During these difficult times, many buyers and sellers alike are feeling unsure about how to continue. Some have ceased looking for homes or taken their homes completely off the market, while others feel unsure of what to do. All of these feelings and choices are completely valid choices and feelings in light of current events. However, if you’re one of those people who feels unsure or truly need to buy or sell as soon as possible, we want you to know there is still an active real estate market ready for you.
This isn’t 2008
As we face the economic impact of this pandemic, there are many rumors and concerns about the possibility of another housing crash. While we are facing what is predicted to be a short recession, the fundamentals in housing are significantly different than they were in 2008. Housing was the key factor that caused the last recession as a bad combination of sub-prime lending, low amounts of equity and falling home values caused an unfortunate amount of short sales and foreclosures that required several years of recovery. Luckily, that is not where we are today. After a decade of steady appreciation and tighter lending guidelines, homeowners have much more equity in their homes and cashing out that equity significantly less and the mortgage default rate is historically low.
Can you/should you still buy and sell?
While that is up to you based on your individual needs and concerns, it is still completely possible. Each part of the industry has worked to make process modifications to help ensure the health and safety of everyone involved.
Some of these modifications include limiting the number of people at closings or showings, even doing mobile or curbside closings. Many sellers and their agents are allowing virtual tours of the property or creating 3D interactive walkthroughs of the home which are almost like being there in person. Meanwhile, contracts can be signed virtually and in-person meetings can be switched to FaceTime or Zoom calls very easily.
We have been pleasantly surprised by how well the market has adapted to these new rules, and in many cases, we expect that these practices will be adopted long after we have this pandemic under control.
It is very much possible to find your next home while in the comfort of your own home. At the very least, these virtual resources should be a great aid in helping you narrow down which you homes you’d like to see in person.
It is also important to note that mortgage rates are still historically low. So if you have the funds and your employment is stable despite the current downturn, it could make sense to move forward. If you buy now, you may be able to afford a larger or more updated home than you would if interest rates rise.
Talk to Your Agent
Your real estate agent will be there to guide you every step of the way. They can provide you with real-time market insights both locally and nationwide to help you make the best decisions for you. Agents also have access to a private network of properties that you won’t find on Zillow. They may be able to find you something that is not officially on the market but still accepting showings and offers.
From a seller’s perspective, our agents can provide you with a proprietary Buyer Market Analysis which can give you an idea of the level of online search activity in your area for homes like yours. If you would like a an analysis on your home, contact us here! We can also put together a Comparative Market Analysis for you to help you see market activity in your area and where your home falls in the mix.
We are here for you no matter what. If you have any questions, please do not hesitate to contact us and we would be happy to connect you with an agent who can help you as you decide the best way to move forward.
Will There Be More Foreclosures?
With all of the devastation being caused by COVID-19, many are worried we may see an increase of foreclosures. Restaurants, hotels, airlines, and many other industries are furloughing their workers or drastically cutting their hours. Without a job, many homeowners are wondering how they’re gonna be able to afford their mortgage payments.
Despite this, there are actually many reasons we won’t see an increase in the number of foreclosures like we did during the housing crash ten years ago. Here are just some of those reasons:
The Government Learned A lot from the 2008 Crash
During the last housing crash, the government was too slow to react to the challenges homeowners were having and waited too long to start relief programs. Today, action is being taken quickly. Just recently:
- The Federal Housing Administration said it is initiating an “immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages” for the next 2 months.
- The Federal Housing Finance Agency announced it is directing Fannie Mae and Freddie Mac to stop foreclosures and evictions for “at least the next 60 days.”
Homeowners Learned From it As Well
When the housing market was going strong in the early 2000s, homeowners gained a substantial amount of equity in their homes. Many began to tap into that equity. Some homeowners began using their homes’ equity to buy luxury items like cars, jet-skis, andexpensive vacations. When prices dropped, many homeowners found themselves in a negative equity situation (where the mortgage was greater than the value of their homes). Some just evacuated their homes, leaving the banks with no other option but to foreclose on the properties.
Today, the home equity situation in America is very different. From 2005-2007, homeowners cashed out $824 billion worth of home equity by refinancing. In the last three years, they cashed out only $232 billion, less than one-third of that amount. That has led to:
- 37% of homes in America having no mortgage.
- Of the remaining 63%, more than 1 in 4 having over 50% equity
Even if prices drop again, most homeowners will still have a lot of value in their homes and will not walk away from that investment.
Will Small Business Get Assistance
The government is aware of the financial struggle COVID-19 has caused and will continue to cause for some. The Associated Press has had this to say:
“In a memorandum, Treasury proposed two $250 billion cash infusions to individuals: A first set of checks issued starting April 6, with a second wave in mid-May. The amounts would depend on income and family size.”
The plan also recommends $300 billion for small businesses.
The last few weeks and months have caused a major health crisis throughout the world, leading to a pause in the U.S. economy as businesses and consumers work to slow the spread of the coronavirus. The rapid spread of the virus has been compared to prior pandemics and outbreaks not seen in many years. It also has consumers remembering the economic slowdown of 2008 that was caused by a housing crash. This economic slowdown, however, is very different from 2008.
Things Will Get Better
One thing the experts are saying is that while we’ll see a swift decline in economic activity in the second quarter, we’ll begin a sharp rebound in the second half of this year. According to John Burns Consulting:
“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices), and some very cutting-edge search engine analysis by our Information Management team showed the current slowdown is playing out similarly thus far.”
Given this situation, if you’re thinking about buying a home this year, the best thing you can do right now is use the time you have to get pre-approved for a mortgage, which you can do from the safety of your home. Pre-approval will help you find out how much you can afford so that you can confidently do the following two things when you’re ready to buy:
- Get an Advantage
Today’s low inventory, like we’ve seen recently and will continue to see, means homebuyers need every advantage they can get to make a strong offer and close the deal. Being pre-approved shows the sellers you’re serious about buying a home, which is always a plus in your corner.
- Speedup the Homebuying Process
Pre-approval can also speed-up the homebuying process so you can move faster when you’re ready to make an offer. Being ready to put your best foot forward when the time comes may be the leg-up you need to cross the finish line first and land the home of your dreams.
What the Experts Say
Here’s a look at what leading experts and current research indicate about the economic impact we’ll likely see as a result of the coronavirus. It starts with a forecast of U.S. Gross Domestic Product (GDP).
According to Investopedia:
“Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of the country’s economic health.”
When looking at GDP (the measure of our country’s economic health), a survey of three leading financial institutions shows a projected sharp decline followed by a steep rebound in the second half of this year:A recent study from John Burns Consulting also notes that past pandemics have also created V-Shaped Economic Recoveries like the ones noted above, and they had minimal impact on housing prices. This certainly gives hope and optimism for what is to come as the crisis passes.
With this historical analysis in mind, many business owners are also optimistic for a bright economic return. A recent PricewaterhouseCoopers survey shows this confidence, noting 66% of surveyed business owners feel their companies will return to normal business rhythms within a month of the pandemic passing, and 90% feel they should be back to normal operation 1 to 3 months after:From expert financial institutions to business leaders across the country, we can clearly see that the anticipation of a quick return to normal once the current crisis subsides is not too far away. In essence, this won’t last forever, and we will get back to growth-mode. We’ve got this.