Were you thinking about buying a house recently, and then the Coronavirus Pandemic occurred? You aren’t alone! Many Americans are Googling “Should You Buy A House During Coronavirus?” right now and the answers they get aren’t always good! In today’s article, I will share with you some considerations for those who are thinking about buying a house right now!
Recently, I took a phone call from a friend of mine from church. As we are all home for the “Coronavirus Pandemic”, he had a common question for me. “Should I buy a house during this coronavirus thing??”
It’s a common question right about now. Many people are asking themselves this very question. As a professional home buyer, I have been asked this question by other Realtors, as well as Investors… Should you buy a house during the coronavirus outbreak?
More importantly than that, what advice would I give to those who must buy right now, or find themselves in a contract for sale here in Arizona?
🔉🔊 Listen to the Podcast that spawned this post! “Should You Buy A House During Coronavirus?”
It seems best to separate the issue into three separate questions…
Should I Buy A House Now Or Wait?
This first question that people ask in this type of market is “Should I buy a house now or wait?” This is very common because in times of econonomic uncertainty, it is difficult to commit to a 30 year mortgage! On the other hand, you might be thinking that because the interest rates are so ridiculously low, it makes sense to buy.
The truth usually lies somewhere in the middle. More often than not, it is usually a matter of opinion. However, there are a few thoughts that seem to prove true no matter what.
If you are currently in a contract for purchasing a home, and the home meets the needs that you feel are important, then by all means, continue to close! If you aren’t planning on moving for the next 7-10 years, it doesn’t really matter what happens in the real estate market during, or immediately after the coronavirus pandemic. Anything that does happen “market wise” will more than likely correct itself within 7-10 years.
Another thought that would seem to be true is that if you aren’t currently in a contract to buy a home, it might be a good idea for you to wait. In my mind, the market values will be correcting themselves shortly. In this post, I would like to offer some various reasons why.
Is It A Good Time To Buy A House Right Now?
If you are looking to purchase a home in the Tucson area in the next 90 days, there are a few things you need to know.
- Mortgage rates are extremely volatile.
- Because of this, they are likely to rise, and fall by as much as .5% during the time of your escrow. Don’t be alarmed.
- This is because of the strain on the mortgage market itself. As the Federal Reserve implements policies that affect the secondary market, credit will be extended and restricted due to the constraints placed upon it by the current regulations and policies.
- The refinance market is currently swamped, and this is why the rates sometimes will go up or down based on demand.
- New Mortgage applications are down 29% in view of the coronavirus outbreak. This means that fewer people are willing to buy a home at this time, despite the low interest rates.
- If you must buy, start the process now.
- Many mortgage brokers and lenders, and their underwriters are overwhelmed with refinances. This can make the process take longer than you anticipated.
- The earlier you being, the faster you will identify what paperwork you need to provide to your lender. Now, more than ever before, speed and accuracy is needed. The faster you can get your mortgage broker the paperwork they need to process your mortgage, the harder they will work for you!
- As the pandemic spreads, and effects more industries, two things will happen. First, people will get sick in the chain of paperwork that will do your mortgage. Somewhere along the line, “Murphys Law” will step in, and affect your loan package. So the faster you get it done, accurately, the better!
- Use Online Resources to research and view properties.
- In previous posts, you saw how I use the Tucson MLS to find cheap homes. You can use the Tucson MLS yourself and search the active properties that are currently on the MLS by clicking here!
- Many Realtors use virtual tours, and plenty of photographs to show their properties. While I recognize that for many of you, buying a home is an intensely personal activity. Being able to walk in the house, and feel the floor beneath your feet while looking through the window is critical for some! After buying, and selling hundreds of homes in Tucson, I don’t always need to “physically see” the home to make an offer!
- Remember. if you find a good deal, you often can make an offer “contingent upon inspection.” Meaning that you aren’t obligated for anything until you inspect it personally at a date and time that makes sense for everyone!
- Work with Realtors And Escrow Companies That Do Remote Closings / Drive Through
- Work with Realtors who are technologically saavy who can do DocuSign or some other form of electronic signing. Since actual signatures are rarely required on contracts (electronic signatures are valid) it doesn’t make much sense to “go into an office and sign contracts.”
- Once you are ready to close, be sure to select Escrow companies that do remote closings or offer “drive through” closings.
- A remote closing is where the title company will FedEx you the paperwork to sign in front of a notary. Recent law changes are making the process even faster and smoother without having the need to physically be in front of a notary. This will enable you to buy and sell real estate from the comfort of your own home while minimizing you and your family’s exposure.
- A “Drive Through” closing is a relatively new phenomenon. While Title companies are considered “essential services”, they do have to maintain social distancing guidelines. A drive through closing can occur a couple different ways.. where one party goes in to sign while the other waits in the car. Or literally where someone meets you at your car and has you sign.
Will The Housing Market Crash 2020?
This addresses the larger issue at hand. As I mentioned in the podcast that started this blogpost, there is a lot of uncertainty in the real estate market.
When KOLD13 interviewed me at the beginning of the coronavirus pandemic, I stated that “People do not buy during times of uncertainty”. While this isn’t universally true, it is generally true. There are currently people buying and selling real estate in the Tucson MLS every day as you can see from my regular Tucson Real Estate Market Updates.
However, this is a period of uncertainty unlike anything Americans have ever seen before. With up to 200,000 Americans being forecasted to perish during this pandemic (many of them elderly), it will undoubtedly have an impact on the U.S. Housing market.
I’ve written at length before this crisis that the United States Housing Market is in far worse condition than many people believe… Whether you are thinking about the Arizona Real Estate Bubble of the 2020’s, or “The 10 Reasons Why The Housing Market is WORSE Than You Think!” the theme is the same. American underlying levels of personal debt have skyrocketed. This is because of cheap interest rates that do nothing to lower the prices of homes. Instead, the availability of cheap, easy money has only aggravated an inflated home price.
And I’m not alone in my conclusions. According to a recent Homeline study, an overwhelming amount of agents surveyed stated that they felt the recession would start by the end of 2020.
While the Federal Government has agreed to suspend foreclosures on FHA properties during this crisis, various State and local governments are pushing for the same Mortgage relief bills as well as rent relief. While these bills are good intentioned, they have caused a problem within the housing market.
Homeowners and renters do not need to pay rent or mortgages if they are affected by Coronavirus (Covid-19), but the servicers that service the loans still have to make payments to the investors. This Federal and State Government intervention, while well intended, may have inadvertently caused the housing market to crash.
When the mortgage servicers still have to make the payments as Ginnie Mae requires, they will quickly run out of liquidity and funds availability. This is why many of these very same servicers are beginning to suspend lending operations for two weeks.
This volitility in the secondary mortgage market makes investors incredibly nervous, as cash calls are becoming a frequent occurrance. Ginnie Mae is in the midst of trying to find solutions to ease this liquidity issue, but in the meantime, available financing is drying up for those who do not fit neatly into a “financing box.”
Conclusions
If you are in a position where you are already committed to a purchase, don’t worry. If your job situation is stable, and you have money set aside in reserves, then your purchase should be fine.
However, if you don’t need to purchase at this time, it might be a good idea to wait to purchase your ideal home. In my opinion, there will be a large amount of homes that will come on the market in 90 -120 days. When you have a large amount of something available for sale, the prices inevitably go down!
The properties that will be coming on the market however, will not be completely remodeled homes, and homes that are perfect. Instead, I see a bruised, battered housing market coming back to sale. A market filled with short sales, foreclosures, as well as a mixture of inherited homes in addition to the regular home market for sale.
Because the amount of distressed properties will rise, the average sale price will dip. My advice to you? If you don’t need to buy, wait for 6 months. The market you find then, will be infinitely more favorable to you!
Questions? Comments? Critiques? Feel free to leave a comment below or contact me directly at (520) 403-6227!