As we know, many business sectors saw a huge disruption in business proceedings due to COVID-19 pandemic. The real estate housing sector was also hit by these disruptions, even though to a lesser extent than service providers. The decision to buy a home during COVID is one that depends on numerous economic and personal factors. One should also consider the pros and the cons of making this potentially life-changing move.
Some of these factors can be controlled by the individual, while others are totally out of their hands. The factors within individual control are:
- Budget and income
You should have good overall financial health. Ensure a steady stream of income, particularly at a time where there’s downsizing by a lot of employers..
- Length of time to properly research the market
Even though the competition for home purchasing is higher, the sellers are also slowing down. This gives ample time to properly understand the benefits and risks.
- Early preapproval for a mortgage
There is time to get a mortgage pre approval because this would reflect your commitment to the purchase.
- Expected duration of ownership
You should stay away from purchasing homes you don’t plan to own for a long time during the pandemic. This is because, if the house prices drop, you may be stuck with the home.
Economic and External factors
These factors are out of the control of the individual. They depend on the “push” and “pull” of the economic and other external non-economic forces. These are the major factors a buyer should consider while making this decision because these are out of their control.
- Difficulty in getting mortgage lending
- Level of competition amongst buyers
- Chances of contracting COVID during the buying process
- Mortgage rates
- Strictness of mortgage policies
Buying a Home in a Sellers’ Market
First, you need to realise that COVID turned this into a sellers’ market. This is a market where the demand outweighs the supply and the buyers are in competition with each other. It is never a good idea to buy a house in a sellers’ market.
In this kind of market, the seller – your real estate agent could decide to sell way over the original asking prices. This is partly because up to 40% of Americans are working from home due to the COVID pandemic. Rise in the cost and demand of homes suggests that these individuals are lacking in space and are in search of bigger, affordable homes.
The rising prices of homes are also due to:
- Low interest rates driving buyers to the real estate market.
- Buyers put their house hunt on hold once the pandemic began and are back manyfold now that the lockdown has eased up a bit.
- Sellers are also reluctant to put their homes on the market, hence the rise in competition.
Should you buy a home during COVID? Sure, as long as you get a good deal on houses that must sell and you avoid buying homes that you don’t intend to own for long. You should generally go for long-term or forever homes. You should also take your budget, income, limited housing supply and expected decline in the prices of houses into consideration.