Buying A House During Recession And COVID-19 Pandemic

This ARTICLE On Buying A House During Recession And COVID-19 Pandemic Was PUBLISHED On August 12th, 2020

The team at GCA Mortgage Group gets countless calls about Buying A House During Recession And COVID-19 Pandemic.

  • Home values have been skyrocketing prior to the coronavirus pandemic for many years
  • Many experts and economists predicted the housing market will undergo a market correction due to the coronavirus pandemic
  • However, economists and analysts were dead wrong
  • The housing market did the opposite
  • The housing market is strong today than it was prior to the COVID-19 pandemic
  • There is more demand for homes than inventory available
  • Part of the reason is due to the lowest mortgage rates in history
  • The Federal Reserve Board has dropped interest rates to zero percent
  • The drop to zero in interest rates by the Central Bank has added fuel to the fire with mortgage rates
  • Mortgage rates on a 30-year fixed-rate mortgage hit under 3.0%
  • Many potential homebuyers are expediting buying homes now rather than to wait due to historic low mortgage rates
  • Many homebuyers do not seem concerned about buying a house during recession and COVID-19 Pandemic

Buying A House During Recession Versus Booming Economy

Buying A House During Recession And COVID-19 Pandemic or a booming housing market depends on each person’s individual situation.

  • The first question to ask yourself is how secure is my job. Job security is the number one factor when it comes to the answer to buying a house during recession and/or a booming housing market
  • Other questions to ask yourself is why would I want to buy a house versus renting a home
  • The coronavirus pandemic has hit the U.S. economy hard
  • Over 50 million Americans have filed for unemployment
  • Is a home purchase now a good idea?
  • What are my risk factors?
  • Is there uncertainty in the market now?
  • The stock market has hit an all-time high in February 2020
  • The Down Jones hit 29,000 in February 2020
  • The Dow Jones Industrial Average then tanked to a low of 18,000 due to the doom and gloom of the coronavirus pandemic
  • The Dow Jones has been creeping up consistently to 27,000 despite 50 million Americans out of work
  • News in the housing market is positive

Experts are telling the world that now is a great time to buy a house despite surging home prices for the past five years.

What Experts Are Forecasting On The Housing Market

Jammi Cash of Gustan Cho Associates is an expert in the housing market. Jammi said the following:

Continued low mortgage interest rates, economic uncertainty, and the unwillingness and inability of potential buyers to tour listed homes during this time of social distancing may make this a perfect storm for secure home buyers. With a limited pool of potential purchasers, the current situation may represent a stronger buyer’s market for homes already listed.  Also, with many jobs in peril, additional homes may come on the market, as some current homeowners may be forced to list their homes. Even as COVID-19 restrictions ease, I expect it to continue to be a good time to buy. We will still be in a downturn later this year, and these tend to be the markets where you can find the most value and the most negotiability. In this market, even established neighborhoods are offering value buys. Experts and economists from the research division at Gustan Cho Associates expect home prices to keep on increasing due to more demand than the inventory of homes. 

Historical low mortgage rates are adding fuel to the fire on the hot booming housing market.

Historic Low Mortgage Rates Attracting More Homebuyers

What is historically low mortgage rates attracting more home buyers

The coronavirus pandemic has failed to ruin the U.S. economy.

  • The housing market after the coronavirus pandemic is stronger than ever
  • There are more homebuyers today than a year ago
  • The demand for housing has never been stronger than before
  • Despite the uncertainty of the U.S. economy due to the COVID-19 pandemic, Americans are shopping for homes like never before
  • The Central Bank lowered interest rates to zero percent
  • With interest rates at zero percent, mortgage rates hit an all-time historic low
  • Mortgage rates for prime borrowers on 30-year fixed-rate mortgages fell below 3.0%
  • One of the things that are boosting the housing market is investors are anticipating a quick economic recovery from the devastation caused by the coronavirus pandemic
  • You can tell that investors are optimistic about a speedy economic recovery due to the Dow Jones trading at 27,000
  • The Dow is nearing the all-time high of 29,000 it reached in February 2020

One devastating news about an economic downturn will send the financial markets tanking like never before.

Overinflated Stock Market

There are over 50 million Americans who have filed unemployment. However, the stock market is nearing all-time highs. Why is that? The stock market and investors think the recovery will be quick and fast. Investors think the 50 million unemployment numbers are just temporary. They believe the economy will be back to normal in a matter of months and not years.

Maria Windham of Gustan Cho Associates is an expert in helping borrowers with lower credit scores and bad credit qualify for a home mortgage. Maria has been researching home prices, home value swings, and housing markets in the nation. Maria Windham said the following:

Home prices could face downward pressure by year’s end if the economic slowdown is worse than what the market is currently pricing in. A recession could bring the recent housing recovery to a halt and provide even more favorable opportunities for well-qualified homebuyers. If you can, wait a few months to purchase to see if even better deals come to market. When it comes to home prices and interest rates, however, it’s almost impossible to perfectly time the market. We won’t be in a downturn forever. These things are cyclical, and when we do start to escalate prices again, buyers who had the foresight to purchase during the downturn will benefit as the market improves, and their home values increase. Owning has its perks. But whether you’re ready to act now or want to hold off for greater bargains a bit later, the pros concur that, overall, buying and owning is a smart long-term strategy. One big reason is that, as you pay down your mortgage principal, you build equity in your home. Building equity in a home is the chief method people utilize to build wealth. The rent they fork over every month is money they will never see again. Consider that, per the US Census Bureau’s most recent data, the median net worth of households is around $95,000. But the median net worth excluding equity is $29,410. In other words, home equity comprises nearly 69 percent of total net worth. This demonstrates that owning a home can be a way to build long-term wealth—wealth that can be passed on to your descendants. In addition, plenty of eligible homeowners can take advantage of tax benefits, including the ability to deduct at least a portion of your paid property taxes as well as mortgage interest paid. Depending on your tax situation, buying a home can be a smart move compared to renting when the mortgage interest deduction is taken into account. Homeowners truly have a place they can call their own and customize. You can modify and expand your space to your tastes, while renters cannot. Buying isn’t for everyone But not everyone is cut out for homeownership. To be a worthy prospect, particularly at this economically risky time, it’s important to meet key criteria.

The decision of when the right time to purchase a home is dependent on individual personal credit, income, and personal standards.

Buying A House During Recession Depends On The Ability To Repay

Whether buying a home during a recession depends on your repayment ability

The U.S. economy is booming. However, it is booming too fast. The stock markets are definitely overpriced due to the optimism. Home prices are still increasing with demand overpowering supply. With mortgage rates as low as it is today, more buyers are itching to purchase a home today than wait. In the event a recession hits the U.S., homes will not tank as it did back in the 2008 financial crisis. People still need to live. Rent prices are escalating and owning is cheaper than renting in many cases. As mentioned in the earlier paragraph, the decision of buying during recession or a booming housing market depends on the individual. Buyers with a strong job and skills who are confident they will remain employed should purchase now rather than waiting. Buyers who have high paying jobs but are in a field as a restaurant industry with a shakey future may want to wait to purchase a home. Lenders prefer wage earners employed by a solid company rather than self-employed borrowers due to job stability during the current market conditions. Most mortgage companies have implemented more lender overlays to weed out weaker borrowers who may experience a difficult time in having the ability to repay their mortgage payments. People who have weaker credit scores, little to no cash reserves and short term on a new job may want to rent versus buying at this time.

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