In just a few short weeks, the coronavirus outbreak has impacted many aspects of everyday life. Events and conventions have been canceled and postponed. Public fear of the unknown, along with an abundance of misinformation, has made supplies of personal and healthcare items unavailable, including hand sanitizer and face masks.
It has also forced the Fed to cut rates this week and mortgage rates to hit all-time lows, leaving many homebuyers with questions. Should they take advantage of current conditions or wait it out to see what happens next?
Low Mortgage Rates Incentivize Buyers
On Thursday, March 3, mortgage rates tumbled to an all-time low. Decreased mortgage rates historically boost home sales. However, between market instability, travel restrictions and a general feeling of public hysteria, it’s impossible to predict if low mortgage rates are enough incentive for buyers to make an offer.
No one knows with complete certainty how coronavirus will impact the real estate market long-term. There are also several other factors to consider.
“While the election year is a given, the fact that the stock market is rolling and the fear of coronavirus is only eight-nine days old in this country (meaning people here are fearful), it is just a bit too early to see how buyers and sellers will react,” Mary Hall Mayer, an agent with Warburg Realty in New York tells me.
It appears that smart buyers are truly taking advantage of this situation. Phones are ringing off the hook and inboxes are jammed for anyone working in the mortgage industry right now. Ryan E. Beverage, a senior mortgage advisor with Lenox Financial in Southern California says coronavirus has been a boon to his business. “I’m working twelve to fourteen hours a day right now and still have things to do when I leave. I’ve been doing this for over ten years, and I have never been busier than I am now,” he says.
But will rates continue to drop? According to Beverage, it’s a possibility.
“COVID-19 has created a global emergency at this point. That has been the sole reason the stock market has seen the biggest losses in history, which has forced the Federal Reserve to drop rates as well. When stocks go down, interest rates do, too. It’s when we see the market starting to rebound when rates will go back up. But if nothing changes soon, interest rates more than likely will drop even further," Beverage says.
Coronavirus Won’t Stop A Buyer’s Market
While travel restrictions might prevent foreign buyers from looking at property in New York, it's status quo for locals. “Thus far, showings by appointment are going forward as are open houses. But if you had three people to an open house, might you have had six?” says Mayer.
First-time buyers are particularly savvy to take advantage of the moment. In a relatively short period, Robin Kencel of Compass has experienced an increase in motivation among this demographic.
“I had first-time buyers (newlyweds) out from Manhattan on Sunday who spent the afternoon looking at properties and made an offer on the next day. They did not reference the virus but their desire to have a home with some elbow room and outdoor space was critical in their rush to leave the city,” she says.
Beverage has also seen an influx of first-time buyers who want to take advantage of the current market. “I’ve noticed a lot of younger people especially, who have never thought about buying, are now more interested and finding out that they actually do qualify. People think that you have to be a millionaire to buy a house, but that is definitely not the case, especially in this current rate environment,” he says.
But Kencel believes it’s still too early to make accurate predictions. “For those of us who have some traction on our tires, we have seen the power of momentum that can be garnered when fear takes hold of the general populace. It is impossible to predict how large the coronavirus fear will grow and what the actual impact on the public health will be, therefore making any real estate fallout guesstimate irresponsible,” she says.
However, Kencel also notes that the uncertainty of financial markets could have investors pulling out of the stock market and funneling their cash into real estate instead.
Should Coronavirus Be A Cause Of Concern For Sellers?
It's important to keep in mind that New York City and the surrounding areas were already buyer's markets prior to the coronavirus outbreak. So, sellers were well aware they didn’t have the upper hand to begin with.
According to Noemi Bitterman of Warburg Realty, the sellers experiencing frustration have either already sold at less than they wanted or taken their properties off the market. So it’s safe to assume that the majority of sellers are extra motivated right now. “The properties that are on the market right now are priced to sell. Although sellers do not love the buyer’s market, they accept what is and have priced their properties accordingly,” she explains.
But Beverage thinks these low prices can ultimately benefit some sellers: “I think that Coronavirus, dropping the 10-year treasury to the lowest level in the history of the mortgage, is going to cause a price war in the home selling market. Prices are going to skyrocket. We will see another bubble again, and then eventually it will pop.”
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