The current pandemic has changed everything, including the way people live, work, and run their businesses. The real estate companies are no exception. Even though the sudden shift toward digitization caused by the pandemic was expected to have some negative effects on the real estate industry, it has actually helped many real estate businesses to stay afloat and even thrive over the past few months.
What’s more, the apps and website tools, which have been around for years, have finally transformed the stressful and cumbersome home-buying process into a more pleasant experience by simply moving the house-hunting, mortgage application, and closing process entirely online. To get a better view on how the pandemic has changed the real estate market, we’ve decided to take a deep dive into expert opinions. Here is what we found out.
Homebuyers Look for Homes in Less Densely Populated Areas
The pandemic-induced migration is by far the most important reason why the real estate market in small cities, suburbs, and rural areas is doing so well compared to the real estate market in the big cities. Dozens of small cities and towns that weren’t even considered urban before the pandemic are now highly desirable, as more Americans turn from dense urban centers to smaller cities, towns, suburbs, and rural areas.
In general, densely populated cities are considered potential hotspots for the spread of pandemics. That’s because density inevitably leads to more interaction among residents. Conversely, smaller cities, towns, suburbs, and rural areas typically have lower case rates, especially when social distancing policies are put in place.
Many companies are also offering their employees the opportunity to work remotely permanently. As a result, many big city dwellers, who have been living under lockdown and are now given this opportunity, intend to buy homes with more space, security, and privacy. Most of the homes that meet these criteria are located in less densely populated areas.
The Pandemic Will Leave a Legacy of Lower Interest Rates
The economic uncertainty, which drove higher mortgage delinquency rates and fewer home sales last year, has negatively affected the credit markets supplying capital for the mortgage industry. In response to the effects of the pandemic on the real estate and mortgage markets, the Federal Reserve decided to cut its benchmark interest rates in March 2020. The federal funds rate has ranged between 0% and 0.25% since then. Although fixed-rate mortgages aren’t affected by the Federal Reserve rate movements, the Fed’s actions influence the interest rates when borrowers refinance or take out a new mortgage. In addition, the Federal Reserve injected money into the mortgage financing system, which has lowered the overall mortgage interest rates even more.
Although lower interest rates benefit current homebuyers, mortgage rates aren’t necessarily the biggest challenge in today’s housing market. The shortage of affordable housing options is. Considering the affordable housing crisis, one way to close on the home you want quickly and avoid losing out to another homebuyer is to get preapproved for a mortgage. In a nutshell, a preapproval letter from your lender will give the seller confidence that you’re able to get the loan, which means the sale will go through. To get pre-approved for a mortgage within a reasonable time frame, make sure that you submit a complete online application, with all the necessary documentation.
The Home-Buying Process Can Be Done Remotely
For years, technological advances have made the real estate market easier to navigate. The pandemic, however, has completely transformed the way people sell and buy homes. Since most people are familiar with video interactions, real estate agents now offer live virtual tours for the shoppers who want to purchase a home these days. In fact, the technologies behind smartphone cameras used in conjunction with apps like FaceTime and WhatsApp are making it easier for sellers to sell their homes, for buyers to buy homes in the locations they want, and for agents to do their job, even during lockdowns. Although it may seem surprising, many people are buying a home these days without even seeing the property in person.
Some real estate agencies also facilitate unaccompanied home tours by sending potential homebuyers a code on their smartphones that will open the doors of homes for sale. Additionally, increasing numbers of states are updating their laws to accommodate remote notarizations so that people can sell and buy homes completely online.
The Long-Term Outlook for the Housing Market
Currently, there is a lot of uncertainty in the housing and financial markets, worsened by the abrupt economic recession we’re facing nowadays. Despite all these, there are some encouraging signs of a return to normal. In fact, potential homebuyers have been increasing their home searches over the past few months. Home sales have also increased and are predicted to remain above pre-pandemic levels, aided by the increase in socially distant viewings and the supply of more affordable housing options.
On the downside, many lenders have tightened their lending standards due to the pandemic. While there is nothing unusual about this, the way some lenders have responded to this unique crisis situation is quite atypical. At North Florida Mortgage, for example, we’ve been empathetic toward our borrowers and implemented a series of measures in an effort to help the people affected by the pandemic avoid default and delinquency. Whether you’re looking for refinancing options or for a new mortgage to buy your dream home, feel free to contact our friendly professionals who are here to offer personalized financial mortgage advice and guidance to current and potential borrowers!