A house is a symbol of stability and safety but is buying a house a smart decision during the coronavirus pandemic? Recently released market statistics may surprise you.
As is always true with real estate, location is key. The housing market is being affected differently based on geography and the buying circumstances in places that have been hit hard like New York exist in stark contrast to other parts of the country, as in Texas where the market has hardly been affected.
Miami Beach Neighborhoods
Though vacation rental properties have taken a major hit in South Florida, real estate closings are still happening. The market has slowed but it hasn’t stopped as people still want to invest in the security of the property.
Market research shows that North Beach, Miami Beach and its surrounding neighborhoods have experienced steady 1st quarter closing sales with 769 sold properties, and also show an increase of nearly 10% in the sale of single-family homes compared to this time last year.
Signs of Stability
South Florida sellers overall are staying strong with their pricing and refraining from lowering the value of their homes. This is a good thing as it is helping to keep the market consistent; in the buyer’s favor, steady prices help to drive down competition with many buyers choosing to put their plans on hold.
Online data from large housing search sites like Zillow has been compared to the data of past pandemics. Though we are living through the most wide-spread pandemic in recent history, it is not the first to occur. Pandemics traditionally place housing markets on pause but don’t bottom them out. We are seeing the same trajectory with coronavirus – just on a larger scale - as housing prices are holding relatively steady.
What to Expect with Financing
Low interest rates, less competition with other buyers, and potential deals are a few of the advantages to buying a home now but let’s break down some of the challenges:
Stricter loan requirements; higher credit score may be needed
More money down
May be harder to find a lender
Lenders overall have been raising their credit requirements for home loans. A credit score of 620 has been the go-to but a few lenders now are raising requirement to as high as 700 and some lenders are suspending the issuing of loans altogether.
For closings, there is a National trend emerging of larger down payments – though this truth is primarily found in highly effected areas where sales have not been as consistent.
How to Prepare For Buying Your Home
Spend some time shopping around for lenders and get preapproved for a home loan. This will encourage sellers that you are serious and helps expedite your process as much as possible in the wake of social distancing and delays. It is also a good idea to prepare for employment verification and other assessments as much as possible by getting the remote contact information for your employers and preparing your documents in advance.
Be ready to put down a larger down payment, keeping in mind that mortgage rates are at an all-time low which will reduce your monthly payments.
Advantages
Historically low rates
At the start of 2020, National averages for mortgage rates were just under 4% and they plummeted to 3.5% with the coronavirus. In Florida, the current average for a 30-year fixed rate is just under 3.5%.
Less competition in a normally competitive market
Many buyers are waiting out the circumstances – but many sellers would rather not wait to sell as we can see by the closing statistics and less competition means that sellers will consider a wider range of offers.
Potential Deals
While most sellers are not reducing their price, homes are priced to sell as we are still experiencing a buyer’s market.
The Future of the Market
Many industry professionals and economists are expecting a quick return to a booming market as the country opens up.
Other markets have bounced back post-coronavirus
The coronavirus effects are not the same as with other events like the 2008 housing crisis. As people are able to return to work, the market is projected to bounce back quickly as seen in other countries like South Korea where business has re-opened on a larger scale.
Homes have value
One of the biggest trends throughout this shared crisis is the renewed focus on family, personal connections, and the value of having a home. A home is an investment, and many would prefer contributing to that investment rather than paying rent. Buyers may be waiting in the wings but current search engine data indicate that they may be preparing to hit the ground running and buy post-pandemic with sites like Zillow seeing a big increase in visibility score.
We’ve seen this reaction before
Though unlike the 2008 crisis, economists have made the comparison that the market is reacting similarly to the way it did after 9/11. The Nation is experiencing shock coupled with the suspension of many businesses, but this is not a permanent reality. The projection is that there will be a sharp economic “V” return with retail and housing rather than a slow “U” like in ’08.
The Effects of Social Distancing
Real estate agents and lenders are all working remotely; like the market, transactions haven’t stopped, they have adapted. Buying a home in today’s climate can seem like an obstacle course where the challenges are all placed six feet apart. From virtual home tours to remote negotiations, here’s how the process has changed:
Increase in virtual showings
Distance meetings
Delays with loan processing
Longer closings to accommodate appraisals and home inspections
Most businesses have transitioned to online operation and real estate is no exception. Technology allows for high-quality video tours and conversations so get ready for your close-up as much of the buying process and negotiations will take place virtually.
The biggest delays are showing up in the appraisal and home inspection process as contractors work with sellers inside social distancing guidelines and scheduling restrictions. Longer closings are also unfortunately a given but with rates as low as 3.5% the wait just might be worth it.
What you’ll need
Look for a real estate agent that can facilitate the new technology demands as your physical presence throughout the process may be more limited. Find an agent with the capability to
Apply virtual tools
Schedule and create thorough virtual home tours
Has an established online platform that can handle form uploads, document transfers, and outreach
Is up to date on local Covid-19 disclosures that can protect you
Is an experienced negotiator
Can facilitate remote inspections, virtual appraisals, and remote closings
Being tech-savvy is a requirement now and you’ll want to partner with someone who can navigate the virtual world as well as they can navigate the current market. Buying a home ‘sight unseen’ is not a new concept but the pandemic has given many buyers a crash course in this alternative process.
Your Process Shouldn’t Change
Perhaps a surprising statistic is that many of the buyers still active during COVID-19 are first-time buyers looking to take advantage of the circumstances. The best direction to take for buying a home during coronavirus is the same direction you would take as a first-time buyer.
Coronavirus has changed the process; it hasn’t changed the factors. Some great advice is to approach buying a home during coronavirus in the same way you would approach buying a home at any other time, don’t get overwhelmed, take it step-by-step.
Make a list. Determine the best neighborhood to suit your needs, look at school districts, amenities, activities, and programming. Decide how long you plan to stay in your new home and consider properties that hold their value. Explore crime rates, property taxes, transportation, and make a clear list of your requirements. Here’s a great guide to help you along.
Approach the financing processes and evaluate your circumstances as you normally would and partner with a Realtor that can answer your questions and guide you through.
Verdict
If your pre-virus goal was to buy a home now is not a bad time – in fact, there is a small window where the buying conditions are ideal. Motivated sellers, low mortgage rates and less competition in the market are definite advantages. There are many indicators that the market with bounce back strongly as people return to work and the country moves to reopen and that could swing things in favor of the seller; so, if you are able, now might be the time to invest in your future home.
How we can help
At Urban Resource, our team has dedicated its time and creativity to bolster our already established communication and virtual capabilities to bring you the best buying experience possible. Our agents know the market well and our resources, knowledge, and connections are available to make the process as seamless as possible from financing to closing.
At Urban Resource, our team is here to help you find the perfect luxury condominium to fit your lifestyle. Reach out today for more information: realestate@urbanresource.com
