Real Estate Matters: Is buying a home in the wake of the COVID-19 pandemic a good idea?
In the past few weeks, we have received questions about COVID-19 and 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.
We 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, Redfin and others. We'll continue to report what we see and make suggestions on how you might want to move forward.
Q: The whole COVID-19 pandemic has made me very 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? Do you feel that it is a good time since interest rates are low? Or do you feel the housing market will crash and buyers should wait?
A: That's a loaded set of questions. Given what we don't know about the coronavirus/COVID-19, where you live, and how long the country (and world) will be locked down, we can't provide a definitive answer.
Let's start with the basics. If you want to move, and you find a home that seems right for you, you have job stability and 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 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 also historically low interest rates. While we don't know if property prices will go that low again, and the government is using the CARES Act to try to support Americans by providing cash, deferring mortgage and other debt payments, and keeping businesses from laying off people, many Americans simply 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 the shock of the Great Recession back in 2008 and the second one is the one just beginning with the COVID-19 pandemic.
While most people are focused on the immediate impact of the virus -- the lives lost, the health issues, and the immediate financial costs -- the longer-term prospects look bleak for the real estate market. As unemployment goes up, the number of people that can afford to buy homes or, at the very least, are willing to buy a home is reduced. Unemployment and job insecurity will contribute to a huge drop in the people looking for real estate.
Without a job, people will have trouble paying rents and mortgages. The current government aid programs are working to get immediate cash to people affected by the current 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.