Spring is upon us, which typically involves a big peak of home buyers checking out properties, negotiating, and closing on new places. But the coronavirus outbreak—with its quarantine measures and economic uncertainties—has many a real estate shopper wondering: Should I buy a home now, or wait?
We're here to help you navigate this confusing new normal with this series, "Home Buying in the Age of Coronavirus."
This first installment aims to help you figure out whether you can—and should—shop for a home right now, or hold off until this crisis blows over. Read on for some honest answers that will help you decide what to do.
The impact of the coronavirus on the housing market
So what state is the housing market in right now, anyway? While that depends on how bad an outbreak an area is suffering, most markets are feeling some sort of hit.
“The coronavirus is leading to fewer home buyers searching in the marketplace, as well as some listings being delayed," says Lawrence Yun, chief economist for the National Association of Realtors®.
The latest NAR Flash Survey: Economic Pulse, conducted on March 16 and 17, found that 48% of real estate agents have noticed a decrease in buyer interest attributable to the coronavirus outbreak.
However, nearly an equal number of members (45%) said that they believe lower-than-average mortgage rates are tempting buyers to shop around anyway, without any significant overall change in buyer behavior.
For those who are determined to buy a home, there is opportunity out there.
“This is the best buyer's market I have ever seen in my career,” says Ryan Serhant of Nest Seekers and Bravo’s "Million Dollar Listing New York."
“Sellers are nervous, there’s excess supply, and interest rates have been hovering at historic lows. You can own a home for less per month than you can rent an equivalent property in most areas," he adds.
With fewer home buyers out there looking, you have less competition in your way.
"Unmotivated and uncommitted buyers have dropped off," adds Maggie Wells, a real estate professional in Lexington, KY. "Less competition is a huge leg up in this market."
The window of opportunity for buyers won't stay open wide forever. NAR data shows that there was a housing shortage prior to the outbreak.
"The temporary softening of the real estate market will likely be followed by a strong rebound, once the quarantine is lifted," says Yun.
This pent-up demand could eventually push home prices higher. That could mean that the time to strike for bargains is now.
Bottom line: If social distancing has made you realize you don't love the place where you're currently spending most of your time, it's a good time to consider buying.
How the housing industry has adapted to keep buyers safe
Although it's a scary time to be out and about checking out real estate, it is still possible to do so and stay relatively safe. The industry has rapidly adapted, introducing approaches that minimize exposure to the virus.
For instance, many agents are now working remotely and conducting most of their business virtually.
"Buyer and seller consultations have transitioned to virtual meetings with success," says Kate Ziegler, a real estate agent with Arborview Realty in Boston.
While open houses or showings may not be easy to arrange because of quarantine or other safety issues, real estate listings have stepped up to the plate by offering virtual tours.
"We can send clients videos of whatever properties they want to see, or we are happy to have our agents FaceTime from a property," says Leslie Turner of Maison Real Estate in Charleston, SC.
While those who are immunocompromised may want to stay home, if you're otherwise healthy, it is also still possible to see some homes in person in some parts of the country. You'll want to take some precautions before you go.
"Hand sanitizer at the door has become the norm, as well as shoe covers, even on sunny days," says Ziegler.
During the tour, it's also now customary for the listing agent to open all doors, so that home buyers can explore closets and other enclosed spaces without touching anything as they look.
If you do make an offer that's accepted and you head to the closing table, real estate agents and attorneys are also adapting to remote closings, to keep you out of a crowded conference room. (We'll provide more information about virtual tours and remote closings in later installments.)
How to weigh economic concerns
Coronavirus aside, anyone thinking about buying a home is also likely to be weighing whether it's a smart idea when the economy is in a downward spiral. But in the same way you can't easily time a stock purchase to make a profit, you can't easily time a home purchase, either.
“Recession or not, it’s impossible to time the market, whether for buying stock or buying real estate,” says Roger Ma, a New York–based financial planner and owner of lifelaidout.
Just keep in mind that while current market conditions offer an incredible opportunity for home buyers to lock in historically low interest rates for a mortgage, rates are actually going up quickly, because so many people are refinancing.
If you wait too long to buy, you may miss the money-saving boat. So make sure to read up on the latest mortgage rates first.
Besides mortgage rates, home buyers are probably wondering about the stability of their income, as fear of layoffs loom.
"We are entering uncharted territory," says Michael Zschunke, a real estate agent in Scottsdale, AZ.
On the flip side, putting a property under contract now and locking in a low interest rate gives a buyer some control at a time of relative uncertainty, adds Turner.
The takeaway from all this? It matters more than ever to get pre-approved for a mortgage, to calculate your home-buying budget accurately.
If you're worried about layoffs, you should buy a home well under budget so you have enough money left over for closing costs, home maintenance, and a rainy day fund. Now is the time to crunch your numbers more carefully than ever before. Below is what you need to consider.
Research ways to reduce your closing costs. For instance, many loans allow sellers to contribute up to 6% of the sale price to the buyer as a closing-cost credit.
Figure out how much you need to set aside for yearly home maintenance and repairs. A smart budget is to have between 1% and 4% of the purchase price of your home.
Be sure to put aside an emergency nest egg for unexpected repairs. On average, it's a good idea to sock away 1% to 3% of a home's value in cash reserves.
In our next installment, we'll explore all the ways to conduct a house hunt safely. Stay tuned! In the meantime, here's more on buying a home during a recession.