Should I Buy A House During A Pandemic?
Friday, Jun 5 2020
Q: I’ve been planning to buy my first home this spring, and I’ve spent years preparing for this purchase. With the Coronavirus, I’m wondering if I should go through with my plans. So, what does home buying during a pandemic look like?
A: The coronavirus outbreak that has swept through the world while wreaking havoc on the national and global economy has given rise to dozens of financial questions. The uncertainty that characterizes this time is confusing the average American and financial experts alike.
No one can say what kind of lasting impact it will have on the economy. Experts can only look at past economic crises and downturns to try to predict what the financial future will look like in the United States.
Let’s take a look at the mid-pandemic housing market and explore purchasing a home during a time of economic instability.
What Does Home Buying During The Pandemic Look Like?
In a twist of irony, the home sales of February 2020 were the strongest they’ve been in the country since 2007, topping 5 million sales.
Factors like falling interest rates and a booming economy contributed to the thriving housing market.
Lawrence Yun, the chief economist of the National Association of Realtors, says the market has turned sharply, adding, “The coronavirus has undoubtedly slowed buyer traffic and it is difficult to predict what short-term effects the pandemic will have on future sales.”
The decrease in home sales is also likely due to practical reasons. When people are worried about their health, it’s difficult to think about purchasing a new home. Meeting with potential sellers and real estate agents and looking at properties is also complicated when trying to maintain social distancing.
No one knows when the spread of the coronavirus will ease, but when it does, and normal life resumes, the market may see an increase in sales.
Does it make financial sense to buy a house now?
A dwindling housing market does not automatically mean this isn’t a good time to buy a house. In fact, times of financial uncertainty generally lead to falling mortgage rates and the ease of credit qualifications. Mortgage rates have already reached a record low of 3.13 percent in the beginning of March, prompting some buyers to rush into new home purchases.
The rate, however, has since jumped back up to 3.65 percent, though it is still relatively low and may fall again.
It takes more than just a favorable mortgage rate to make a home purchase a sensible decision.
Some market experts believe the coronavirus pandemic will cause an eventual spike in home sales as buyers, fearing a recession, will want the stability and control that homeownership brings. A fixed-rate mortgage will not be subject to the peaks and valleys of a volatile national interest rate. It can also help the owner feel secure if job loss and unemployment become the norm.
Before You Buy…
Before you jump into a home purchase, step back and look at your entire financial picture. Consider the following factors:
- How stable is your income? If you believe you might be facing a layoff, you may want to hold off on your purchase. Mortgages will need to be paid each month, regardless of your employment status.
- How long do you plan on living in this home? If you anticipate living in your new home until you’ve paid off your mortgage, it can be a great time to buy a house at a low interest rate. However, if you plan on selling within the next few years, you may come out at a loss due to an unstable economy.
- Will you have savings left after going through with the purchase? As the economy heads toward a probable recession, this is not the best time to be without a savings cushion.
The coronavirus outbreak has destroyed all kinds of plans, from vacations to weddings, parties and more. That doesn’t mean you need to put your plans of buying a house on hold. If you can comfortably afford the purchase and your income isn’t threatened by the economic instability, the favorable interest rates and looser qualifications can make this a good time to buy a new home. Talk to one of our Mortgage Officer’s today to see if home buying during the pandemic is right for you.