With the world going through a never-seen-before crisis due to the Covid-19 pandemic, everything has come to a standstill in many ways. The lockdowns imposed in different parts of the world has sent shockwaves across the different aspects of world economy, and the real-estate industry is no exception. As a result, general buyers and big-time investors are facing an all-time dilemma – to buy or not to buy?
What is the current situation of the real estate industry?
It would not be an exaggeration to say that the industry and its related markets are not showing great signs. There are several reasons for this. With a lot of states still continuing with stay-at-home policies, the pandemic has seriously hit the industry thanks to people being reluctant to sell their houses. In fact, new listings were down by 44% in April when compared to the same time of last year, according to Realtor.
This has directly translated to close to 190,000 fewer homes being available in the market at this point of time than last year, which means there is a considerable drop in the amount of available options for the buyers. Furthermore, most people are expecting a V-shaped recovery in the market and hence are holding onto their properties for now.
Downturn Affects
However, having said that, here’s some good news – many economists believe that the price of houses will reduce by 5-10% by the end of this year and continue to further drop in the coming times. Therefore, this should make the current scenario a good time to invest big because sellers will be eager to sell their houses to make the most out of their sale.
With several states lifting the total lockdown, people are coming back to the market. This is especially true for people who have more than one property and relied on the rent coming from one of them to pay off their mortgages. With most tenants being unable to pay rents, owners are trying to sell the property to meet their expenses. With not many buyers out there, homeowners will be ready to sell properties at discounted prices. Naturally, this is a good time for both big-time investors and first-time buyers to capitalise on such situations.
When you look at the overall picture, the major issue lies in the fact that there is a sense of uncertainty in terms of how the market will behave in the future and regarding how long the current situation will prevail. As a result, according to a poll conducted by Gallup, only 50% Americans believe that it is a good time to buy a house, which is an all-time low. All said and done, the trends suggest that even though it is a good time to buy a house as an investment, one should not expect low prices and also be prepared for fewer options to choose from.
How has The Federal Reserve reacted to the situation?
The Federal Reserve has been taking several steps to revive the economy. One of these steps has been to cut down interest rates for home-buyers to keep them interested in the market. Economists and realtors believe that if the interest rates continue to remain so low, home-buyers will be virtually forced to buy houses at this point of time because of the attractive offers they may find. In fact, people have started buying houses once again – an act that has been at a standstill for a few months.
What are the implications for buyers due to the current situation?
The market has been acting differently for different kinds of buyers and investors, so here is a breakdown of the implications faced by them.
For savvy investors
For savvy investors, just like most times, this is a good time to invest in houses with interest rates at historic lows. You need to identify the right sellers who are ready to sell the properties even at low prices and buy them immediately to improve your portfolio. With a possible V-shaped recovery, the investments made now should give you good returns in the future.
For those who want to buy and flip the house immediately
If you are someone who buys houses and flips them in a matter of weeks to make profits, then this is probably not the right time to do so. This is because to execute your strategy properly, you should be able to buy at low prices and sell for high prices, which is not a scenario that you can expect in the current times. With the market not showing signs of an appreciation in the immediate coming months, it would be better if you hold this practice for a while.
For first-time buyers
For first-time buyers, it is a favourable situation thanks to the slashed interest rates at which you can get home loans now. Since your goal is to live in the house and not sell it immediately, you do not have to worry about getting a good price in return. Furthermore, with the number of buyers dropping considerably, certain sellers have started panicking over the prospect of selling their properties. If you can manage to identify such sellers either on your own or through a real estate agent, it is probably one of the best times for you to make the deal.
For buyers looking to buy a property as a long-term investment
Investors who owned Airbnb properties and other such travel rental properties are looking for immediate liquidity, thanks to the ban on travel in most places. Similarly, many elderly people whose main income was through the rents coming from their rented properties are now looking to sell those properties since a lot of tenants are unable to pay the rent. Therefore, the possibility of getting great properties at low prices is at an all-time high, thus making it ideal for a good long-term investment.
In conclusion, we can say that as the world has never experienced such a situation, no one can really predict how the real-estate market will behave. However, if you are a savvy investor or a first-time buyer, it is preferably a good time for you to buy a house.
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