When the economy booms, people want to buy homes. But when so many Americans are being laid off, there’s the question of what happens to the housing market.
COVID-19, the Novel Coronavirus, has wreaked havoc on public health and the economy. Every industry is suffering, as more than 3.8 million people filed for unemployment during the week ending April 25, according to the U.S. Department of Labor. More than 16.3 million people were claiming benefits in all programs for the week ending April 11.
2020 has become a year of unprecedented unknowns for every industry, including real estate. The good news is that experts expect the housing market to rebound, despite the world-wide pandemic and low housing supply.
“The housing market is temporarily grappling with the coronavirus-induced shutdown, which pulled down new listings and new contracts,” National Association of Realtors (NAR) Chief Economist Lawrence Yun said on the company’s website. “As consumers become more accustomed to social distancing protocols, and with the economy slowly and safely reopening, listings and buying activity will resume, especially given the record low mortgage rates.”
Will unemployment affect the housing market?
Outside of the health crisis this pandemic has created; unemployment is a real, widespread concern for many Americans. However, the good news is many still have a steady paycheck and feel this could be the right time to capitalize on the housing market.
“Nearly 70 percent of Americans have secure employment, and those interested in purchasing homes are looking at the enticing mortgage rates,” Yun said on the company’s website. “One in five potential buyers have dropped out of the market due to job loss concerns, hopes are the massive financial stimulus package can help replace a good portion of lost income until the economy steadily reopens. More home sellers are needed to relieve the acute inventory shortage.”
NAR’s Economic Pulse Survey conducted April 26-27 found that 43 percent of NAR members reported buyers postponing their home purchase a few months due to the pandemic. Nineteen percent of buyers stopped looking for a new home due to concerns about being laid off and being on a strict budget. Eight percent said clients are deciding to postpone buying or selling indefinitely. But 12 percent reported no change in client behavior to purchase or sell.
“The coronavirus is leading to fewer homebuyers searching in the marketplace, as well as some listings being delayed,” Yun said. “At the same time, the dramatic fall in interest rates may induce some potential buyers to take advantage of the better affordability conditions. It is too early to assess the likely impact as to whether lower interest rates can overcome the economic and health anxieties. But the survey is implying in the short-term at least that home sales will be chopped by around 10 percent, compared to what would have been the case, due to the spread of coronavirus.”
Is now a good time to buy a home?
Supply and demand are currently down, but supply was already limited pre-COVID-19. Despite a limited selection, prospective buyers are looking for a deal.
NAR surveyed real estate agents for its Economic Pulse Flash Survey and found that 64 percent of agents reported buyers are looking for discounts and deals on home prices. For those on a budget, this can seem like an exciting opportunity.
However, buyers shouldn’t get too excited just yet. In the same survey, 76 percent of real estate agents reported that their clients hadn’t reduced listing prices to attract buyers.
“Consumers are mostly abiding by stay-in-shelter directives, and it appears the current decline in buyer and seller activity is only temporary, with a majority ready to hit the market in a couple of months,” Yun said on the company’s website. “The housing market faced an inventory shortage before the pandemic. Given that there are even fewer new listings during the pandemic, home sellers are taking a calm approach and appear unwilling to lower prices to attract buyers during the temporary disruptions to the economy.”
For those looking to buy, overall, there has been an 85 percent decline in buyer interest. Fewer buyers can mean less overall competition for those who do want to purchase.
For those who are able, another great reason to buy right now is the competitive and low mortgage rates. Mortgage rates have been in constant flux since the pandemic started, but they continue to trend toward historical lows. The average rate for the popular 30-year fixed mortgage is 3.52 percent, as of May 4, a decrease of 4 basis points since the same time last week. In early April, the average 30-year fixed mortgage rate was much higher, coming in at 3.79 percent.
REX Home Loans can provide buyers with a competitive, low rate. In fact, REX Home Loans can save the seller’s money, too, with the average seller saving nearly $20,000 in fees.
“The usual Spring buying season will be missed, however, so a bounce-back later in the year will be insufficient to make up for the loss of sales in the second quarter,” Yun said. “Overall, home sales are projected to have declined 14 percent for the year.”
Can people buy homes with social distancing in place?
Before the Coronavirus, a typical Sunday across the country would consist of groups of people wandering around homes that are for sale, envisioning their new life in a new home. With social distancing in place, people gathering in groups have been banned, and homeowners don’t want strangers touching surfaces in their homes.
However, with help from technology and a few tweaks in human behavior, the ability for people to buy homes continues.
The first step to buying a home is securing prequalification. Buyers might imagine this happening in a crowded bank as they talk with a mortgage loan officer. However, REX Home Loans has always operated online or via the phone. Prospective buyers can start the prequalification process by filling out an online form or giving a REX agent a call. REX Insurance also offers online coverage to help homeowners receive full coverage and also prepare for the unexpected times we are all living in.
Next, it’s time to view the home. NAR reported 58 percent of buyers are using virtual tours, and 43 percent of real estate agents said buyers have taken advantage of e-closings. The same survey said 25 percent of agents had at least one client enter into contracts on a home they have not physically seen.
“Expect second-quarter home sales activity to slow down with the broad observance of stay-at-home orders, but sales will pick up when the economy reopens as many potential home buyers and sellers indicate they’re still in the market or will be in a couple of months,” Yun said. “Home prices remain stable as deals continue to happen with the growing use of new technology tools. Remarkably, 10 percent of real estate agents report the same level or even more business activity now than before the economic lockdown.”
The National Realtor’s Association reported that 30 percent of agents were able to perform closing transactions for home sales with social distancing measures in place. Forty-one percent still felt face-to-face interactions were necessary but used gloves and masks to help protect all parties involved.
Thirty-five percent of agents said there had been no delays in closing due to the pandemic.
“Although the pandemic continues to be a major disruption in regard to the timing of home sales, home prices have been holding up well,” Yun said. “In fact, due to the ongoing housing shortage, home prices are likely to squeeze out a gain in 2020 to a new record high. I project the national median home price to increase 1.3 percent for the year, though there will be local market variations, and the upper-end market will likely experience a reduction in home price.”