics are not new, the current crisis is new to modern times. There are no reliable prediction models, and a return to normalcy may come sooner than expected. It is also entirely reasonable to think that homeowners who hold steady will come out the other end of this crisis more or less unscathed.
As the stock market recovers, the economy gets back on track, and consumer spending increases, so too will home prices and faith in the mortgage industry.
As the old saying goes, “this too shall pass.” The COVID-19 crisis is going to inconvenience a lot of people, but this country has faced challenges before. So long as everyone does their part, avoids panic, and stays steady until things return to normal, the real estate market will bounce back stronger than ever. Contact one of our real estate agents today if you need help finding your next home!