Home Buying During COVID-19: Buyers Stay Positive, Home Sellers Remain Nervous

The coronavirus pandemic has sent shockwaves through the housing industry, affecting not only real estate, but also mortgages.

While some buyers have paused their home search to see how things play out, real estate agents and mortgage lenders have had to innovate with virtual house tours and virtual closings.

With so much uncertainty about the near future, home buyers and sellers are understandably cautious. There’s no way to predict how current conditions will impact the housing industry long-term. Recovery will happen—the question is when.

But while COVID impacts both sides of the coin, home sellers appear to be a bit more apprehensive while home buyers remain positive.

Why Are Home Sellers Nervous?

Decreasing mortgage rates over the past few months have triggered more mortgage applications for refinances and new purchases. The increase in new purchase applications indicates that buyers are eager despite the virus.

This is excellent news for home sellers who’ve listed their homes before or during the pandemic. But even though there’ll always be buyers, some sellers fear that current conditions will cause home prices to decline over the next 12 months. In which case, they could walk away with less profit than anticipated. This translates into less money to put down on their next property.

Sellers concerned over falling prices might decide to pull their house off the market, and take a wait and see approach.

Spring is typically a seller’s market, but with many sellers seeing less traffic and less interest in their properties, the playing field has become somewhat equal for buyers and sellers.

Less traffic is likely due to would-be buyers postponing their home buying plans over uncertainty about their jobs or incomes. This makes sense. Most people don’t want to get into a new mortgage, only to lose their main source of income shortly after closing.

As states ease their stay-at-home orders, though, more buyers may enter the housing market and take advantage of virtual tours. This is again good news for home sellers, real estate agents, and mortgage lenders.

Why Are Buyers Remaining Positive?

Even though some buyers have delayed their home buying plans, overall this group remains positive and confident—for good reason.

Mortgage interest rates—which have been at historic lows for a while now—continue to decrease in the wake of the pandemic. This is exciting news for buyers who are eligible for the most favorable rates. Low mortgage rates increase purchasing power, allowing these individuals to get more house for their money.

Also, if seller fears come true—and home prices start to decline in the near future—this decrease benefits home buyers, too. It can further reduce their housing costs.

However, home buyers also have their own set of challenges. With some home sellers postponing selling their properties, there’s limited inventory in some parts of the country. This creates more competition for home buyers. So even with lower home prices, bidding wars can drive up prices again.

Also, home buyers have to prepare for the possibility of stricter lending guidelines. Mortgage lenders are understandably concerned during this time as many people have unexpectedly lost their main sources of income, and some have had to request forbearance.

Just because someone has the means to purchase a home today, this doesn’t mean that their situation won’t change over the next couple of months. So lenders are cautious. As a result, getting approved for a mortgage isn’t as easy as it was earlier in the year.

A few mortgage lenders have increased the minimum credit score for approval from 620 to 680. Some have paused offering riskier loans, and others have turned down borrower’s with high debt-to-income ratios.

Bottom Line

The pandemic has affected just about every industry, and with no way of knowing when we can expect some normalcy, adjustments are being made across the board.

As mortgage interest rates drop to new lows, now is a good time to think about refinancing or a new purchase—but only if you have stable income. To learn more about getting pre-approved for a home loan, contact the loan experts at Blue Spot Home Loans.