The pandemic may have affected businesses around the country, but the real estate industry continued to thrive, albeit after a short pause at the start. The current health crisis didn’t stop real estate sales. This resiliency in the market surprised a lot of industry watchers.
At this point, people may be thinking if it’s the right time for them to join the real estate boom and buy a house. The low mortgage rates make buying a house a tempting idea. But a potential homeowner should sit down and think before committing to it.
Current Market Situation
One thing that people should take into account is the current situation in the market. While the mortgage rates are low, they should look into the other aspects of the current situation in the real estate industry.
Low Mortgage Rates
One of the things that spurred real estate sales is the low mortgage rates. Rates for the 15-year fixed-rate mortgage reached their lowest level ever since it was first offered. Even after the rates increased at the start of the year, they were still low enough to make it appealing for potential homebuyers.
High Demand for Properties
Aside from the low mortgage, a potential homebuyer should also consider the high demand for properties in the market. The demand is higher than the supply, which means people are competing against each other for a small number of properties available in the market.
The huge demand and low inventory have made real estate a seller’s market in many parts of the country. The majority of the homes sold at the start of 2021 were only in the market for less than one month, which shows the competitiveness of the market.
Increasing Home Prices
For January 2021, the median sale price of new homes was $346,400. This is higher than the price in January 2020, which was at $328,900. While many people may still opt to buy homes at these prices, others may look for other options to owning a property. For instance, people may also consider looking for a plot of land available for sale where they can build a home in the future.
The current pandemic has also compelled people to avoid going out to prevent spreading the virus. Despite this, they continued to check available homes even without visiting the place physically. Real estate agents and brokers adapted to the situation and offered virtual tours for their clients. This allowed people to continue checking out homes that they want to buy.
Another issue that potential homebuyers have to contend with is the stricter requirements imposed by lenders. When the pandemic started, lenders implemented stricter requirements for mortgages. Due to this, people who have a low credit score may not qualify for a loan. On the other hand, people with high credit scores will enjoy a lower interest rate.
While some lenders will consider people with a credit score of 600 to qualify for a loan, they must meet other requirements. These requirements include a source of income to allow them to pay for the mortgage, good credit history, and an existing debt of less than 45 percent of the pre-tax income. They should also have been employed for two consecutive years or more.
Before buying a home, people should make sure they are ready to own one. More often, buying a home means a person is ready to put down roots at the place where the house is located. It also means the person sees himself staying at the place for most, if not the rest of his life.
Additionally, the person can also opt to resell the property once its value increases. It may take a couple of years. But would this be a good decision for the person to buy and sell homes rather than look for one where he can stay for the rest of his life? This decision will depend on the personal preference of the person.
Source of Income
Another thing that can influence the decision of a person to buy a house or not is the source of income. Around 25 percent of American households have at least one member who lost a job due to the pandemic. This affected the source of income of these households. People who belong to this group may think twice about buying a house at this time. They will have to focus on finding a new job to support the family rather than paying the mortgage for a new house.
Even as the real estate market saw an increase in home sales, people should consider many factors before buying a house at this time.