This has been one of the real estate industry’s longest-held maxims. But we’re in a pandemic that started last spring. How is it still a thing today? Won’t the pandemic’s effects from last year change the way the property market works this year?
For the longest time, those in the real estate industry believe that when the sun is out, the buyers are about. Perhaps under normal circumstances, yes, that might hold true. But since we’re still in a pandemic, which is totally in every way not normal for all of us, things were shaken up and a lot of changes took place in and around the industry.
Real Estate amid a Pandemic
For starters, industry insiders and business experts predicted that there will be a major slump in real estate sales which will be supposedly caused by a pandemic-induced economic recession. And while the entire world did suffer from an economic setback, no such recession took place. At least, not yet. We hope it doesn’t happen, anyway.
But the property market proved to be quite resilient. True, the coronavirus pandemic did affect the industry, especially at the onset. Home sales plummeted which was expected. But the surprising turnaround is that signed contracts and future sales went up, even property prices skyrocketed faster than they did before.
People expected some sort of extended recession or depression in the market for single-family homes and it was true for a few months in 2020.
On average, first-time homebuyers make up 40% to 45% of the market but in 2020, there are more first-time homebuyers and even more existing buyers and both markets are doing pretty well. One of the main challenges first-timers are faced with in shopping for a property in a pandemic is this is a period when there are far fewer constructions going on because land prices have also gone up. Developers will have a hard time recouping if they continue to build low-priced homes in this type of market even if they build in parts of the country where costs are relatively low.
Renting Is a Winner
The pandemic has shaken up the real estate market in both positive and negative ways. One of the upsides is that a lot of folks who got stuck at home decided to increase the value of their properties by carrying out several home improvement projects. From a rain gutter installation to repainting the interiors to renovating a basement, people got busy making their homes better and more appealing.
Some did it because they just wanted to make their homes as comfortable and as pleasant as they can be to make staying indoors as bearable as possible. Others did it with the possibility of selling or renting out their property in the near future. Still, others did it just because they were bored and had nothing better to do.
One of the most unexpected wins — for lack of a better term — during this season is renting became a big thing, especially among the millions of millennials who weren’t able to get on board the first-time buyer market. These people have taken to renting apartments and even single-family homes because the prices are very competitive at this point. Because the rental market took off, it took away from the buyer market.
Pandemic-Induced Shift in Buyer Behavior
However, because of the pandemic, interest rates went down to very affordable prices which made buying almost in the same price range as renting. This somehow contributed to the unexpected industry boom amid a pandemic. Yes, it is still considered a boom because initially, the forecast was that there will be a recession or depression of some sort. No way did market analysts predict that the pandemic can affect the market that could lead to a shift in buyer behavior. If ever there was, it was thought of to be the exception rather than the norm.
But we’ve seen a steady recovery from a few months of a slump in the real estate market primarily because those who initially rented apartments wanted to have more space. Since they will be spending a lot of time at home, they wanted to have more comfort and freedom to move around. They wanted gardens and backyards and patios and front lawns.
With the very affordable mortgage rates, people who before the pandemic didn’t have the means to pay for a mortgage now have better chances at owning a property. Even if property prices have increased, the financial sustainability of owning a house is being offset by the lower mortgage rates we see today.
Ultimately, the choice will still boil down to your financial readiness. Can you afford to pay for a house now with all the financial and economic uncertainty? If you have enough savings to make the downpayment, pay for incidental expenses, and have a steady income to pay for your monthlies, you might be in a good position to buy.
Keep in mind that buying a house is a very expensive undertaking, with or without a pandemic. All the pandemic did was to shift buyer behavior and the market focus but ultimately, the decision to buy will be based on your overall readiness.
