The COVID-19 pandemic has caused the mortgage rates all over the country to fall, repeatedly, to its lowest levels in history which encouraged people to either get a mortgage for the first time or refinance their current mortgage. The heightened activity led to a boost in the price of real estate in most places.
COVID-19’s Lasting Effects
The current economic crisis has been devastating for many businesses, forcing thousands of small to massive corporations to shut down forever. However, the housing market has been resilient, even remaining active despite social distancing protocols in place in many states.
The future is unpredictable. The mass unemployment, which happened earlier this year, and the recession, which experts said is one of the worst in history, will definitely have an effect on the housing market in the years to come.
The U.S. Federal Reserve, which controls interest rates, has already warned that, even if the economy has started to recover, it will not be back to its pre-pandemic state for a while. It will take quite some time before things are truly back to normal.
That is why the interest rate for a home loan will continue to be low for at least a couple more months. Although mortgage rates are usually determined by supply and demand, the Federal Reserve still has an influence on it. Aspiring homeowners will like still have the chance to take advantage of historically low mortgage rates in the foreseeable future.
Why Wait to Buy a Home?
However, despite low mortgage rates, experts advise first-time homebuyers to actually wait until next year to shop around for properties. The mortgage rates are good, but there are not a lot of houses that are available this year. Due to the pandemic, people decided to temporarily postpone selling their houses this year. Some are cautious over allowing strangers into their homes and potentially exposing their family to the virus. Others do not want to deal with the stressful process of moving, especially if they are moving to a state that still does not have the virus under control. Many do not want to make a major financial decision, which selling a house is, during an economic downturn.
As a result, asking prices are being inflated and there are ongoing bidding wars which further raises the cost of owning a home. It is a seller’s market.
Right now, mortgages may be affordable to more people, but houses are not. According to Zillow, in 2020, the average cost of a house in the U.S. increased by 5.8%. There is a chance that the price of properties will increase in the coming months, but more houses will likely be available in 2021. If more houses open up, then the cost of owning real estate will go down. A home affordability calculator is helpful in determining what is cost-efficient for each prospective home buyer.
Buyer’s Market in 2021?
Aspiring homeowners may be able to enjoy low mortgage rates and a low price on a house if they can wait for more favorable conditions which, hopefully, will happen in 2021. For years, the sellers were benefiting from the housing market. However, by next year, the housing market may favor the buyers.
If listings increase by next year, there will be a shift toward a buyer’s market. Having a buyer’s market means the supply is greater than the demand and, therefore, those who want to make a purchase are at an advantage during negotiations. They can ask for a better deal to acquire a property.
A buyer’s market, if it happens, will be temporary. As buyers snap up available listings, the supply and demand will even out. Prices will return to normal. Aspiring homeowners should be ready to make a purchase as soon as the costs of owning a house become more favorable.
The Right Time to Buy a House
Regardless of everything that has been happening in the housing market this year, the best time to invest in a home will always be when you are financially stable. Real estate is a huge purchase that will take you years to pay off. It is a decision that should be made after carefully assessing your personal situation and determining whether you really are ready to make a long-term commitment.
A pandemic coupled with a recession is a time of uncertainty. Jobs that may seem unshakable now might disappear at any time.
No one knows what the future will hold, especially with COVID-19 still devastating the U.S. Whether mortgage rates will continue to drop and the cost of buying a house will rise is still yet to be determined. The best thing that homebuyers should do right now is to monitor the housing market and act when the conditions are favorable to them.