The novel coronavirus has of late been making all sorts of headlines.
From the global closure of schools to the search for the elusive vaccine to the funny lockdown activities across the world…the virus has indeed kept the media houses busy. The real estate industry has not been left behind, with some unique headlines that arouse public interest.
Search Google for real estate news and you’ll see results related to “falling house prices” “0% interest rates” “stock market crash” and even news about the impact of the virus on real estate.
And this raises the question: Is now a good time to invest in real estate? We think it could be. And we’ll share some thoughts referencing what has been happening in the property market to explain why this is the case.
Low Mortgage Rates
The incredibly low mortgage rates that lenders are offering present a great opportunity to save some money when investing in real estate.
In June, for example, mortgage rates hit a record low, with some lenders even offering 30-year mortgages below 3% for owner-occupied houses. Such low rates make owning a house more affordable than renting.
However, low mortgage rates may not necessarily make houses affordable. Sometimes, when homes become more affordable due to low rates, sellers may respond by raising the asking price by up to 30%. The good news; in the real world, this doesn’t happen instantaneously.
Buying a home is a complex process that involves many parties, high closing costs, and lengthy transactions (check this article for a complete guide to real estate transactions). But with mortgage fees being the single highest cost for any homebuyer, there is no better time to buy a house than now when mortgage rates are at historic lows.
Motivated Sellers and Few Buyers
When a recession hits, you know it’s a good time to invest in property. That’s because a recession, like the one created by COVID-19, creates very motivated sellers. Even though recessions result in a shortage in housing supply, they also create a lot of distressed homeowners.
The COVID-19 pandemic has caused many sellers to pull their listings off the market.
At the same time, some buyers have decided to put off buying until the market stabilizes. The latest survey from NAR should give you insights into how the market is responding to changes in seller and buyer behavior. According to the survey:
● 37% of sellers reported a decrease in buyer interest
● 23% of the respondents reported seeing sellers pulling their listings off the market
The takeaway from this data is that if you choose to buy property now, you’ll find a good supply of housing inventory to choose from, and at an affordable price due to the changes in demand.
Today, Real Estate Offers Stability that Stock Market Cannot
Market volatility is inevitable—it’s common for markets to move up and down. However, the sudden toll COVID-19 has taken on the global economy demystifies how volatile and unstable the stock market is compared to the property market.
For instance, analysts report that since Feb 2020, market capitalizations across BEACH industries (booking, entertainment, airlines, cruises, and hotels) have sunk by a whopping $332 billion. The pandemic has plunged the travel industry into uncharted territory.
While it’s not all roses and sunshine in real estate, the property market is quite stable and in most regions, sales are happening as usual. In fact, some markets have seen home demand exceeding supply and homes selling quickly for top dollar.