The COVID-19 pandemic caused the stock market and economy to spiral down, leading to the lowest mortgage rates in decades. In July, mortgage rates have dropped below 2% in both fixed 30-year and 15-year loans.
While, at present, the mortgage rate has gone back up above 3%, it is still lower than usual. Many homeowners have already decided to refinance their mortgages and save thousands of dollars over time. Many prospective homeowners are also taking advantage of the best mortgage rates they have ever seen and made their dreams of buying a house a reality.
While mortgage rates are still in consumers’ favor, should you take the plunge and buy a house now?
Many in Danger of Losing Their Homes
COVID-19 forced many states to impose restrictions that closed down businesses and offices. As a result, millions of Americans went into unemployment. The government has provided financial help to those affected, paused mortgage payments, and temporarily put a stop to evictions.
However, these measures were only briefly in effect. By July, landlords were again able to kick out tenants who fail to pay their monthly rate. According to research, eviction rates went back up to levels seen before COVID-19.
In the middle of a deadly pandemic, many have lost or will lose their homes.
Analysts warned that, across the nation, 40% of renters are at risk of eviction.
For homeowners, there are relief options available, especially if they have a government-back mortgage. They can get into a forbearance program if they are unlikely to meet their monthly payment due to the pandemic. However, some experts warn that a foreclosure crisis could still happen.
Increase in Home Loan Applications
However, not everyone is struggling. The low mortgage rates have encouraged a lot of prospective homeowners to finally apply for a loan. Both new loans and refinancing are up this year compared to 2019.
Despite the mass unemployment, more people are capable of investing in real estate properties.
House Prices Surge
In theory, with the economy in the dumps, and as millions lose their jobs, prices of houses should drop. For a while, that seems to be the case.
Now, buying a house is more expensive. Realtor said that, currently, the median prices for listings are 5.6% higher compared to a year ago. The cost of purchasing real estate should be going down. Why is it going up instead?
The supply of houses remain the same, but the demand for them went up. As mortgage rates drop, more families become capable of buying real estate properties. This created a bidding war that kept prices of real estate up despite the economic recession.
Due to the pandemic, some homeowners have also delayed putting their properties in the market. Sellers, typically older than buyers, are either worried about the economy, their jobs, or not willing to welcome strangers into their doors. They decided not to sell until things go back to normal, further creating limited supply.
Moreover, the lack of foreclosed properties, due to the foreclosure moratorium in many places across the nation, is contributing to the surge in prices of houses for sale.
Should You Buy a House?
The interest rates for mortgages are lower than ever, but the prices of houses in the market have gone up. Whether it is a good idea to get a home loan now and purchase real estate depends on your current situation.
A bad economy typically pushes people to reduce expenses and save money. If there is any uncertainty in the future, you may want to hold off making any major investments right now. You should spend this time growing your savings so that, in case of an adverse event, you would have money to spend on essential items such as rent, medical bills, groceries, utilities, etc.
However, if you have been planning to buy a house for a really long time and you have enough money reserved in the bank in case of a sudden financial issue, then you have no reason to put it off. While the prices of houses are high, it would be offset by low mortgage rates. You still can save a bit of money by buying now.
Do not worry. The low mortgage rates that consumers are enjoying now would likely be here for a while longer. There is a new fee that will be imposed on lenders that will likely trickle down to borrowers starting Dec. 1. You still have time to think about whether you should buy a house during the pandemic, or wait until 2021.