Should I still Buy a House now?
If you have been thinking about whether or not to buy a house in 2020 and were waiting for a good time, you know that things have changed. A downturn in the economy almost always affects the real estate industry. Social-distancing practices have also changed the way house buying and selling are done. Even moving home during these times is extremely difficult. Statistics suggest that by the start of spring, there were fewer new listings of homes for sale than usual.
The market uncertainty appeared to keep home sellers on the sidelines. If you’re in the market to buy a house, market conditions might have you wondering something similar: Therefore, you may well find yourself wondering if this is still a good time to buy a house.
Here are some things to consider.
Buyer competition is down
In some areas, homes are such a hot commodity that they attract multiple offers and sell above listing price. It can be frustrating for home buyers. But when there are fewer buyers in the market, there’s less competition for desirable homes. It’s true that there might be fewer homes hitting the market, but less competition could make this a good time to buy the house you want.
Mortgage rates are extremely low
Many countries have made moves in 2020 that dropped mortgage interest rates to record lows. They have since see-sawed a bit, but rates remain very low overall and will likely stay that way for the foreseeable future.
A good time to buy a house is often at a time of reduced interest rates. A half-point difference in the interest rate on a 30-year makes a huge difference. Your fixed-rate mortgage would translate to about a €25 difference in the monthly payment for every €100,000 borrowed. That means if you were to take a €200,000 home loan, you’d pay about €50 less per month. This is with a 3.5-percent rate versus a 4-percent rate.
What's your job situation?
Had you been in the market for a home, then suffered a reduction in income, your circumstances could be very different now. If you had a pre-approval letter from a lender to buy a house, it’s likely invalid. Should your employment situation have changed, you’re probably not going to qualify for the same loan amount. An uncertain financial situation is never a good time to buy a house.
Along the same lines, it’s important to be aware of how your job situation might change going forward. Maybe you can qualify for a certain mortgage payment now. But what happens if your income falls down the road? Would you struggle to make a house payment if your salary fell by 10 percent or more?
You'll have to shop online
Social distancing doesn’t stop home sales, but it does mostly stop in-person open houses and home tours. Buying a house is done primarily online when people are practicing social distancing, and virtual open houses and home tours are the tools used. Nearly all real estate agents have a presence online these days, and there are many online only services.
Similarly, there are lenders that offer online mortgage applications. For those that don’t, you might have a video conference with a loan officer rather than meeting face-to-face. Even document signing and closing services are available online in many cases. With today’s technology, there’s never been a better time to buy a house online.
There might be delays
If you’re comfortable with touring a home and making an offer online, the rest of the process might take a little longer than usual. There are a lot of moving parts in a real estate transaction, and any slowdown among any of those parts along the way can delay the closing.
Reduced office hours or smaller staffs can slow lenders, title companies, and government offices. Difficulty getting into a home in person can cause hiccups with appraisals and home inspections. Be prepared for the period of time between offer and close to be a bit longer than normal.
The bottom line
The question of whether it is a good time to buy a house is an extremely personal one. It can depend on how comfortable you are with virtual visits to a home and how you feel about your employment circumstances. If you’re comfortable enough and are willing to accept a process that might be slower than usual, you might take advantage of less buyer competition and lower interest rates by not pressing pause on home buying.