Coronavirus has shifted home buying trends
When it comes to buying a house, people are increasingly giving up downtown and headed for the hills. Also the beaches, small towns, and rural ZIP codes.
Maybe you’ve been thinking it’s time to quit the city, to get more room to breathe in a house of your own.
But what does it mean to pack up and move during coronavirus?
How difficult will it be to buy a house and get a mortgage in the middle of a pandemic?
The fact is, plenty of people are doing it. And you likely can too. Here’s how.
Verify your home buying eligibility (Aug 4th, 2020)
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Why move during coronavirus?
Moving during coronavirus increasingly makes sense for many people.
It’s the chance to re-boot, take a different career path, and make new life choices. It’s also a time when the housing market is surprisingly attractive.
- Interest rates have been at or near record lows for weeks. Financing below 3% is now available for those with solid credit, little debt, and healthy cash reserves. Rates have never been this low for this long in the U.S.
- Low down payments make it easier to buy. Accessible loan programs are available to almost all homebuyers. Think of low rates plus USDA and VA financing with zero down, FHA loans with just 3.5% upfront, and conventional mortgages with as little as 3% down
- Home prices and values have been going up. According to the National Association of Realtors (NAR), the typical existing home sold for $295,300 in June — up 3.5% from a year earlier. “June’s national price increase,” said NAR, “ marks 100 straight months of year-over-year gains“
- When you buy in a market where home values are appreciating, you gain equity more quickly. You also avoid paying more for the same house if you buy a year from now
- There are new home buying options in affordable markets. Rising prices mean buyers may want to consider buying in selected opportunity zones, census tracts with lower-cost properties that may benefit from development
Lots of renters are taking this as an opportunity to make the move to homeownership. And current homeowners are using record-low rates as an opportunity to size up.
In July, home buying activity was up 21% compared to a year ago. That’s huge.
So not only is buying a home during coronavirus attractive — but it’s also doable for many.
Verify your home buying eligibility (Aug 4th, 2020)
Potential challenges of moving right now
Of course, moving in the middle of a pandemic is going to be a tough process. We don’t want to over-simplify it.
It will likely be harder to pack, clean, hire a moving company, and deal with the standard moving logistics when everyday life is already so complicated.
And then there are challenges in the housing market itself. Here are two big ones to keep in mind:
- Inventory is tight, down 18% from last year. That means home buying and bidding wars are more competitive, especially in the most affordable markets
- Mortgage standards may be a little tougher than normal. Coronavirus has added more risk to the economy. Jobs are no longer as secure as they once were. As a result, many lenders have tightened their qualifying standards to make lending an extra-safe prospect. However, shopping with multiple lenders may help you get around this issue if your credit or finances are borderline
Despite these drawbacks, many Americans have decided it’s still the right time to buy a home.
Ask yourself: Do the long-term benefits outweigh the immediate challenges?
If you’re looking for extra guidance on whether or not to buy a house during coronavirus — and how the process works — see:
Where everyone’s moving
In the midst of buying and selling, financing, and refinancing, something else is happening.
People are voting with their moving vans — and often that means shifting to places far from metro cores.
“Busy high-rise apartment buildings and cramped square footage have lost their luster,” says Mansion Global.
It adds that “with working from home increasingly the norm and some companies offering their employees the opportunity to work remotely for good, many Americans are weighing a move to areas where they can buy properties with more space, privacy, and security.”
For instance, think of Idaho. According to the United Van Lines, 67% of the moves it did in Idaho in 2019 were inbound — the highest percentage in the country.
“With no access to the usual perks of urban life (nightlife, museums, sports events), spending a small fortune for a cramped apartment or condo seems to make a lot less sense.” –Realtor.com
People were going the other way in states like New Jersey, where 68% were moving elsewhere.
Pandemic life “is leading more and more city-dwelling Americans to reevaluate their living situations — and the long-term ramifications for the nation’s hottest urban hubs could be vast and transformational,” explains Realtor.com.
“With no access to the usual perks of urban life (nightlife, museums, sports events), spending a small fortune for a cramped apartment or condo seems to make a lot less sense.
“And early, preliminary data suggests more die-hard urbanites are seeking new homes in towns or smaller cities,” continues Realtor.
Homebuyers are taking advantage of a mobile office
Coronavirus has changed the work/life dynamic for most households. It’s one of the biggest reasons renters are becoming homeowners in droves.
The new office environment
The pandemic has changed the big city workplace. It’s no longer a question of spending more time or less time at the office. In many cases the office is closed and the building is sealed.
In their place the home office has now become the office; there’s nowhere else to go.
This has families looking for more space than an apartment can offer. With kids ‘at-home-learning’ in one room and adults working from home in another, a house offers some much-needed breathing room.
The new workday
It turns out that buying a house in a distant location can have big advantages for both workers and employees.
The workday is being restructured. Instead of spending time on the road or otherwise commuting, we now have more time for actual work. In many cases, this is a win-win.
Employers may be seeing higher productivity, and employees get more flexibility — and the freedom to work in sweatpants.
“Residents of all ages and incomes are moving in record numbers to suburban areas and small towns.” –Kristin Tate, The Hill
Kristin Tate, writing in The Hill, explains that “a combination of the coronavirus pandemic, economic uncertainty, and social unrest is prompting waves of Americans to move from large cities and permanently relocate to more sparsely populated areas.
“The trend has been accelerated by technology and shifting attitudes that make it easier than ever to work remotely.”
As Tate says, “Residents of all ages and incomes are moving in record numbers to suburban areas and small towns.”
Are big cities finished?
In June the Business Insider named “the 50 best places” to live in America.
At the top of the list were big cities such as Denver, San Diego, and Austin. But also among the fabulous 50 were much smaller places, such as:
- Grand Rapids, MI
- Pensacola, FL (population 53,000)
- Manchester, NH
- Portland (the one in Maine)
- Boise, ID
- Asheville, NC
Does this mean big cities will empty out as people flee to small and distant locations?
Not entirely.
Big cities, merely because of their size, can support businesses and institutions that are not possible in smaller locations.
Think of major museums, a large array of restaurants, huge medical facilities, entertainment, and the opportunities to network.
Big cities will always be attractive. But the idea of the distributed office with people buying a house far from traditional office centers will become more common.
For many, the small(er) town life simply makes more sense now than ever before.
Getting a mortgage during the pandemic
Getting a mortgage is one of the few things that actually became more convenient during the pandemic. At least, for the most part.
Although qualifying can be a little tougher in some cases, the actual mortgage process has gotten easier.
Most lenders are doing all-online mortgages right now — so you can shop, apply, turn in documents, sign, and close without ever having to sit down in a loan office.
If you’re planning to buy, start by checking in with a lender to see what rate you qualify for and what you can afford.
With mortgage rates still near record lows, homeowners can afford bigger houses than they could just one year ago.
Verify your new rate (Aug 4th, 2020)
