Is now the right time to buy a home? This is a question floating around countless Americans’ minds as our lives seem to be on hold because of COVID-19.
With the current state of our economy and the hovering uncertainty plaguing our lives, does it make sense to purchase a home right now?
While there is no perfect answer to this question, there are several things you should consider before deciding to buy a home in 2020.
Let’s take a closer look at the why’s and why not’s.
I'll help you feel a little more confident about your decision to buy a home during the COVID-19 pandemic.
Let’s dig deep into the pros and cons of buying a home in 2020.
Why Should You Buy a Home in 2020?
It goes without saying that if the situation is right for you, it makes sense to purchase a home in 2020.
The perfect answer to this common question that’s clouding Americans’ minds truly depends on your circumstances.
Here are a few conditions that make it enticing to buy a home amid the COVID-19 pandemic:
Interest rates are currently at an all-time low for buyers. This is a motivating force when it comes to deciding to buy.
As of the date of this article, the 30 year fixed rate is around 2.86% and the 15 year fixed rate around 2.37%.
In short, the incentives for buying a home are pretty convincing.
If you can afford to buy today, how can you turn down those fantastic rates?
Well, you don’t.
But before you jump into making the purchase, read through the rest of my article for some things to be cautious of when buying in 2020.
You’re In the Right Position
It’s no secret that people spend years saving, preparing, and waiting to be in the right position to purchase a home.
Some renters are fast approaching the end of their lease term and don’t want to renew.
Lack of privacy, pesky neighbors, and missing out on the tax benefits of being a homeowner are just a few reasons why some people don’t want to wait.
Even more, you might have recently sold a home and simply need a new place to live.
So, what happens if 2020 was finally going to be your time to buy or ended up being the time you needed to buy?
If you are still in the right position to do so, then go ahead.
But be sure to do your research now more than ever before you sign the dotted line.
What to Consider Before Buying a Home During the COVID-19 Pandemic
Whether you’ve lined everything up perfectly to make a home purchase or you’ve just decided to go with your gut and see how things play out, there are several things to keep in mind before you head to the closing.
Here are a few:
Do You Have Solid Credit?
Your credit score dramatically impacts the interest rates and buying options you’ll get when purchasing a home.
Be sure to do all the leg work to get your credit at its best before going all in.
Do You Have a Down Payment?
While some professionals will tell you that a down payment isn’t necessary, you really should aim to have 20% of your purchase price to put down upfront.
This will help you avoid the cost of private mortgage insurance, also called PMI, that you might not be informed about.
In most cases, PMI costs between 0.5-1% of your purchase price. A fee that you continue to pay on top of your principal payment, every month!
Is Your Job Stable?
This is something fundamental to consider, especially amidst the COVID-19 pandemic.
Do you have a good job?
Are you blessed with a stable income?
If you’re uncertain about your career or the future of your income, it might be best to wait to buy a home.
Can You Live Comfortably If You Purchase?
It’s important not to overextend yourself in making mortgage payments.
Can you purchase this home and still live comfortably?
If you don’t think you can comfortably make payments on your home for at least 3-5 years, hold off.
Do You Have a Realtor You Can Trust?
Another of the most important things to do before purchasing a home in 2020 is finding a realtor you can trust.
A great realtor will give it to you REAL and provide you with information that is to YOUR benefit, not the realtor.
A great realtor will also help negotiate on your behalf.
This will ensure you don’t overpay for your new home and that you get the best deal possible.
Why Should You Wait to Purchase a Home in 2020?
Now that you know some reasons why you should buy a home and what to consider before you do, are there reasons why you shouldn’t buy a home in 2020?
Due to COVID-19 pandemic, there are several reasons why you should wait.
- Unemployment rates are high. Even if you are currently employed, be sure you have a sense of stability for the future of your employment.
- Companies are closing or downsizing. With companies closing, people are losing their jobs at higher rates than ever. Furthermore, many businesses find that they can work at a lower capacity and eliminate several positions without being affected. Whether you are worried about your company closing or are a business owner yourself, it’s essential to consider this before making your decision.
- It’s a time of uncertainty. Even if you have a great job and aren’t worried about the future, we are living in a time of great uncertainty. The state of our economy, the upcoming government stimulus package, the upcoming election are all things that leave us faced with great uncertainty today.
The Supply and Demand Waves
The current status of our real estate has lead to an increase in supply and decrease in demand. We can expect this to continue in waves.
Right now, we are in a sellers’ market due to a shortage of inventory.
We’re currently sitting at a two-months worth of supply, but we are past the peak of this surge.
Between 4.1 and 4.2 million borrowers are currently in forbearance. That means that around 8% of mortgage loans are presently deferring payments for a time.
Mortgage lenders offer programs that allow borrowers to defer payments due to hardship. Because of the COVID-19 pandemic, borrowers are currently extending their payments for six months.
So, what happens when that 6-month forbearance ends?
Either borrowers can’t make their payments and need to sell their home, or homeowners are offered another six-month extension.
Since the first six month period is expected to end between October and November, we can expect a surge in supply when homeowners are forced to sell.
We can also expect another wave six months from that when the twelve-month forbearance period ends.
What does this mean?
Prices of homes are set to drop in six and twelve months.
So, if you wait to buy, it’ll play in your favor as the market changes.
With all this information, it’s important to circle back and remind you that buying and selling is a decision unique to each individual.
Is now the time?
For your circumstances, it just may be the perfect time to purchase a home.
If what you read in things to consider and why you should wait sections of this article resonate with you, then the right decision is to wait.
Whatever choice you make, educate yourself on how to get the best possible deal before you head to your closing.
And be sure to get a professional real estate agent you can trust to help you navigate the process.
If you have any questions or want to discuss your circumstances further, get in touch with me!
I’m here to VEST in your future!