To help you decipher the news you hear and things you see on line about the real estate market right now, I will touch on what's media spin, what's true and what is just plain false the that might be filling your social media feeds.
Here are five prevalent myths about real estate during the COVID-19 pandemic—and some much-needed reality checks.
Myth 1. Home prices are plummeting
Data shows just the opposite: Home prices are actually rising.
According to the NAR, the national median price for single-family homes grew 7.7% during the first quarter of 2020, to $274,600.
“We're seeing home prices grow faster than pre-COVID-19,” Hale says. “In fact, they are on pace with the home price growth we saw this time last year.”
The reasons are record-low mortgage rates and lack of inventory.
“Record-low mortgage rates boost buying power," Yun says, "and, when combined with a lack of supply, will result in higher and higher home prices.” This is because the lower the interest rate, the more affordable the payments are and most people shop based on the payments they can afford.
Are you wondering about your home value during this pandemic? Get a free instant valuation sent to your email now. (Disclaimer - you need an in-person or virtual tour with an agent to get a true picture of your home's value in this market as there are a lot of factors not plugged into these automated valuations.)
Myth 2. It's a terrible time to sell your home
Many home sellers who may have hoped to put their house on the market this spring/summer have put those plans on hold. In early July, nationally new home listings dropped 14% compared with a year ago, and total home inventory was 32% lower, according to realtor.com®’s Weekly Housing Trends report for July 11.
Fear of coronavirus exposure is probably the main reason people are keeping their homes off the market, but many might also assume that selling a home right now is just a futile endeavor, plagued by few home buyers and low prices.
But on the contrary, the latest statistics suggest that now is one of the best times in years to sell a home for several reasons.
"Given the pandemic and uncertainty it's caused, the general sentiment [among some owners] is that now is not a good time to sell your home," says Danielle Hale, chief economist at realtor.com. "Yet so far, the data suggests the opposite—that buyers outnumber sellers in the housing market, which means it's better to be a seller than a buyer.”
The aforementioned low housing inventory is one reason why those who do list their homes will enjoy a strong seller's market, characterized by bidding wars that could fetch them a high price.
“Multiple offers could be fairly common over the next few months," predicts Lawrence Yun, chief economist at the National Association of Realtors®.
“As long as buyer demand remains strong, I expect the market to remain tipped in favor of sellers,” says Hale.
Myth 3. Homes can't be viewed in person
As states issued stay-at-home and social distancing mandates to stop the spread of COVID-19, open houses were put on hold temporarily in MN and showings were skipped in favor of virtual home tours but real estate transactions were deemed an essential service. As of July, most of these restrictions have been lifted across the country so homes can be viewed in person—however real estate agents are taking extra precautions to protect buyers and sellers.
In Minnesota, we are seeing a hybrid of agents showing homes virtually and in person following CDC guidelines, commonly requiring everyone involved to fill out a COVID-19 disclosure form and limitation of liability form and now following the mask mandate.
It's also common to see real estate agents are requiring potential buyers to have pre-approval letters or review a home inspection report before they can see a home in person.
These extra steps also weed out the lookers from the serious buyers. A buyer that is serious about competing in this market needs to have their ducks in a row before showing or they are just wasting everyone's time and creating unnecessary risk during this pandemic.
Important to note: With infection rates in some parts of the country rising, some restrictions on home showings may take hold again. Contact me if you are unsure where MN is at when you are reading this.
Myth 4. Buyers are holding off on home purchases
According to NAR’s Pending Home Sales Index (a forward-looking glimpse at home sales based on contract signings), pending home sales jumped 44.3% in May, the largest month-over-month increase since the index’s inception in 2001.
Record-low interest rates are driving much of the buyer demand, Hale says.
Mortgage interest rates dipped below 3% for the first time in 50 years, to 2.98% as of July 16, according to Freddie Mac.
“Certainly low interest rates help," says Karl Jacob, CEO of LoanSnap. "You can lock in a rate that you just wouldn't even have been able to imagine six, seven months ago.”
One caveat: Not all borrowers will qualify for the lowest interest rate, Jacob says. A borrower’s debt-to-income ratio and credit score typically affect the type of loan and interest rates, so someone with large amounts of debt or a low credit score may be offered a higher rate.
And although the market is booming now, it may not remain that way for long depending on what unfolds.
"If [COVID-19] cases worsen and that leads to a broad reversal of reopenings, this could cause longer-term job loss that would put a dent in buyer demand," says Hale.
Myth 5. Everyone's fleeing cities for the suburbs
This is probably the most rampant myth of all, and it certainly makes sense from a pure impulse level. Since urban centers like New York City make social distancing far more challenging than in less densely populated areas, why wouldn't city dwellers flee en masse and try to buy a house in the burbs?
Well, this is only partly true. Yes, listings in the suburbs are drawing more attention these days. In May, the number of views on properties with suburban ZIP codes increased 13%, almost double those in urban areas, according to realtor.com data.
“We have seen home-buying demand recover faster in the suburbs and rural areas than urban areas,” Hale says. “There's also evidence of home shoppers in cities that were hit early and hard by COVID-19, such as New York and Philadelphia, seeking homes in nearby smaller communities at a higher pace, like the Poconos.”
That doesn’t mean everyone is fleeing to the suburbs, though.
While a few companies have announced that their employees can work from home indefinitely, most firms haven't decided yet whether their employees will one day have to return to the office so unless a person is certain they won't need to commute in the future, it's hard to commit to the financial expenses of moving.
As a result, many of those people surfing suburban real estate listings might not be all that serious about following through. They might fantasize about moving, but when it comes to making an offer on a house and packing up their belongings, there is too much uncertainty and many may prefer to stay put and see how the coronavirus pandemic shakes out first.
“This pandemic, although bad, will eventually pass," points out Jacob. "And when it does, are people really going to stop wanting to be in a city? I just don't think that's the case. Even though you can get delivery from Grubhub every night, it doesn't mean you're never going to want to go out to a restaurant, and if you have to drive 30 minutes to a restaurant versus being able to walk around the corner, that's a different lifestyle."
Now that you have heard the myths, want to read some truths? Check out this:
