When it comes to buying real estate the golden rule is, “location, location, location.” However, the golden rule can also include, “opportunity, opportunity, opportunity.” Yes, you should consider opportunities of the future – even in the midst of a coronavirus, also known as COVID-19, pandemic and global panic.
There is no future in despair.
Stay safe, stay home, socially distance, and financially plan for the future now to the best of your ability.
The coronavirus, and the government’s response to it, has created investment opportunities in real estate that shouldn’t be ignored.
If you’re in the market for real estate, you should consider your options in the next few months.
This is a moment in history when everyone is terrified. However, there are many Americans who are much worse off than you.
10 million Americans applied for unemployment insurance in the final weeks of March 2020. More than that probably tried to apply but couldn’t due to an over-strained system not designed to accommodate such unprecedented numbers. Worse, the one-time $1,200 coronavirus stimulus checks that millions of Americans are waiting for probably won’t arrive until late Summer or early Fall.
I’m not suggesting you revel in the misfortune of others. Just remember that even in the darkest of times there may be an opportunity.
Life is going to become difficult for millions of people globally. Millions won’t have options or opportunities. Think of how to improve your finances or investment portfolio now. Not later. Not in this time of crisis.
So, here are some factors you should consider about the current real estate market in the era of COVID-19:
- 0% interest rates
- Buyer’s market in mortgage industry
- Easier to refinance mortgages now
- Increased affordability, and accessibility, of former privileged housing markets
- More time to assess investment opportunities
Research, don’t rush, and proceed carefully
0% Interest
On Sunday, March 15, 2020, the United States Federal Reserve cut interest rates all the way down to zero.
It was the largest emergency interest rate cut reduction in over a century. The Fed is trying to calm the markets, investors, and pump the brakes on the speeding COVID-19 initiated economic downturn on the way.
Lower interest rates can pump more money in the economy, encourage investment, and encourage consumers to spend.
Unfortunately, zero percent interest rates won’t encourage most economically stressed people to spend.
However, if you’re in the market for real estate investment, zero percent interest means low mortgage interest rates.
Mortgage Applications and Rates are Low
The coronavirus pandemic, and ensuing panic, is creating a near buyer’s market when it comes to mortgage applications.
One of the prime tenets of business is the weighted interests of supply and demand.
When it comes to mortgage applications in the age of COVID-19, demand is may get low.
You might have a lot more leverage, and options, as a homebuyer than a mortgage lender.
Mortgage interest rates have plummeted to a 50-year low due to the economy halting impact of COVID-19.
Mortgage applications have fallen by 24% now compared to the same time period last year.
How does this fact translate into opportunity for you?
If fewer people are buying homes, then that means there may be more options for you than most mortgage lenders.
If you are a current homeowner, your chances of refinancing your mortgage, maybe even on your terms, is better now than ever before.
Mortgage Refinancing
Mortgage refinancing is essentially the act of replacing an existing mortgage arrangement with a new one. The new mortgage features more favorable interest rates and terms than the original.
However, the terms and conditions for refinancing a mortgage are dependent on your finances, intentions, and the state of the current market, among other things.
If you have been thinking about refinancing your mortgage, you should think about doing it now.
Mortgage refinancing applications surged by over 26% in the first week of April 2020. They also increased by over 168% now compared to this same time last year.
If you’re only looking to buy a home, you’ll probably have more access to previously hot and financially prohibitive real estate markets now too.
Increased Access to Previously Cost-Prohibitive Markets
Before COVID-19 took over the world, I had a very cynical worldview when it came to real estate investing.
For one thing, trying to buy a home in Miami, San Francisco, New York City, Las Vegas, Los Angeles, or in some other large metropolitan city would have been a financially prohibitive thing to do in a pre-COVID-19 world.
Before COVID-19, I would have advised buying a home in a small city or metro area and buy a starter home.
Then, save for a few years before trying to move to a big city with a high cost of living.
There is going to be a significant drop in consumer-grade real estate investing this year. Pay attention when opportunity knocks.
If you’re in the market, it would be foolish not to pay attention to housing price changes in hot markets this year.
Housing markets that were previously out of reach to many buyers may become more accessible.
Temper your expectations. The real estate market hasn’t burst yet. Houses won’t be free.
But It will pay off to watch how the market reacts to demand decreasing against supply.
Be Patient, Cautious, and Prepared
Be vigilant but take your time with real estate investing in the age of COVID-19. Home sellers and mortgage lenders are reassessing their processes as well.
Reassess your processes as well and stay apprised of market conditions. Don’t rush.
Real estate investment and home buying practices are slowly changing at the dawn of COVID-19. Think about how you can change your approach as well.
Look for mortgage lenders and open houses who take COVID-19 and its impact on the global economy seriously.
Ask if the seller or broker allows virtual tours of the home. Inquire what COVID-19 precautions are implemented for in-person tours and inspections before you go.
This is a terrifying and anxiety-inducing era of humanity.
There is no future in despair.
So make plans.
Read More
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.
