Here are the reasons why you should wait to buy a new home during the pandemic
The COVID-19 pandemic has made an impact on the nation’s real estate market and has raised some red flags when it comes to buying a new home.
In recent months, much of the buzz around the nation’s real estate market has focused on how strong home sales have been despite the ongoing pandemic. The truth is there are many good things going on in the residential real estate market. Home sales are on the rise, sellers are making more money, and mortgage rates are low.
But that’s not necessarily good news for home buyers. With homes selling faster and at higher prices, the real estate market now is heavily favoring sellers. And low mortgage rates won’t necessarily be good for a buyer if the economy continues to struggle. That mortgage payment with lower interest becomes a burden in the future if you are targeted for downsizing at work.
The commercial real estate market will continue to struggle into 2021, industry veterans like Paul Daneshrad have said, just one of the uncertainties in the coming months. That could be bad news for owners of commercial property, but it may mean good news for anyone looking to rent in the future.
That’s one of several reasons you should take it slow when considering whether to buy a home during a pandemic. Rental prices could decrease as commercial property values fall and some buildings are converted into housing units. In New York City, rents began falling early in the pandemic as residents moved out of the city to neighborhoods with more space. And recently in Los Angeles, residential rental rates fell more than 5 percent this year after COVID-19 began spreading.
Another reason to think twice about buying a home now is the continued economic uncertainty caused by the pandemic. With three surges in new infections, hospitalizations, and deaths in 2020, some areas of the country already are under a new round of stay-home orders. That means some businesses once again are being forced to shut down and many are struggling to survive. With the prospect of more job losses mounting across the country as businesses again cutback to survive the recession, it may not be the best time to commit to a new mortgage.
If you buy a new home, chances are you will need a good down payment to make the purchase. That means using up savings at a time when you may need to rely on it if you lose income. That’s another reason to hold off on buying that new home.
The surprisingly robust real estate market is another reason to wait. As sellers benefit from a healthy market, buyers are left with fewer options because there is less housing inventory for sale. Part of that is due to buyers in the market eagerly picking their new home, but part of it is because some homeowners are holding off on selling. Buying your home in a seller’s market is one of the worst times to invest and all but guarantees you’ll pay too much for your home.
And don’t let the low-interest rates fool you. The fact that home sale prices are rising could mean you cancel out any savings you would have enjoyed from that lower rate, so it may not be as good a deal as previously thought.
A strong real estate market does not always serve buyers. If you’re patient, you can still get the home of your dreams and not worry that it will turn into a nightmare later.