Traditionally, spring is one of the busiest times of the year for real estate. However, the coronavirus outbreak—and subsequent stay-at-home orders—led many buyers and sellers to put their moving plans on hold. Across the country in April, new listings fell nearly 45%, and sales volume fell 15% compared to last year.¹

Fortunately, as restrictions have eased, we've seen an uptick in market activity, most notably here in Michigan where real estate had been completely shut down. And economists at Realtor.com expect a rebound in July, August, and September, as fears about the pandemic subside, and buyers return to the market with pent-up demand from a lost spring season.²

But given safety concerns and the current economic climate, is it prudent to jump back into the real estate market? Before you decide, it's important to consider where the housing market is headed, how it could impact your timeline and ability to buy a home, and your own individual needs and circumstances.

WHAT'S AHEAD FOR THE HOUSING MARKET?

The economic aftermath of the coronavirus outbreak has been severe. We've seen record unemployment numbers, and economists believe the country is headed toward a recession. But people still need a place to live. So what effect will these factors have on the housing market?

Home Values Expected to Remain Stable

A lot of Americans recall our last recession and assume we will see another drop in home values. But the 2008 real estate market crash was the cause—not the result—of that downturn. In fact, ATTOM Data Solutions analyzed real estate prices during the last five recessions and found that home prices actually went up in most cases. Only twice (in 1990 and 2008) did prices fall, and in 1990 it was by less than one percent.³

Many economists expect home values to remain relatively steady this time around. And so far, that's been the case. As of mid-May, the median listing price in the U.S. was up 1.4% from the same period last year.⁴ 

Demand for Homes Will Exceed Supply

There's been a shortage of affordable homes on the market for years, and the pandemic has further hindered supply. In addition to sellers pulling back, new home starts fell 22% in March.⁵ In fact, Fannie Mae doesn't foresee a return to pre-pandemic construction levels before the end of 2021.⁶

This supply shortage is expected to prop up home prices, despite recessionary pressures. Fannie Mae and the National Association of Realtors predict housing prices will rise slightly this year^7. Even if Zillow's prediction of a dip between 2-3%⁸ came true, that would be a far cry from the double-digit declines that occurred during the last recession.⁹

Government Intervention Will Help Stabilize the Market

Policymakers have been quick to pass legislation aimed at preventing a surge in foreclosures like we saw in 2008. The Coronavirus Aid, Relief, and Economic Security (CARES) Act passed by Congress give government-backed mortgage holders who were impacted by the pandemic up to a year of reduced or delayed payments.¹⁰

 The Federal Reserve has also taken measures to help stabilize the housing market, lower borrowing costs, and inject liquidity into the mortgage industry. These steps have led to record-low mortgage rates that should help drive buyer demand and make homeownership more affordable for millions of Americans.¹¹

HOW HAS THE REAL ESTATE PROCESS CHANGED?

As the pandemic hit, real estate and mortgage professionals across the country revised their processes to adapt to shifting safety standards and economic realities. Now, as states are opening up and we are allowed to get back to work, many of these changes will stick around as people appreciate the convenience, and in some cases, smoother flow, of virtual interactions.

New Safety Procedures

The safety of my clients, their families, and mine, are my top priority. That's why I've implemented more tools which leverage technology to minimize personal contact.

For my listings, I now will hold online open houses, offer virtual viewings, and conduct walk-through video tours as needed. As always, I am qualifying interested buyers before we book in-person showings, and ask other agents to do the same. This enables me to promote your property to a broad audience while limiting physical foot traffic to only serious buyers.

Likewise, my buyer clients can view properties online and take virtual video tours to minimize the number of homes they step inside. Ready to visit a property in person? We can decrease surface contact by asking the seller to turn on all the lights and open doors and cabinets before your scheduled showing.

The majority of our "paperwork" is also digital, and has been for years. If you're comfortable with this process, it is a great way to safely view and eSign contracts from your smartphone or computer. It's not difficult to learn, and I am happy to teach you how to make use of this really convenient method.

Longer Timelines and Higher Mortgage Standards

Overall, you can expect a few delays in the real estate process. Both buyers and sellers are more cautious when it comes to viewing and showing homes. With so many house hunters and less available inventory, it can also take more time to match a buyer with the right property.

Contractors who were recently furloughed are working through the tremendous backlog of work they had scheduled, so finding someone willing to give quotes and make repairs can be quite a challenge.

 In a recent survey, 67% of Realtors also reported delays in the closing process. The top reasons were financing and buyer job loss, but appraisals and home inspections are also taking more time due to shifting safety protocol.¹²

Securing a mortgage may take longer, too. With forbearance requests rising, lenders are getting increasingly conservative when it comes to issuing new loans. Many are raising their standards—requiring higher credit scores and larger down payments. Prepare for greater scrutiny, and build in some extra time to shop around.¹³

IS IT THE RIGHT TIME FOR ME TO MAKE A MOVE?

The reality is, there's no "one size fits all" answer as to whether it's a good time to buy or sell a home because everyone's circumstances are unique. But now that you know the state of the market and what you can expect, consider the following questions:

Why do you want or need to move?

It's important to consider why you want to move and if your needs may shift over the next year. For example, if you need a larger home for your growing family, your space constraints aren't likely to go away. In fact, they could be amplified as you spend more time at home.

However, if you're planning a move to be closer to your office, consider whether your commute could change. Some companies are rethinking their office dynamics and may encourage their employees to work remotely on a permanent basis.

How urgently do you need to complete your move?

If you want to be settled in before fall, I recommend that you begin aggressively searching now, already pre-approved and ready to make a strong offer when you see the home you want. With fewer homes on the market and a lengthier closing process, it's smart to allow yourself as much of a time cushion as possible.

However, if your timeline is flexible, you may be well-positioned to score a deal. I am seeing some highly-motivated sellers who are willing to negotiate on terms and price. Talk to me about setting up a search so we can keep an eye out for any opportunities that pop up. And get pre-qualified for a mortgage now so you'll be ready to act quickly.

If you're eager to sell this year, now is the time to be prepping your home for the market.  A second wave of infections is predicted for the winter, which could mean another lockdown.¹⁴ If you wait, you might miss your window of opportunity.

How long do you plan to stay in your new  home?

The U.S. real estate market has enjoyed steady appreciation since 2012, which made it fairly easy for owners and investors to buy and sell properties for a profit in a short period of time. However, with home values expected to remain relatively flat over the next year, your best bet is to buy a home you can envision yourself keeping for several years. Fortunately, at today's rock-bottom mortgage rates, you can lock in a low interest rate and start building equity right away.

Can you meet the higher standards for a mortgage?

Many mortgage lenders are tightening their standards in response to the growing number of mortgage forbearance requests. Some have raised their minimum credit score and down payment requirements for applicants. Even if you've been pre-qualified in the past, you should contact your lender to find out if you meet their new, more stringent standards.

Is your income stable?

If there's a good chance you could lose your job, you may be better off waiting to buy a home. The exception would be if you're planning to downsize. Moving to a less expensive home could allow you to tap into your home equity or cut down on your monthly expenses.

While uncertain market conditions may give pause to some buyers and sellers, they can actually present an opportunity for those who are willing, able, and motivated to make a move.

WHEN YOU'RE READY TO MOVE, I'M HERE TO HELP

Right now, motivated players are out in the market. The lockdown caused a lot of people to realize they are ready to move on to someplace where they'll actually enjoy spending time. If you are able to secure a low rate mortgage, you just boosted your purchasing power.

If you're hoping to sell this year, you'll have fewer listings to compete against in your neighborhood and price range. But you'll want to act quickly. Buyer demand is already very strong, and is expected to surge around July when many will have enough time back at their jobs to allow for financing—so you should start prepping your home now. And keep in mind, a second wave of coronavirus cases could be coming in this winter. Ask yourself how you will feel if you have to face another lockdown in your current home.

Let's schedule a free consultation – virtual or in-person - to discuss your individual needs and circumstances. I can help you assess your options and create a plan that makes you feel both comfortable and confident during these unprecedented times.

The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult a financial professional for advice regarding your individual needs.

Sources:

1. Forbes - https://www.forbes.com/sites/ellenparis/2020/05/08/latest-housing-market-update-from-realtorcom/#20bf7829113e
2. HousingWire -
   https://www.housingwire.com/articles/realtor-com-housing-market-will-bounce-back-this-year-but-the-rebound-will-be-short-lived/
3. Curbed -
   https://www.curbed.com/2019/1/10/18139601/recession-impact-housing-market-interest-rates
4. com -
   https://www.realtor.com/research/weekly-housing-trends-view-data-week-may-9-2020/
5. com -
   https://money.com/coronavirus-real-estate-home-prices/
6. Fannie Mae -
   https://www.fanniemae.com/resources/file/research/emma/pdf/Housing_Forecast_051320.pdf
7. HousingWire -
   https://www.housingwire.com/articles/pending-home-sales-tumble-on-covid-19-shock/
8. HousingWire -
   https://www.housingwire.com/articles/zillow-predicts-small-home-price-drop-through-rest-of-2020/
9. Federal Reserve Bank of St. Louis -
   https://fred.stlouisfed.org/series/CSUSHPINSA
10. Consumer Financial Protection Bureau -
    https://www.consumerfinance.gov/coronavirus/cares-act-mortgage-forbearance-what-you-need-know/
11. Bankrate -
    https://www.bankrate.com/mortgages/federal-reserve-and-mortgage-rates
12. National Association of Realtors -
    https://www.nar.realtor/sites/default/files/documents/2020-05-11-nar-flash-survey-economic-pulse-05-14-2020.pdf
13. Forbes -
    https://www.forbes.com/sites/alyyale/2020/04/17/buying-a-home-during-the-pandemic-dont-expect-your-everyday-home-purchase/#fadad3d33b0c
14. Washington Post -
    https://www.washingtonpost.com/health/2020/04/21/coronavirus-secondwave-cdcdirector/