While the current crisis is primarily a public health one, the economic downturn has led many of you to wonder how the real estate market is affected, whether you are hoping to buy, sell, refinance or just understand the impact on your financial health. we wanted to explain how the pandemic has affected real estate showings and closings.
Current State Market Overview:
The residential real estate market is seeing a downtick of approximately 30-35% of activity from what is considered a normal spring market. Housing inventory continues to be constrained. Some sellers are hesitant to list and waiting for normalcy resume, which causes more restraint to housing inventory. There is still pent-up demand from buyers looking to purchase, which has caused a bit of a stalemate in the market.
What does this mean, whether you are looking to sell or buy? The basic principle of supply and demand means that property values will continue to remain steady, or even increase, as inventory remains constrained. Buying and selling will continue, as people will always need to move for various reasons.
Financial Market Perspective:
In a recent conversation with Ron Erdmann, Regional Manager/SVP of Mortgage Lending at Guaranteed Rate, he noted that many buyers have been on the sidelines for the last year waiting for the right house to come along. It has been a buyer’s market the last few years, and as new listings begin to emerge, he is seeing an increase in buyers calling for preapproval.
Significantly lower interest rates are also boosting affordability. In Nov 2018, the average 30-year mortgage rate was 4.94%. Last week, it was 3.23%. For a $275k mortgage loan, this lowers the monthly payment from $1,466 to $1,193. A buyer who could afford a $1,466 payment on a $275k mortgage payment in 2018 can now borrow $337k for the same payment, and homes that buyers were priced out of before are more affordable today.
Many lenders are still offering competitive mortgage financing for qualified buyers with as little as 3% down payment if they meet the required income and credit standards that lenders have. However, there are a number of banks and lenders are starting to severely limit mortgage financing options and requiring 20% down payments.
Business as Usual (But with Some Tweaks):
If you are buying or selling, there are some updates on showings and closings as a result of the pandemic.
- Timing: Showings must be spaced out so there is no overlap in showing times. We have seen next showing appointments waiting patiently in their vehicles until the house is clear for their appointments.
- Sanitization: We have been wearing gloves, a mask, using hand sanitizer and booties when available and requiring our clients to do the same during any showings.
- Limiting the Attendees: We all love our kids, but we are asking clients to leave their children or other family members at home if possible.
- Utilizing Technology: We have embraced video technology to showcase listings with virtual tours and even videoconferencing with clients and our team to maintain proper social distancing while keeping things still on track.
- Closings: Title companies are also taking steps to ensure your safety during closings. They are using proper precautions with sanitization and limiting attendees at closings as well. One of our clients even closed on their new home in the parking lot of the title agency at a folding card table!
We hope this helps to answer any of your questions on the market and our plan moving forward to ensure the health and safety of all of our friends and family. Feel free to call us if you have any questions about what is outlined above, if you want a more detailed analysis of your real-estate situation. Please know that we are thinking about all of our clients, especially if you’ve experienced any sort of health or economic hardship. Stay safe and healthy.