Residential Real Estate During the Times of The Coronavirus - What's Next?
We are living in unprecedented times in our country. In the span of a few weeks, we went from record low unemployment to almost 3.3 million new unemployment claims. The Covid-19 virus has proven to be a formidable foe for our economy and our public health system.
Since the beginning of the year, I have spoken to dozens of clients and prospects about making 2020 the year they achieved the goal of home ownership. While pondering their future in a newly-quarantined world, one of the questions in their minds is what to do about real estate.
For the next six to eight weeks, I envision a deterioration of the market as it regards to activity and number of transactions. The spring season is always busy, but under the current emergency, most sellers have disengaged from the market. It's natural. In times of crisis, we want to be in the comfort of our own homes. Unless we really have to move, we stay put during uncertain times.
Likewise, the buyer side of real estate is affected. In Central Florida, many active buyers who would have been searching for a home this time of the year have been fired or furloughed because their employers can't continue paying during an extended shut down.
Mortgage lenders have also been affected by the uncertainty of the coronavirus crisis. The investors that back our secondary mortgage market understandably fear the volatility caused by the crisis. Their fear is reflected in rising interest rates, increased credit requirements and the suspension of "Non-QM" programs that represented a lifeline for buyers without traditional sources of income.
This is a perfect storm that will slow down market growth in the near future. However, it won't last forever.
The market is open for business and going forward because those that have not been directly affected by the coronavirus crisis continue to buy and sell. They actually agree that this is indeed a good time to buy and sell! Even with less activity, I see new listings pop up every day. Builders continue to develop new subdivisions, giving buyers the opportunity to purchase a brand new home with great incentives and low interest rates.
My forecast: Those who need or want to sell will have qualified buyers for their properties. As long as financing does not dry up, buyers with good credit and good debt to income ratios will be able to complete their transactions and make their move to a better life via home ownership.
The key question is how long will this crisis last.
Coronavirus fears aside, the foundation of our real estate market today is much more solid than 2008. After the 2008 economic meltdown, the lending industry went through a radical transformation that saw the implementation of strict underwriting guidelines. The days of easy 100% financing and "no doc" loans are long gone. This time around, we don't have as many underwater and toxic mortgages at risk of default.
In response to the coronavirus crisis, the politicians in Washington came together in a rare act of bipartisanship and approved a $2 Trillion aid package that should help individuals weather this storm. The lending industry also acted quickly. Led by Fannie and Freddie, mortgage servicers and banks are being proactive when dealing with homeowners who can't pay their mortgages.
Since the beginning of the year, I have spoken to dozens of clients and prospects about making 2020 the year they achieved the goal of home ownership. While pondering their future in a newly-quarantined world, one of the questions in their minds is what to do about real estate.
THE SHORT TERM - WHAT'S NEXT FOR REAL ESTATE?
For the next six to eight weeks, I envision a deterioration of the market as it regards to activity and number of transactions. The spring season is always busy, but under the current emergency, most sellers have disengaged from the market. It's natural. In times of crisis, we want to be in the comfort of our own homes. Unless we really have to move, we stay put during uncertain times.
Likewise, the buyer side of real estate is affected. In Central Florida, many active buyers who would have been searching for a home this time of the year have been fired or furloughed because their employers can't continue paying during an extended shut down.
Mortgage lenders have also been affected by the uncertainty of the coronavirus crisis. The investors that back our secondary mortgage market understandably fear the volatility caused by the crisis. Their fear is reflected in rising interest rates, increased credit requirements and the suspension of "Non-QM" programs that represented a lifeline for buyers without traditional sources of income.
This is a perfect storm that will slow down market growth in the near future. However, it won't last forever.
The market is open for business and going forward because those that have not been directly affected by the coronavirus crisis continue to buy and sell. They actually agree that this is indeed a good time to buy and sell! Even with less activity, I see new listings pop up every day. Builders continue to develop new subdivisions, giving buyers the opportunity to purchase a brand new home with great incentives and low interest rates.
My forecast: Those who need or want to sell will have qualified buyers for their properties. As long as financing does not dry up, buyers with good credit and good debt to income ratios will be able to complete their transactions and make their move to a better life via home ownership.
THE LONGER TERM - WHERE DOES REAL ESTATE GOES FROM HERE?
The key question is how long will this crisis last.
Coronavirus fears aside, the foundation of our real estate market today is much more solid than 2008. After the 2008 economic meltdown, the lending industry went through a radical transformation that saw the implementation of strict underwriting guidelines. The days of easy 100% financing and "no doc" loans are long gone. This time around, we don't have as many underwater and toxic mortgages at risk of default.
In response to the coronavirus crisis, the politicians in Washington came together in a rare act of bipartisanship and approved a $2 Trillion aid package that should help individuals weather this storm. The lending industry also acted quickly. Led by Fannie and Freddie, mortgage servicers and banks are being proactive when dealing with homeowners who can't pay their mortgages.
Avoiding mass defaults and costly foreclosures is in the best interest of banks and borrowers alike. With that in mind, homeowners must act quickly to secure forbearance arrangements with their lenders. Otherwise, a scenario of a massive rash of foreclosures and bankruptcies in the next 6 to 8 months becomes more plausible. By the way, homeowners should note that the law regarding foreclosures has changed since the 2008 meltdown. It is now easier for the banks to foreclose.
Certainly, a prolonged economic shutdown may lead to mass unemployment, defaults, foreclosures and bankruptcy filings. As we head into the spring and summer months, we need to win the battle against coronavirus and prepare to define what a new normal will look like after the crisis. In Central Florida, at least as of the date of this post, real estate has been deemed an essential activity. My advice for fellow agents and brokers: carefully screen your clients to find out their true intent before you go out on listing appointments or showings. Explain to your clients how to marry social distancing and sales in this unprecedented time.
My answer is don't stay on the fence. If you are currently qualified to buy, don't postpone your decision. Buying your home today will bring great benefits in the long run. Waiting until the coronavirus is gone is not in your best interest. What if you lose your job in three months? What if interest rates go up? What if financing dries up for an extended period of time? The long list of "what ifs" favors those who purchase sooner rather than later.
Defeating the threat of the coronavirus and slowly (but surely) making the move to a new normal will accelerate the recovery for our real estate market. Otherwise, the Central Florida real estate market will be in serious trouble. In the 12 years since 2008, the market has grown amid events of uncertainty. We have had hurricanes, viruses, elections, international turmoil and changes in monetary policy. With those events, the real estate market slowed down briefly and recovered its pace. This time looks different due to the nature of the coronavirus challenge. But if we band together, it won't last forever.
SO... FOR THOSE WHO CAN MAKE THE JUMP...
IS IT WORTH TO STAY ON THE FENCE?
IS IT WORTH TO STAY ON THE FENCE?
My answer is don't stay on the fence. If you are currently qualified to buy, don't postpone your decision. Buying your home today will bring great benefits in the long run. Waiting until the coronavirus is gone is not in your best interest. What if you lose your job in three months? What if interest rates go up? What if financing dries up for an extended period of time? The long list of "what ifs" favors those who purchase sooner rather than later.
Likewise, if you planned on selling, the time to act is now. You will definitively have less traffic coming to see the home, but a solid marketing plan heavy on technology and creativity, as well as careful attention to social distancing, will save the day.
For buyers and sellers alike, please keep in mind that the coronavirus has changed the way we do business but won't preclude you from achieving your home ownership goals. Yes, it's risky to be out there looking at homes when the government is telling you to stay home, but technology makes it easier to weed out the good properties from the bad ones via virtual tours. As an agent, I can visit a home and call you via Skype, WhatsApp or any other video application, giving you the ability to see the home from the comfort of your living room. In addition, electronic signing and document delivery make it easier for you to complete all lender and contract related tasks without added exposure. For your own protection, always observe social distancing rules when looking at homes and attending inspections and closings.
So.. if you are on the fence, my advice is to jump to the bright side. You deserve a great home and all of its benefits. Make it yours today. I will be there for you.
Call me at (407) 443-3833 or visit my page at www.MiltonTheRealtor.com for more information.
* - Don't forget to connect with me on LinkedIn, Facebook (English and Spanish) and Twitter!
For buyers and sellers alike, please keep in mind that the coronavirus has changed the way we do business but won't preclude you from achieving your home ownership goals. Yes, it's risky to be out there looking at homes when the government is telling you to stay home, but technology makes it easier to weed out the good properties from the bad ones via virtual tours. As an agent, I can visit a home and call you via Skype, WhatsApp or any other video application, giving you the ability to see the home from the comfort of your living room. In addition, electronic signing and document delivery make it easier for you to complete all lender and contract related tasks without added exposure. For your own protection, always observe social distancing rules when looking at homes and attending inspections and closings.
So.. if you are on the fence, my advice is to jump to the bright side. You deserve a great home and all of its benefits. Make it yours today. I will be there for you.
Call me at (407) 443-3833 or visit my page at www.MiltonTheRealtor.com for more information.
* - Don't forget to connect with me on LinkedIn, Facebook (English and Spanish) and Twitter!
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