Yes, it is! There has not been a global pandemic in our lifetime. There has not been an economic shutdown like this before. There is uncertainty out there and unfortunately, people fear what they do not understand. Enough doom and gloom, there are opportunities for those who can act during this unprecedented time.
The subprime mortgage crisis led to dramatic reductions in home values during the recent Great Recession. In 2004, U.S. homeownership peaked at 69.2 percent fed by lenders and questionable practices and approving anyone who applied for a mortgage.
Since then, Congress combined with the mortgage industry has put in place significant rules that require a buyer to qualify based on their ability to pay back the loan, having cash and savings necessary to close, the house to secure the loan, and good credit history.
First-time home buyers and investors were able to acquire properties at a below-market price thus capitalizing on opportunities available during the recession. They had good credit, the down payment, the income base, and a willingness to act quickly to seize the moment. And once the recession began passing those home values did not stay depressed for long.
Due to the change in policies beginning in 2016, a large part of America has good credit, a saved down payment, and the income to qualify but are waiting to see what will happen after this pandemic. Buyers and sellers are wondering if today is the time to make a move.
There is a big difference in being able to qualify for a home and having the ability to afford and maintain it. If you are a buyer and have a secure income and job status, then a real estate market with less competition can be your opportunity.
The U.S. Census Bureau shows the homeownership rate s 65.1 percent. This is approximately four points below the all-time high.
“The housing sector enters this current recession underbuilt rather than overbuilt” states Robert Dietz, chief economist with the National Association of Home Builders, “that means as the economy rebounds … which it will at some stage … housing is set to help lead the way out.” Ali Wolf, the chief economist with Meyers Research, believes housing will be the hero this time “Last time housing led the recession. This time it’s poised to bring us out.”
We are still experiencing a housing shortage and most housing economists do not expect prices to fall. Existing homes on the market and new construction are simply not meeting the high demand from current buyers. Some of these buyers have tried to buy and lost a home in a bidding war.
Homebuilders learned a valuable lesson during the recession when they were stuck with a large inventory of just built homes that they could not sell. Homebuilders have taken a cautious approach by building based on demand and not on prediction.
Then again, we have buyers and sellers who will wait and see what happens with the economy before they jump into the market. The latest indicators are showing home values are staying steady or increasing due to lack of inventory. Fortunately for them but maybe not quite as fortunate for buyers.
However, all real estate is local, and each market has its price ranges and characteristics. As an example, I pulled a chart out of our local MLS for the City of Fairfax Virginia. The period is December 2019 before the pandemic got its start to April 2020. This chart represents sale prices during that period. As you can see below, there was a dip in January and February when we first started hearing about the pandemic as uncertainty ramped up, but March and April have rebounded to above December 2019.
If you would like to investigate how it might affect your decision to buy or sell, now or a few months from now, we can arrange a video meeting. We can provide you with details on current inventory levels in your area and price range, recent sales, and current demand levels.
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