The coronavirus pandemic has caused shock waves across the real estate industry. But is now a good time to bid on a property?
The answer to this question will largely depend on what you plan to do with the house – especially if you are an investor.
“You shouldn’t expect a low price and you may not have many options to choose from. “
But finding accommodation at a good price could be a challenge.
When the coronavirus pandemic began to trigger home stay orders across the country, it disrupted the home buying process.
Companies specializing in buying and selling for-profit homes temporarily suspended operations, and real estate agents had to innovate, opting for virtual open houses and remote closings to meet social distancing protocols.
Against the backdrop of these changes – as well as rapidly increasing unemployment – the sellers reacted by removing their ads. New registrations fell more than 44% in April from a year earlier, according to data from Realtor.com.
This meant that there were around 189,000 fewer homes on the market last month than during the same period in 2019. At the same time, construction of new homes slowed in April, with many builders worried about the state of the housing industry in the midst of the pandemic.
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“It doesn’t mean it’s a bad time to buy an investment property, but that you shouldn’t expect a low price and that you may not have many options to choose from,” said Danielle Hale, chief economist at Realtor. com.
Before the coronavirus crisis started, economists had warned that the US housing market was short of food. Years of housing construction downturns following the financial crisis made the number of homes for sale far below demand.
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The apprehension of sellers and home builders could exacerbate this problem – especially if the housing market is experiencing a V-shaped recovery. Indeed, there is already evidence that buyers are returning to the market, especially in states where home stay orders have been relaxed.
Another factor that makes it more difficult for people to reach an agreement on an investment property: the lack of foreclosures.
Another factor that makes it more difficult for people to reach an agreement on an investment property: the lack of foreclosures, due to foreclosure moratoria. “We see many investors who mainly acquired during the foreclosure auction of the courthouse migrate to buy houses belonging to banks (REO) via online auctions, which also offers the additional advantage of their afford to buy without interaction in person, “said Blomquist. . Additional competition for these homes could drive up prices.
However, certain property categories may start to hit the market in droves in the coming months. The slowdown in travel wiped out reservations for people who owned and rented vacation homes on sites like Airbnb and VRBO.
Many of these people depended on the income generated by these short-term rentals to pay their mortgage. “I don’t think many of these people have reservations at Marriott or Hilton,” Glenn Kelman, general manager of Redfin
told MarketWatch. “Investors who own Airbnb properties are looking for immediate liquidity.”
Likewise, many mom and pop owners are struggling because the tenants do not collect the rent. Like vacation home owners, these payments tend to go directly to the mortgage. Savvy investors could find a solid buying opportunity by making an attractive offer to these owners.
“Looking at the housing market right now, it’s hard to say that prices are low. “
But investors in the housing market should also consider their end goal. Those looking to buy a home and keep it for the long term, especially as a rental property, will not run as much risk. In fact, 64% of investors who mainly buy rental investment properties said they plan to increase or hold on to their acquisitions despite the pandemic, according to a recent Auction.com survey.
This is a different question for someone looking to buy a house and return it immediately. This could become a very risky bet, given that it is unclear where property prices will go. “For investments, you always want to buy low and sell high,” said Hale. “Looking at the housing market right now, it’s hard to say that prices are low. “
As many economists predict that house prices will continue to rise, much will depend on the economy’s ability to rebound after the pandemic. House price appreciation has slowed so far, Hale said, but prices continue to rise.
“What makes this time unique in recent history – and truly unprecedented – is the uncertainty in the weeks and months to come,” said Mike DelPrete, independent real estate analyst. “No one knows for sure what will happen. There are many unknowns and the general pandemic situation must play its role. “