The COVID-19 pandemic has had a significant effect on the way we function as a society, and, as a result, our economy has also been affected. In particular, real estate markets have taken downturns across the country, virtually turning a seller’s market into a buyer’s market overnight. Here are a few specific ways in which the pandemic has affected the market for homebuyers.
The Federal Reserve Took Action
On March 3, the Federal Reserve cut rates on mortgages by half of a point and later made another cut equaling a full point. They also announced that federal rates would be kept as low as possible until the economy rebounded in terms of getting people back to work and earning regular paychecks. This quantitative easing strategy is used to ensure our financial system continues to function as smoothly as possible while our society deals with the economic fallout caused by the pandemic.
Homebuyers Will Need to Get Pre-Qualified
In the past, getting pre-qualified for a mortgage was a choice. While it did make the home buying process easier and faster, it was still a choice left to the individual buyer. The situation created by the COVID-19 pandemic will change that as interest rates drop and housing availability remains low. This will lead to a bigger demand for homes and a limited supply of real estate on the market. Getting pre-qualified will help buyers beat the rush and get the homes they want.
Closing Times Will Be Longer
As a result of the higher demand, there will be a backup of real estate closings as the economy starts to rebound. This means that a closing that, at maximum, took 45 days will now take up to 60 or 75 days to complete. Buyers should take the longer closing times into account when planning their living situation, because it will likely be longer before they can get into their new homes.
Even though interest rates are lower, buying homes in the current market will require advanced planning and patience. The best thing buyers can do is to discuss their situation with their lender to develop an actionable timeline for buying a new home. This will help them avoid confusion, which can affect their living situations and finances into the future.