Mortgage Rates Are at All Time Lows
Buyer demand has been fired up by the extremely low interest rates now available for mortgages. According to Freddie Mac, the average 30-year fixed mortgage rate at the end of June was 3.13%, the lowest rate in the 49 years that Freddie Mac has been collecting and sharing mortgage data (and it went down to 3.03 % in early July).
While the historic low mortgage rates are good news for buyers, the not so good news is that mortgages can be somewhat harder to obtain. Some lenders have put in place tougher credit score requirements, are checking job status of applicants much more frequently, are increasing reserve requirements (the minimum amount of cash borrowers need to have left after they close), are jacking up interest rates for certain types of loans, and are deferring rate locks. Practices vary among lenders, so it pays to shop around not just for the best rate, but for the optimum set of eligibility requirements that best suit the borrower's situation.
Real Estate Transactions Are Mostly Virtual Now
In recent newsletters I detailed how the real estate sector has taken a number of steps to ensure the safety of all parties to a real estate transaction.
Most large real estate firms have discontinued in-person open houses. Prerecorded video tours and live virtual open houses (the listing agent shows the house via Zoom or similar video communication platform, answering questions real time) have mostly taken the place of in-person open houses.
In-person private showings are still taking place, but have become more restrictive, with sellers limiting access to the house to decision-makers only, and then only after receiving a pre-approval letter, and in some cases a filled out questionnaire aimed at determining Covid-19 risk. Limitations are typically imposed on the number of visitors allowed in a house at one time and, of course, everyone must wear protective equipment (mask, booties, gloves).
It has not become unusual for sellers to move out of a house to make it easier to sell. A vacant house minimizes risk for buyers and virtually eliminates risk for sellers.
Home inspections are still taking place following sensible precautions, including appropriate personal protective gear, having only the buyer present for the inspection (if at all), and maintaining social distancing.
Bank appraisals are being performed largely via drive by, with physical inspection of the interior of the house more the exception than the rule.
The need for interpersonal interactions during a closing have been pared down to the absolute minimum and much of the closing can take place remotely.
Thoughts for Sellers
It's understandable if potential sellers want to wait until the pandemic is more under control before they put their homes on the market.
But sellers should understand that it's perfectly feasible to sell right now. Procedures have been put in place by the real estate sector to address safety concerns. Serious, well-qualified buyers are looking for houses and entering into deals. And there's less competition in terms other houses coming on market, so buyers have less to choose from.
And if a potential seller would prefer to wait there is a middle course. Take all the steps needed to prepare a home for sale right now so that when things open up you can be as fast out of the gate as possible beating the competition by a crucial two or three weeks while a host of buyers come into the market looking to satisfy their pent up demand. That means taking steps such as completing those projects that will most improve the appearance and marketability of the house, de-cluttering, staging, and getting professional photographs and videos of the property.
Thoughts for Buyers
As with sellers, there are some buyers who would prefer to wait, and of course that too is perfectly understandable.
But potential buyers may want to keep a few things in mind about the market right now. The sellers who have kept their homes on the market or who have recently listed are motivated to sell. There are deals to be had. And mortgages can be obtained at the lowest rates they have been at in over 50 years. If a buyer has confidence in his or her job security, from a financial point of view right now is a great time to buy.
When things open up there's a good chance there will be circus-like feel to the market. While it's possible that prices might soften as new listings flood the market, it's also possible that lots more buyers will be back in the hunt, maintaining prices at current levels or even driving prices up. Buyers who have been keeping tabs on the market by participating in virtual open houses, taking video tours, cleaning up their credit scores and making sure they are well-qualified for mortgages will be that much further ahead of the competition when they are ready to buy.