How to Buy a Home During COVID-19
The Coronavirus doesn’t have to wreck your real estate plans. Warren Buffett says buyers should “be greedy when others are fearful.” As Coronavirus leads to school closures, job loss, and a bear market for the Dow Jones, people are way past fearful. But what does this mean for the real estate market? As Coronavirus social distancing measures take effect, mortgage rates have dropped drastically, along with less buyer competition and less open houses and in many major cities including San Francisco, California - no open houses are allowed. Real estate price tags are in the air. But you might be wondering, “Hasn’t Bay Area real estate always held its value?” Historically, it has. Today’s low prices could be a once in a lifetime opportunity for buyers. But it’s important to understand all the facts before jumping into the market.
Last week, 30-year fixed-rate mortgages hit an all-time low since 1971. Mortgage applications and refinancing skyrocketed, as borrowers were looking at what would quite possibly be the lowest rate they would ever see. But why exactly are mortgage rates so low?
Sellers
The first piece of this puzzle is sellers, the property owners. How will they respond to Coronavirus COVID-19 measures? According to a California Association of Realtors Survey, nearly half of Real Estate Agents surveyed expected the Coronavirus to lower the number of home property sales and lengthen properties' time on the market particularly due to the mandated hold on all open houses whether public or private. About a quarter of real estate agents predicted lower sale prices. While that may sound gloomy, for potential buyers and first-time homebuyers this could be the opportunity of a lifetime.
The National Association of Realtors survey also shows about 25% of sellers and property owners are changing how their home is shown to buyers due to Coronavirus mandates and COVID-19 government-issued real estate policies. For California, real estate agents have been asking to halt and stop open houses for the next three weeks. Many seller’s agents are prioritizing virtual tours through home property videos and pictures, giving first-time homebuyers a complete digital look before inviting them in when the anticipated COVID-19 policies are lifted.
Sellers may also worry about timing. Generally, there will likely always be sellers who need to sell fast for personal reasons such as retirement, death in the family, job relocation, expanding family, or others. But many might be hesitant if prices drop too far. It’s possible that there may be a time coming that there aren’t enough homes for sale to meet the demand from homebuyers. Only 3% of NAR’s surveyed home sellers said homes were removed from the market due to the coronavirus.
In the long run, a bear market could also lead to less home construction and repair, meaning fewer homes on the market. But in recent months, home builder confidence has skyrocketed according to the National Association of Home Builders. Low-interest rates make building more profitable than ever. Builders are more inclined to build properties. Property sales depend on how many new homes are constructed, and as builder confidence has been high, the number of properties for sale could very well stay high, or at least not dip below demand.
In short, property sellers are not a major obstacle for now. In fact, less populated showings and Coronavirus measures may actually make things easier for you as a first-time homebuyer or general homebuyer, as you won’t have to deal with as many other buyers.
Other Buyers
Other buyers will be hugely important to Coronavirus’s impact on real estate, but buyers are also something of a wild card. They can be unpredictable.
We know first-time homebuyers are scared of Coronavirus. Nobody knows for sure if they’ll be fearful about getting into real estate, but this is certainly the case at present. Coronavirus precautions, social distancing, and self-isolation mean less buyer competition right now. There are fewer buyers searching for properties, fewer buyers at open houses, and fewer buyers even thinking about real estate as the world seems to shut down. The exception to this are investors who purchase properties that will appreciate or properties they can add value to later. This is good news for first-time homebuyers as investors are not looking at the same properties. If you’re a first-time homebuyer looking for a move-in ready home, this is an excellent opportunity for you!
As mortgage rates drop, mortgage applications could very well skyrocket. Sure, for now buying a new home or a second home during COVID-19 measures and policies may seem like a bold new idea. While others are fearful, readers like you are educated and may now consider the incredible upsides to buying a new home while prices are low in a historically stable area like San Francisco. But as more potential homebuyers in San Francisco read articles just like this one, that could very well change. There’s no guarantee that people will stay away from the market for long.
But does that you mean you should throw in the towel? Of course not! Take the time to research, to be extra diligent during these fearful times. You could very well slay this bear market if you do you pay close attention, watching for properties and showings while the getting is still good.
The Fed and Refinancing
In the past weeks, both the stock and the bond market plummeted, with 10-year Treasury bond's yield going below 1% for the first time in history. Interest rates from banks and the FED is at an all-time low as The Fed dropped rates down to 1.25%. The rate for a 30-year-fixed mortgage dropped to 3.73% last week, the lowest in many years.
As rates hit an all-time low, many homeowners rush to refinance, trying to take advantage of low mortgages not seen in many years. As treasury rates drop, home refinancing is likely to increase until rates stabilize. However, the recent spike has backed up lenders. The sheer number of refinancing applications has created a quea, meaning in the immediate future, refinancing may not be as smooth or simple as before.
Your Action Steps
Low prices from the break out of the Coronavirus mean this could be a once-in-a-lifetime opportunity to find the perfect house at a low price in an otherwise high priced, stable real estate market. However, sellers and agents probably don’t see this as the time to educate buyers about the market.
You’ll want to do your research and do it fast. Find out what sort of property you’re looking for and then find a knowledgable agent. The sooner the better. Come into this very unique time for the market prepared to make the most of it.
Then be ready to jump through hoops. Accept that open houses may screen you or be completely digital during this time. But know that these barriers are actually helping you - you’ll have less competition.
Finally, be ready to slay the bear. A bear market, any economic downturn, can scare people out of the market entirely. But like Buffett says, those who are willing to face it bravely often do extremely well for themselves. These are scary times, yes. But if you can keep your head while others lose theirs, arming yourself with an agent and real estate information, this could very well be the best time in your life to buy your dream house.
Check out these Money.com mortgage lenders.
LINKS TO OTHER BLOG ARTICLES
QUICK GUIDE TO BUYING A HOUSE IN SAN FRANCISCO
THINGS YOU CAN DO WHILE QUARANTINED AT HOME
HOW TO BUY A HOME DURING COVID-19
GOVERNOR GAVIN NEWSOM’S EXECUTIVE ORDER EFFECTS ON REAL ESTATE
About Our Founder, Crystle
As the CEO of a San Francisco founded, global tech startup, Crystle understands from experience what it takes to succeed. Her real estate experience spans from successfully managing multiple properties over the last decade including residential, commercial, and mixed-use, as well as her time spent actively investing in flipping properties, tax liens, tax deeds, and other property types. Crystle shares her firsthand experience and knowledge with clients through the process of buying or selling your property.
You might ask yourself, “What does a tech startup have to do with real estate?”
Good question! Everything about Crystle exudes intention. Her ultimate goal is to grow her tech company so that she can utilize its philanthropic arm to fund micro-housing for the homeless in partnership with key, long standing and successful social services organizations in San Francisco. Real Estate gives her the ability to network and learn about developing land to purchase in the future to develop the micro housing. Her time serving on boards for these non profits gives her the knowledge of what these organizations really need to be able to get more people off the streets for good.
The same cornerstones that drive success in her tech company are the same cornerstones that make her the best real estate agent to work with: honesty, transparency, integrity, and a relationship- focused mindset toward life.
Crystle was born and raised in San Francisco’s Inner Richmond district and continues to choose to establish her future life in San Francisco as well. She is a woman of her word. She not only financially supports several not-for-profits, but also regularly serves in her community helping the homeless, youth, and those in poverty.
In her spare time, she is an active and current member of the Board of Directors of Lutheran Social Services of Northern California and the APA Heritage Foundation Committee of San Francisco. She has previously and faithfully served on the Board of Directors for Zion Lutheran Church and School of San Francisco, the Board of Directors for Designing a Difference, the Board of Directors for APAPA San Francisco, a member of the Friends of Smuin Ballet, and as a Co-Chair for the Princess Project.