Mom-and-pop landlords have been losing market share for decades. The last time there was a downturn, that trend accelerated…
How To Buy A Home During Covid-19 Pandemic?
Open houses may be few and far between until the pandemic passes, but people are still buying and selling homes.
In the past few weeks, I have received questions about how the coronavirus pandemic has affected local real estate markets. Many buyers and sellers are worried about making a move right now, which makes us think real estate has already come to a near-complete halt.
I don’t have anything but anecdotal evidence to support this at the moment, but in a few weeks the real estate response will become clear through monthly data and surveys that will be published by the major players, including the National Association of Realtors, Zillow and Redfin. We’ll continue to report what we see and make suggestions on how you might want to move forward.
Q: The covid-19 pandemic has made me nervous about the real estate market and our neighborhood in particular.
What are your thoughts for first-time home buyers purchasing a home right now? Is it a good time because interest rates are low? Or will the housing market crash, meaning buyers should wait?
A: That’s a loaded set of questions. Given what we don’t know about the coronavirus, where you live, and how long the country (and world) will be locked down, we can’t provide a definitive answer.
Number of homes listed last month declines 15 percent from March 2019, report shows
Let’s start with the basics. If you find a home that seems right for you, you have job stability and you can get financing at historically low rates, buying a home might be a wise choice and the right thing to do — even now.
The same story is true for someone who wants to buy an investment property. Ten years ago, the housing crisis gave investors a unique opportunity to scoop up properties at extremely low prices and finance them with historically low interest rates. While we don’t know if property prices will go that low again (the government is using the Cares Act to support Americans by providing cash, deferring mortgage and other debt payments and keeping businesses from laying off people) many Americans won’t have enough money and will likely walk away from their properties.
It’s difficult to time the real estate market. For decades, it was understood that you could safely put your money into a home, sit back, and watch your home’s value go up. In our lifetimes, the real estate market has now suffered at least two major shocks. The first one was from the Great Recession in 2008 and the second one just beginning.
While most people are focused on the immediate impact of the virus — lives lost, health issues, and immediate financial costs — the longer-term prospects look bleak for the real estate market. As unemployment goes up, the number of people who can afford to buy homes is reduced. Unemployment and job insecurity will contribute to a huge drop in the people looking for real estate.
Help for homeowners and borrowers during the coronavirus crisis…
Without a job, people will have trouble paying rents and mortgages. The government aid programs are working to get immediate cash to people affected by the crisis. We won’t know whether help will come soon enough, whether help will come to the people that need it most, or whether the cash will simply be enough to help them get by.
During the Great Recession, homeowners didn’t get the benefit of most government programs, and the programs that were created took too much time to get up and running; they were also difficult to apply for and navigate. As a result, millions of homeowners lost their homes through foreclosure. Only time will tell whether the current programs work to help homeowners and renters. We mention renters because as renters stop making their rent payments, those rental unit owners (the investors) will suffer.
We usually think of rental property owners as being large companies or entities, but there are millions of rental units owned by individuals. If those individuals have no income from their tenants, those owners might default on their mortgage payments or try to sell their units. Those units may be single-family homes, townhouse units or condominium units.
1. Determine how long you plan to stay in your new home. If it’s less than five years, look for a property where you can build value.
2. Understand how much you can spend. This isn’t a time to spend beyond your means and hope for the best. It is likely that prices will decline in the short run, so don’t overspend.
3. Find a place that meets your needs. Unless you’re getting a dream price, you may want to spend for the neighborhood and improve the home over time. (See No. 1 about building in value.)
4. Find the right neighborhood for you. Look for a good school district, as homes in those neighborhoods tend to hold their value better in a declining market and rise faster when the local market is strong.
5. Make sure the financing you obtain is on terms that work for you now.
The book, “100 Questions Every First-Time Home Buyer Should Ask,” goes through the basics. You’ll need a place to live whether you rent or buy, unless you are living with your parents or have other living arrangements. So, the question is whether the funds you pay on a monthly basis go to a landlord or a lender.
As you make that decision, you have to take a long view of the market. Your plan should be to live in your first home for at least five years. Over that time, you’ll have the enjoyment of a home, and in five years the market outlook should be quite different from where we are today.