Prospective homeowners may have planned on buying a home this spring, and spent years preparing for the purchase. Amidst the coronavirus’s negative impact on the economy, many may wonder if it’s still good idea to buy a house.
While no one can say with certainty when this pandemic will come to an end, or what kind of lasting impact it will have on the economy, experts can look at past economic crises and downturns to try to predict what the short-term and long-term financial future will look like in the United States.
What does the current housing market look like?
In a twist of irony, the home sales of February 2020 were the strongest they’ve been in the country since 2007, topping 5 million sales. Factors like falling interest rates and a booming economy contributed to the thriving housing market, but two months later, experts already are seeing a decline in the buying trend.
Lawrence Yun, the chief economist of the National Association of Realtors, says the market has turned sharply, adding, “The coronavirus has undoubtedly slowed buyer traffic and it is difficult to predict what short-term effects the pandemic will have on future sales.”
While the downturn is likely being triggered by the economic devastation caused by the outbreak (including job insecurity, shuttered businesses and employees on leave from work due to statewide and self-imposed quarantines) the decrease in home sales is also likely due to practical reasons. Meeting with potential sellers and real estate agents and looking at properties is complicated while trying to maintain social distancing.
No one knows when the spread of the coronavirus will ease, but when it does, and normal life resumes, the market may see an increase in sales.
Does it make financial sense to buy a house now?
A dwindling housing market does not automatically mean this isn’t a good time to buy a house. In fact, times of financial uncertainty generally lead to falling mortgage rates and the ease of credit qualifications. Mortgage rates have already reached a record low of 3.130% APR for a 30-year fixed rate mortgage in the beginning of March, prompting some buyers to rush into new home purchases. The rate, however, has since jumped back up to 3.860% APR, as of April 2, 2020, though it is still relatively low and may fall again.
It takes more than just a favorable mortgage rate to make a home purchase a sensible decision.
Some market experts believe the coronavirus pandemic will cause an eventual spike in home sales as buyers, fearing a recession, will want the stability and control that homeownership brings. A fixed-rate mortgage will not be subject to the peaks and valleys of a volatile national interest rate. It can also help the owner feel secure if job loss and unemployment become the norm.
Before you jump into a home purchase at this time, step back and look at your entire financial picture. Among the factors to consider are: the stability of your income, how long you plan on living in your home, and the amount of savings you’ll have left after your purchase (it’s always wise to leave a safety net and emergency fund.)
While the coronavirus outbreak has postponed all kinds of plans, from vacations to weddings, parties and more. That doesn’t mean you need to put your plans of buying a house on hold. If you can comfortably afford the purchase and your income isn’t threatened by the economic instability, the favorable interest rates can make this a good time to buy a new home.
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