At this point, almost on a daily basis, I get asked "is now really a good time to move?" Yes, this year has been a wild one, to say the least, so it’s completely normal that there are concerns about the status of the housing market and the safety of packing up and moving your family, especially if you don’t HAVE to. The truth is, whether you are renting an apartment or own a home, the answer is the same; it depends.
With many people’s changing needs, moving may make sense, especially given how the current health crisis has altered our daily lifestyles. Many homeowners are re-considering priorities in a home and looking for more space for their families. The biggest new priorities? No surprise here: more square footage, a home office, space for virtual learning, and outdoor living areas. For the most part, the current market is actually a great time to make these upgrades happen.
Is now still a good time to sell?
If you own a home, know that the real estate market has changed in a lot of ways over the last 10 years. Before then, homes appreciated much slower and interest rates encouraged homeowners to stay in their homes longer. However, even just considering this year, the average appreciation of homes is currently through the roof, with the average homeowner gaining almost $10,000 in equity in the first three months of the year alone. If you’ve considered selling, you may have more equity to cash out than you realize.
Plus, mortgage rates have hit another record low, igniting a large increase in home buyer activity and demand. This demand has been growing rapidly by double-digit rates for the last four months. Why? Take a look at the math. Making a move into a new home right now and locking in a lower interest rate can save you hundreds on a monthly basis and just under a hundred thousand dollars in interest over the life of the loan.
I don’t have a home to sell and it’s a seller’s market. Is it still a good time to buy?
Even if you don’t have home equity to take advantage of, it is still a great time to buy. While it’s true that inventory is low and that it is a seller’s market, the record low-interest rates mean your buying power has never been greater.
In today’s market, you can spend between $30,000-40,000 more on a home for the exact same monthly payment compared to a year ago today.
In most markets, that is far and above any bump in cost that you may experience due to increased demand and stiffer competition. Plus, if you are able to buy right now, monthly mortgage payments have never looked so good in comparison to rental rates.
But what about COVID? Is it safe to buy or sell right now?
While this is a very individual decision, know that we are taking every precaution to ensure your safety while your home is on the market and during home tours. Berkshire Hathaway has set specific policies and procedures in place to keep you safe during the buying and selling process. Whether it is through access to facemasks and hand sanitization supplies or strategies to minimize physical touch to home surfaces and controlling home access, there are many ways we can reduce your exposure risk to keep you safe. We can also offer fully virtual open houses and home tour events to further reduce exposure risk. Have specific concerns? I’d love to talk about how we can address them.
But won’t the housing market tank like it did during the Great Recession?
Yes, the unemployment rate in April of 2020 was a sky-high 14.7%, but since that time it has nearly been cut in half, a great sign for market recovery. Another great sign? Mortgage forbearance rates are also on the decline. Since mortgage forbearances and delinquencies tend to track very closely with the availability of jobs, with the continued improvement in the market, it is likely that mortgage delinquencies and forbearances will also continue to decrease.
In addition, there are several mitigating factors that make the number of delinquencies and forbearances different from the Great Recession. These factors include overall home-price gains, home equity accumulation, and loan deferral and modification options for distressed homeowners that were not present before. These factors help to insulate the housing market and prevent the steep decline that occurred in the Great Recession.
The truth of the matter is that buying or selling a home is a very individual decision. While the market is currently favorable for both buying and selling, everyone’s personal situation is very different. While taking advantage of the record low-interest rates CAN save you a lot of money, doing things like emptying out your savings account or over-stretching your budget in a time like this can be risky if your employment situation isn’t stable or you don’t have an emergency fund to fall back on. That’s really where the “it depends” comes in. Your local real estate agent can help with current real estate market trends, and assessing your current home's value. However, for a higher-level financial assessment, it is best to consult with a financial advisor or your accountant if you have one. These professionals can advise on your individual situation and the best next steps moving forward. Realizing you need to save some money before making the jump? Check out these 7 strategies to help you save for a down payment faster.