We are living in challenging times. Our daily routines are being disrupted and many people fear for their health, safety, and financial future. This is an understandable response to a global pandemic that we still don’t completely understand.
Yet despite this uncertainty, the virus will eventually run its course and our lives will return to normal. That may be weeks or months from now, but there is little doubt that years from now most of us will look back on this time and recognize the fear of this moment for just that.
None of us has a crystal ball, but there are a few facts that we can point to as guides to inform our decisions moving forward.
So what does this mean for your financial future, your investment opportunities, and your search for a home? None of us has a crystal ball, but there are a few facts that we can point to as guides to inform our decisions moving forward.
- Mortgage interest rates remain at historic low levels. While we have seen a modest rebound in the past week due to the glut of mortgage debt on the market, the Federal Reserve again lowered the lending rate to near zero on March 15th. The Fed also announced $200B of quantitative easing in the form of mortgage-backed securities which should drive mortgage rates even lower in the coming weeks.
- East bay home inventory levels are constrained. Spring is the time of year when most listings come on the market, and the Coronavirus pandemic is likely to keep inventory levels relatively low as sellers wait for buyer confidence to stabilize before putting their homes on the market
- For existing listings, open houses are being cancelled due to social distancing efforts. Private and virtual showings (via 3D walkthroughs) are increasingly common.
- Prospective buyers, whose savings have taken a beating in the recent stock market sell offs, may wait for a market recovery before seriously looking at purchasing real estate.
- The long-term historic trends regarding Bay Area real estate appreciation are unlikely to change, regardless of the temporary dips in the financial markets and uncertainty around short-term investment opportunities.
So what to make of all this confusing data? This is just an anecdotal interpretation of the information, but it is highly likely that the real estate market will recover and long-term home values will continue their historic upward trend. As consumer confidence is restored in the months following the peak of the Coronavirus spread, markets and interest rates will invariably rise and competition for limited real estate will resume, resulting in higher prices.
It is highly likely that the real estate market will recover and long-term home values will continue their historic upward trend.
This means that for the confident, qualified home buyer with a long-term investment horizon, there are likely deals to be had. With fewer buyers in the market, there will be less competition for listings. This could equate to more pricing transparency which can aid buyers who have previously felt priced out of a market that routinely saw sellers capturing 30% or more over their initial asking price.
The trick to succeeding in such an uncertain market, is to identify a highly skilled agent that incorporates some of the following approaches in their real estate practice:
- No Budget Capping. Some agents will reject buyer clients that they feel do not have a large enough budget to compete in the market, or where they feel they won’t be sufficiently compensated for their effort. Reject any agent who tells you they have a minimum budget threshold to represent a client.
- Clear Targeting. You want an agent who will be honest with you and help you target properties that are within your budget. You don’t want pressure to spend more than you can afford (even if you are qualified to borrow more) and you also don’t want to waste precious time bidding on properties you have little chance of winning.
- Local Experience. Working with an agent that understands the nuances of each neighborhood and has strong relationships with other local agents is essential to finding and winning deals in an uncertain market. The value of this unique knowledge set cannot be overstated.
- Proven Track Record. Ask your prospective agent how often they win deals and how many offers they typically write before getting their clients into contract. If it takes more than 2 or 3 offers to win a deal, you are probably not being well represented.
With a long-term investment horizon, a bit of capital liquidity, and a top notch agent, you could find that in spite of the fear and uncertainty swirling around the world, a great deal on buying a home can be found.buyer, Coronavirus, investment, local experience, mortgage rates, proven track record, transactional, uncertainty