The coronavirus pandemic has been the defining feature of 2020. For many industries, the pandemic has been a major disruption. Restaurants and entertainment have been particularly hard hit by closures and restrictions. This has led to an increase in permanent closures, as well as a loss of jobs for employees in these industries. Many predicted that the pandemic would destroy all aspects of our economy, including the real estate market. However, real estate has defied all expectations and new home sales have boomed over the year. The house buying frenzy has been fueled by historically low mortgage rates designed to buoy the pandemic-hit economy. Recently, the world has learned that relief from the pandemic might be on the way from two different vaccines. This is great news! Everyone wants this pandemic to end. The question is, what do these vaccines mean for the real estate market and mortgage rates? 

Two Coronavirus Vaccines On The way

Just recently, the world received some incredible news about the ongoing coronavirus pandemic. Two separate vaccines have demonstrated through testing that they are highly effective at preventing people from getting COVID-19. First, Pfizer announced that a vaccine they have been working on is over 90% effective at preventing COVID-19. A few days later, they released test results that indicate it is over 94% effective in preventing the disease in people older than 65. This is fantastic news considering people over 65 and those with underlying health conditions are most at risk from the virus. A few days later, Moderna announced that their own vaccine has proven to be 94% effective in their set of clinical trials. 

These dual announcements mark an important turning point in the pandemic. Effective vaccines can help inoculate large portions of the world to this virus and allow us to start getting back to normal routines. People will be able to return to work. Kids will be able to return to school. We will be able to safely eat at restaurants and watch movies in a theatre. 2020 has been anything but normal. Effective vaccines will help us get back to some semblance of our lives before the lockdowns started in March. 

The announcements by Pfizer and Moderna mean that it’s no longer a question of if we will get a vaccine. Rather, it is a question of when. That question is complicated. The vaccines are still awaiting final approval from the FDA. After that, they will need to be mass produced on a scale large enough to distribute to most of the world. Even then, states are still figuring out how it will distribute them and who will get them first. There is light at the end of the tunnel. It is just difficult to tell how long it will be until we are finally basking in it. There is no doubt that the coronavirus pandemic has greatly impacted our economy. Now, the question is how the vaccine will impact it, as well.

What the COVID-19 Vaccines Mean for Real Estate

Once the vaccine is widely available to the masses, the real estate market will be impacted. There will probably be some impact on both the demand for buying new homes, as well as the supply of homes available. 

COVID-19 Vaccines Will Impact Mortgage Rates

The first way in which the COVID-19 vaccine will affect home sales is by changing mortgage rates. Today’s historically low interest rates are thanks to decisions by the Federal Reserve to offset the economic impacts of the pandemic. Theoretically, the vaccine will be a shot in the arm to our economy, which will take away the need for rock bottom interest rates. This means that home buyers should not expect mortgage rates to fall any lower than they already are. In fact, mortgage rates might rise a little next year. However, they shouldn’t rise to the point where people stop buying homes. The Federal Reserve will be hesitant to raise interest points too much because we are still in recovery mode. This does mean that this might be the last time to take advantage of historically low mortgage rates. If you have wanted to buy a new home or refinance your current loan, you probably want to do that now.

COVID-19 Vaccines Will Impact Housing Inventory

The second way in which the COVID-19 vaccine will impact home sales is that it will probably mean that home inventory will remain low. At the beginning of the pandemic, many prognosticators predicted that the real estate market would collapse, just like 2008. One of the reasons for this prediction is that the pandemic would cause a wave of unemployment, which it did. This wave of unemployment would then cause millions to fall behind on their mortgages, which also happened. Then, banks would foreclose on their homes, which would put a bunch of homes on the market, driving down home prices. This last part did not happen. 

The federal government foresaw this potential problem and worked to prevent a wave of foreclosures. In the first coronavirus stimulus package, the CARES Act, there were provisions that stopped foreclosures from happening. There was an eviction moratorium. So, even though millions did fall behind on their mortgages, we didn’t see the wave of foreclosures. And it doesn’t seem like this will happen in the future. The vaccine means that millions of Americans should be able to return to work at some point in the future. Getting millions back to work means that millions will be able to catch up on their mortgage payments. 

Even if the vaccine wasn’t around the corner, there were already signs that a wave of foreclosures would not occur. The number of mortgages in forbearance has been on the decline since it peaked in May. This means that house prices will remain high, as home prices have been pushed higher all year because of low inventory. Some people have sat on the sidelines of this red hot real estate market because they wanted to see if home prices would crash. Now, it doesn’t look like that will happen. So, if you have been waiting to get a new house at a discount, it doesn’t look like you will have that chance. The best chance you have of saving money on a new home is buyine one now while mortgage rates are still low. 

Final Thoughts

The promise of not one, but two vaccines to end the coronavirus pandemic is the kind of good news we deserve. Millions have been out of work and every aspect of our lives has been disrupted. These vaccines give us the hope that our lives will return to normal soon. What they also mean is that right now is the best time to buy a new home or refinance your current home. The COVID-19 vaccines will be a shot in the arm to the economy. It will prevent a flood of homes from entering the market and mortgage rates from falling lower. If you have been waiting to see if you will get a better opportunity to get a new home or refinance, the answer is probably no. There is only a risk that mortgage rates will increase and so will home prices. If you would like to take advantage of today’s low mortgage rates, contact us. The team at Peoples Choice Mortgage will give you a complimentary qualification review to see if you qualify for your dream home.