Current Market Trends and Your Home-Buying Plans
With the COVID-19 pandemic raising numerous fears of a recession far larger than the one that took place in 2008, many individuals without as much available cash were hoping that the real estate market would shift dramatically and bring house prices crashing down. Certainly, the market was rocked by the pandemic, however not exactly in the ways that many had anticipated.
While it is true that the median home price did not rise as much as expected, it is also the case that it didn’t exactly drop. According to the chief economist with Realtor.com, the initial expectation was for the average price of a home to rise anywhere between 2 and 4% during 2020. After the coronavirus outbreak, forecasts were adjusted and now show home prices staying either fairly consistent to what they were in 2019 or rising by around 1.1%.
The reason for this is that prior to the pandemic there was a far greater demand for homes than there were homes actually for sale. Prices therefore began to climb dramatically. Now, while the demand for homes has fallen as many people chose instead to wait for a safer period of time before purchasing a home, the amount of homes actually for sale is also dropping. The reason? People don’t want to sell their homes for less than they believe they are worth. Instead of dropping the prices, many individuals are choosing to simply postpone selling their property until the market begins to level out somewhere in the future.
According to some reports, the number of homes on the market dropped by 45% during the month of April. This indicates very strongly that people are choosing to sit on their properties in the hopes of an economic return of some sorts.
Mortgage rates, on the other hand, are definitely down. By a lot. Last year, the interest on a home mortgage hovered somewhere around 4%. This year, it is expected to sink to 3.2%, perhaps even lower than 2% during the upcoming late summer and fall. While this definitely makes purchasing a home more attractive, it also comes with some added caveats.
For instance, banks and other financial institutions are a lot more concerned about credit scores than they were before. Additionally, many are insisting that people place a much higher down payment on a home than previously expected, with 20% of the closing price being increasingly expected before a lending company will consider backing the buyer. This again places many people in a position of needing to postpone any hopes of buying a house until some point in the murky future.
We will continue to keep you abreast of real estate news as the pandemic unfolds.