Blog posted On May 14, 2020
The coronavirus or covid-19 pandemic has impacted many industries including the real estate industry. Widespread layoffs and furloughs have caused economic disruption and social distancing procedures have impacted the way people do business. As states and municipalities gradually start to reopen, home buyers, home sellers, and renters will start to see the long-term impacts on the post-pandemic housing market.
Before the pandemic, low mortgage rates and a strong economy were setting the stage for a busy spring home buying and selling season. In recent years, the biggest challenge home shoppers have faced has been lack of available homes for sale. The pandemic has caused some home sellers to delay putting their home on the market or pull the listing, further contributing to low supply.
Mortgage rates have remained low, trending even lower according to some sources. Buyers who can find a home for sale have an opportunity to lock in a lower interest rate for years to come. Some lenders are tightening their credit standards or restricting loan funding to protect liquidity. As a well-capitalized, direct lender, we are prepared to continue offering our same loan products with the same requirements.
The demand for video tours and virtual listings has surged in recent weeks. Although pandemic-related restrictions have changed the way we tour homes, people who needed to move before stay-at-home orders, likely still need to move. Realtors and real estate agents are swapping live video walk-throughs for in-person tours and improving online listings with video and 3-D images. Many parts of the mortgage process can be completed online or through our mobile app.
Although the Great Recession caused home prices to drop, the circumstances for the current economic downturn are vastly different. While the financial crisis of 2007-2008 was brought on by risky lending, today’s lending standards are strict and safe. Despite an impending recession, home prices will likely still continue to appreciate because of mismatched supply and demand. National Association of Realtors (NAR) chief economist, Lawrence Yun, predicted, “I think given the inventory shortage prices will still rise on the affordable homes and mid-priced homes.”
With layoffs and furloughs prompting a nationwide “rent strike,” April’s rent collection was stronger than expected, according to Forbes. With nearly 26 million unemployment claims filed in recent weeks, more of America’s 44 million renting households may be forced to pay a reduced rent or skip the payment entirely. Missed rental payments will especially hurt “mom-and-pop” landlords, or individual property owners collecting rent on an investment property.
If you choose to act as a landlord on an investment property, it’s important to think ahead to situations like this. Save an emergency fund if you can to cover your investment property’s mortgage in the case of missed rent. Consider shorter-term leases so you can replace a non-paying tenant with one who is able to pay the rent. Work with a lawyer to write a lease agreement that meets your needs and always protect yourself financially. If you can’t pay your mortgage because of your tenant’s missed rent, that will still hurt your credit score.
If both buyers and sellers return to the housing market this summer, most real estate professionals expect things to pick up where they left off. Low mortgage rates, sustained home price appreciation, and social distancing adjustments will likely keep everyone moving.