Any good realtor will tell you that springtime is the best time of the year for buying and selling a home. In a booming buyer’s market, early forecasts for 2020 predicted a continued demand for homes—that is, until the onset and rise of COVID-19. The emergence of COVID-19 brought its challenges for buyers. A recent study led by OJO Labs found that 80 percent of prospective buyers have either delayed or stopped their home search. Sixty percent of these individuals cited concerns in their future employment prospects as the reason for halting their search. Additionally, many banks have paused on offering jumbo loans, cutting off loan amounts past a certain price point depending on the market.
These temporary lending restrictions are preventing determined buyers from moving forward in their homebuying process and, potentially, losing out on their dream home. On the other end, buyers who can acquire a loan are waiting longer for appraisals. Before COVID-19, appraisals were typically conducted within ten business days, or less, but now can take between 14-20 business days, further delaying closing timelines.
But it’s not all bad. While COVID-19 hindered the real estate market this spring, the outlook for home sales actually remains positive. Contrary to popular belief, home prices have not plummeted, but have merely stayed stagnant. Also, many homes available on the market right now are fairly priced, making it an optimal time for buyers who were already planning on purchasing or refinancing a home.
However, home prices are just half of the picture: if you’re not buying in cash, then you’ll need to also get a home loan. Thankfully, the outlook for the market also remains positive due to enticingly low interest rates from lenders. Loans of course vary based on each individual’s financial profile and who is giving the loan, but we’re seeing rates as low as 2.875% for 30-year loans and 2.625% for 15-year loans, compared to an average of 3.9% for 30-year loans and 3.25% for 15-year loans typical for this time of year over the last 5 years.
As we transition to the new normal, buyers, sellers and realtors alike should not expect an immediate return to how the homebuying process was prior to the pandemic. Much of the workforce is still working remotely and social distancing orders remain in place, which makes routine tasks like touring homes and scheduling financing meetings difficult to coordinate. Luckily, millennials are the majority of home purchasers. Unlike older buyers who might feel more comfortable with a hands-on approach to homebuying, digital-first millennials are receptive to using remote resources, services and technology to handle transactions.
However, the rise in unemployment due to the pandemic can mean some millennial buyers will have to delay purchasing a home to ensure financial security. As the millennial generation has been plagued with high student loans, challenging job prospects, and slower wage growth, it’s important that the industry provide prospective buyers with the right tools to give them financial confidence.
Now is the time for companies to step up to the plate to alleviate the major pain points and provide transparency to buyers. Sites like Zillow for real estate research and even digital home loan platforms are also good examples of companies offering prospective buyers flexibility and transparency, enabling agents and buyers the ability to engage with properties even when they are unable to visit the homes in-person.
Ultimately, COVID-19 has paved the way for more innovative solutions in real estate. In the short-term, now is a good time for buyers who are seeking low rates and affordable prices, but long-term, it is a call-to-action for insurance companies to innovate in this antiqued industry. With a revamped, fresh approach to homebuying, advancements in technology can help keep costs for purchasing a home low (not just during COVID-19), while providing buyers with a clear and confident line-of-sight for acquiring a home, especially in a post-pandemic world.
