Can Surging Home Sales Withstand a Surging Pandemic?
2020 has been anything but normal. Several trends have seemed to persist that nobody would have believed in the beginning of the year. The first trend is the pandemic. When lockdowns were put into place in March, many thought this would be a blip. Instead, we are nearing 2021 and the pandemic is at its worst point in the entire year. The other trend that few people anticipated was the surging real estate market. Many feared that the economic slowdown due to the pandemic would result in a real estate crash like 2008. Instead, home sales have dramatically increased and so have home prices thanks to historically low mortgage rates. However, with many places considering stricter lockdowns to control the coronavirus it is reasonable to wonder if the red hot housing market can be sustained. Can surging home sales withstand a surging pandemic? We think it can.
The State of the Pandemic
The pandemic is worse than it has been at any point in the year. Just this week the United States has recorded the most deaths in a single day, as well as the most hospitalizations. Furthermore, the outbreaks are more widespread than they have ever been. Our nation has weathered several surges of the coronavirus in 2020; however, these previous surges were geographically isolated in some sense. In March and April, the Northeast was particularly hit hard. In the summer, the West and South were the hotspots. Now it seems like the pandemic is raging everywhere. States in every region are experiencing daily highs in every bad statistic possible.
To stem the tide of this current viral surge, many of the restrictions we thought were a thing of the past are now more necessary than ever. The case numbers in Los Angeles County are so frightening that the Mayor of Los Angeles just initiated the strictest lockdown of the year. All residents are supposed to stay in their homes and are not even allowed to go on walks or ride their bikes. Other communities will soon be forced to make tough choices for themselves, as well. Even in our own backyard numbers are rising. Areas like Cape Cod are seeing rapidly rising numbers of cases and hospitalizations. By all measures the pandemic is getting worse and communities are going to start taking drastic measures to curb it.
The State of the Real Estate Market
Overall, home sales have fared far better than anyone would have expected this year. New home sales are up over 40% from last year. However, home sales have started to decline for the second straight month. There are a few factors that go into slowing home sales. First, home sales are cyclical. Every year home sales decline in colder months and then pick up as the weather warms. Second, home prices have been rising all year. There is a chance that potential home buyers are balking at new home prices. The third factor is the pandemic. The rise in cases might be causing some buyers to wait. The question is whether or not this slowdown is temporary or if it is a sign of things to come. Does the surging pandemic mean that we have seen the end of surging home sales?
The Real Estate Market Will Adapt
Even if states and localities are forced to adopt very strict measures to control the pandemic the real estate market will adapt. If 2020 has demonstrated anything it is that we are adaptable and innovative. Remember, where there is a will, there is a way. And, as long as mortgage rates are at historic lows, there will be people who are willing to buy homes. For some, this means merely waiting out the current virus surge. We are currently in the midst of the biggest case surge since the pandemic has started, but it will not always be this way. We will get over the hump, and when we do, home buyers will continue to take advantage of low mortgage rates. For others, there is no need to wait.
This year many of our routines have been disrupted by the pandemic. Many people are now working for home and going to school from home. Instead of letting the pandemic stop us in our tracks, we merely found ways to work around it. Same is true for realtors, home buyers and home sellers. This year, about 5% of all homes have been purchased sight unseen. Before this year, it was very rare that a home buyer would buy a new home without ever having set foot in it. This year, more home buyers are willing to take the plunge.
Realtors are adopting new technology to overcome the limitations of the pandemic.
Instead of relying on in-person tours, realtors have turned to other ways of giving potential buyers an inside look into their potential dream home. First, realtors are providing elaborate virtual tours to give buyers a good idea of what homes look like. These virtual tours utilize detailed photo galleries, video walk-throughs, and 3-D floor plans. Second, realtors are going outside the box to give buyers new angles to envision their dream homes. Some are going as far as to use drones or virtual reality to provide unique perspectives on prospective homes. These new approaches are clearly working for some buyers since they are willing to buy homes without ever having set foot on the property.
While home purchases for homes sight-unseen have increased this year, they still only represent about 1 in 20 home purchases. For most buyers, instead of never seeing a potential home in-person, they are seeing less homes in-person. Buyers are using the internet to do most of their home searching. Before the pandemic buyers would visit on average 9 homes in-person before making an offer. During the pandemic, buyers are only visiting about 4. Buyers are using all of the virtual walk-throughs to narrow their choices and are using the walk-through as their final decision maker.
Final Thoughts
The surging pandemic and the increased restrictions designed to control it will certainly slow down the home buying surge of 2020. However, it will not put an end to it. As long as mortgage rates remain at historic lows potential home buyers will do what they have to do to get their dream home. For some, this means getting comfortable with the idea of purchasing a home sight unseen. For others, it merely means seeing less houses in-person or even waiting a couple of months before pulling the trigger on buying a new home. Either way, as the pandemic gets under control and the weather starts to heat up, the real estate market should heat up with it.
For those that are interested in taking advantage of today’s mortgage rates and buy a home of their own it is the perfect time to speak with a mortgage broker. Working with a professional mortgage broker now can help you learn what it will take to qualify for a home loan. This will give you plenty of time to get your budget together and work on enhancing your credit, so that you can get the most favorable loan terms possible. Either way, if you want to buy a new home either now or in the near future, contact us now! The sooner we can learn about your situation and your needs, the sooner we can help set you up for success.
