As coronavirus lights up our media outlets, we begin to wonder how it is going to affect the economy, particularly the housing market. Stocks have been tanking – dropping almost 10% in the last few weeks. We begin to question as spring, the “busy” real estate time approaches – is housing next?
The spread of coronavirus has infected hundreds of thousands of people. Nations are declaring states of emergency, people are stockpiling household items and groceries, events are being canceled, and the US has put systems in place in case this virus becomes a pandemic.
You may be wondering if it’s a good time to buy or sell your home. While there are some ways the virus could affect the housing market, you can breathe a sigh of relief (with your face mask securely fastened), if there is a downturn in the housing market, it will not be nearly as significant as the 2008 housing crisis.
The ways we have already seen the housing market change over the last few months are record low inventory, low-interest rates, and a still solid economy.
The stock market has been unpredictable the last few weeks and when investors think the stock market is vulnerable, they sell stocks and buy less risky investments such as bonds which affects mortgage rates. When there is an increase in bonds, the price of bonds goes up, and mortgage prices get pushed down. Enter extremely low mortgage rates. With the combination of the Federal Reserve taking steps to cut rates over the last month and the increase in bond demand, mortgage rates are now hovering around 3% this week, the lowest in 4 years. Fantastic.
A Still Solid Economy
Despite coronavirus, we have still seen a solid economy in the United States. Unemployment rates dropped from 3.6% to 3.5% in February, the lowest it has been since 1969 and wage growth continues to exceed inflation. The number of new jobs being created is outnumbering predictions and innovation is at an all-time high. The labor department says that job growth averaged 243,000 a month for each of the last three months. A strong job market historically means a strong housing market.
Housing supply in most of the country is low. Buyers are trolling neighborhoods nationwide, driving housing prices up. Last spring, we saw buyers have an upper hand because of higher inventory, this spring is looking to be more of a seller’s market. More millennials are also entering the housing market looking to purchase their first home driving the number of buyers up and in turn prices up. Despite low inventory, housing applications are up 10% from one year ago. This indicates a strong housing market.
1- Move fast but be patient. With demand at an all-time high, the earlier you get into a house this year the better. We expect houses to get snatched up quickly which means you need to put in offers fast. This might also mean you will not get the house you put an offer in for. Be patient. You may have to bid on several properties before your offer gets accepted.
2- Work with a broker. Brokers have a network system. They typically have insider info from other brokers on what properties are coming onto the market. They also will be invaluable in the buying and bidding negotiation process.
3- Have your ducks in a row. Unless you are paying cash, make sure to have your pre-approval letter on hand when you start shopping. This will show the seller’s agent you are serious about purchasing the home and can typically close quicker since you are already pre-approved.
1- Consider selling even if you weren’t before. Since we predict a seller’s market, now may be a good time to put up that for sale sign. However, make sure you have a plan of where you are going to live after the sale. Have you dreamed of buying a van and traveling around the country? Now may be a PERFECT time.
2- Focus on curb appeal. Just because inventory is low, does not mean you can get away with not sprucing up your home. Buyer expectations have increased, especially in the millennial age group. Millennials prefer updated appliances, smart technology in the home, and a strong outdoor/indoor synergy.
3- Work with a broker. A broker will make sure they do everything they can to get top dollar for your home. This includes staging, marketing, and negotiating on your behalf.
It’s still too early to predict a recession. However; history tells us, with exception to the 2008 housing crisis, that during recessions the housing market remains the most stable since people will always need a place to live. The combination of low-interest rates, a solid economy, and housing inventory are the perfect recipe for real estate!
At Lovato Properties, we are with you every step of the process. After thoroughly washing your hands, please reach out if you have any questions about the state of the market and/or if you are looking to buy or sell a home.