So, we are headed into spring, normally the busiest time for real estate, but we are in the middle of an unprecedented pandemic. You want or maybe you need to buy a home, but:
1. is it smart to buy a home now
2. is it possible to buy a home now?
3. how do you go about buying a home now?
We will answer all of these questions in this report.
Is it smart to buy a home now?
HomeYap sees this as a good, possible GREAT time to be buying a home. Real Estate agents have said in surveys that they are seeing a reduction in the number of buyers, while they also are seeing buyers excited about historically low interest rates. Lawrence Yun, chief economist for the National Association of Realtors® believes the demand for housing will be strong post-shutdown. "The temporary softening of the real estate market will likely be followed by a strong rebound, once the quarantine is lifted," Yun said.*
HomeYap also sees a strong housing market as the Pandemic winds down. In our blogs entitled ...., and …, and …… we go into great detail to show why demand for houses could actually skyrocket in the wake of Covid-19. The reasoning is not complicated and involves a supercharging of a trend that was already in place:
1. COVID-19 will drive many different types of people out of cities, in which the vast majority of people rent, to suburban and rural areas where most people own homes.
2. PRE- PANDEMIC THERE WAS A SELLERS’ MARKET – more buyers than sellers.
3. The imbalance of buyers and sellers was caused by two identifiable factors that arose from the Financial Crisis of 2008-2009.
Ø HUGE REDUCTION IN HOME BUILDING - The cumulative effect of reduced home building from 2007 to 2018 was deficit of 7.6 million homes at a time when the U.S. population grew by 28 million people (Using average annual home built for the 36 years from 1970 to 2006).
Ø LARGE INVESTORS BUY TO RENT - From 2011 to 2017 large institutions and private-equity groups bought billions of dollars of homes and real estate companies that own homes further reducing housing supply by hundreds of thousand if not millions of homes. These homes were turned into rentals and will not return to the market for sale. From 2006 to 2014 the stock of rental units in the U.S grew by 33%.
In addition,mortgage rates are historically low, which makes the cost of owning a home much more affordable. (see chart below)
Is it possible to buy a home now?
It is definitely possible to buy a home now. In fact, homes sales declined from February, but were still at an annualized rate of 5.27 million. That means that 439,166 homes changed hands in the March period. It is important to recognize that some of that period was before the full scope of Covid-19 was known, but buyers were still purchasing homes in March. In fact, the U.S. Department of Homeland Security has declared that residential and commercial real estate services are an essential service that should be allowed to continue.
How do you go about buying a home now?
Given the need to social distance and sellers, real estate agents, home inspectors, mortgage originators, bankers, and lawyers concerns about infection, the process of looking for, finding, and closing on a home is currently more arduous that it was 2 months ago. The U.S. Department of Homeland Security, however, has declared that residential and commercial real estate services are an essential service that should be allowed to continue. The realization of the need to do things differently has driven a wave of innovation and technology. Below is a helpful guide for home buyers.
· Getting to see what is on the market
Ø New technologies like HomeYap are available to give buyers a new edge in the real estate market. Here you can let the market know what you want so sellers will come to you.
Ø Agents and seller communication can be done by phone, Facetime, Zoom, and other technology for remote meetings
· House tours
Ø different areas have different restrictions and rules
Ø virtual showings and open houses
Ø beyond the stated rules, homes showing will ultimately depend on the comfort level and health vulnerability of the home seller
Ø Given the technology that is now available, buying a home “sight unseen” is fairly inexcusable. There should be a way, even if you cannot physically be I the home, to see the details of the house through pictures and video.
· Home closings –closings are taking longer. On average closings are taking 40 days versus 33 days a year ago.
Ø Again, rules vary between states
Ø Curb side closings are being done
Ø Lawyers changing protocols to make closings safer and less stressful, including having parties into conference rooms at different times to review and sign paperwork
Ø “When it comes to the financial aspect of home buying, many lenders had already made the entire mortgage process digital long before anyone heard of social distancing.”***
· Moving in
Ø According to the American Moving & Storage Association, moving has been deemed an essential service by the federal government.
Ø Even though moving has been deemed essential, you should check with your local and state governments (and your HOA or condo board, if applicable) before scheduling any move.
· How can I prepare to buy a house?
Ø Check your credit score
Ø Figure out how much home you can afford
Ø Secure mortgage pre-approval
Ø Avoid any major changes to your finances
Ø Register with HomeYap.com to broadcast your Wants to agents and sellers in the area
Ø Check online listings
As a buyer(or seller) you may be interested to watch the May NAR Residential Economic Issues & Trends Forum webinar featuring Lawrence Yun, PhD, NAR Chief Economist.