Should I buy? Should I sell? Are home prices going up? Going down? Is the housing market crashing, or will it come back strong?
Even in the best of times, real estate decisions carry a hint of uncertainty. But over the roughly two months that the novel coronavirus has turned daily life upside down in Colorado, these questions from would-be homebuyers and sellers have never been more prevalent — or more warranted.
Below I’ve responded to five questions that are filling up my inbox over recent weeks, and — with the help of some national real estate data and economist views — here are some answers that hopefully shed some light on what’s next.
How is the COVID-19 crisis affecting prices?
Here, I turn to insights from Lawrence Yun, chief economist for the National Association of Realtors. Overall, Yun forecasts price stability. In Northern Colorado, Yun predicts no negative impact on prices for a region that continues to be short on supply yet remains a desirable place to live. Nationally, the impact of stay-at-home orders is cutting into the prime selling months of spring and early summer, a fact that is dampening price appreciation in the second quarter as it limits both demand and supply. Yun thinks the net effect is a mostly stable market in the third and fourth quarters. Long-term, he believes that when stay-at-home orders are lifted, the country will experience a burst of GDP growth.
Is it the right time to get in the market?
Understanding supply-and-demand factors will help you weigh the risk. In Northern Colorado — and many parts of the country — we’ve recently emerged from an incredible seller’s market with a tight supply of homes. Undersupply typically leads to rising prices and more competition among buyers. And with COVID-19, we’ve seen supply of homes decrease further. At the same time, demand continues to be strong — Northern Colorado still ranks high for quality of life and desirability for relocation. Many see real estate as a financial safe haven from riskier investments. For anybody trying to figure out the timing of buying or selling, start with clarifying your goal. For instance, when do you want to move into a new neighborhood, or do you need to move across the country to take a job by a certain date? From there, work with a trusted advisor to assess the risk vs. reward.
Will interest rates go down?
Thinking back on where many economists predicted interest rates would be at the end of 2019, they were all wrong. What we know today is that we still live in one of the most advantageous interest-rate environments in history. Holding out for lower rates might just backfire on many would-be purchasers if rates start climbing. My recommendation is to seize upon the certainty — that we’re in one of the lowest interest rate environments in history — and use it to your advantage. Keep in mind that for every 1% difference in rates, your purchasing power goes up or down by 10%.
Will the housing market suffer any long-term damage?
In short, we think the answer is no. In fact, we believe housing is as well-positioned as any industry to weather this storm successfully. Housing is one of life’s three basic necessities (food, clothing, shelter), and people will always need to buy and sell real estate. Transferring a home usually takes at least a couple of months. Unlike buying groceries or going out to eat, it doesn’t happen frequently. The real estate industry is built on intermittent and uneven sales patterns. When the stay-at-home and safer-at-home orders are lifted, we believe many clients who postponed their move will be eager to get started.
Should I wait to buy?
Truthfully, the only person that can answer that is you. Our job is to provide you with the most up-to-date information so you can make an educated decision. Meanwhile, two core fundamentals hold true about the housing market.
First, it’s one of the best investments you can make. That’s because the place we call home has never been more important than it has during this global pandemic. This crisis will forever rearrange the value of home for most of us. Second, more retirement wealth is created from real estate equity than any other financial investment. According to Homebot, 83% of personal wealth in the U.S. comes from home equity. Why wait on getting started? This isn’t a day trade in the stock market, this is a long-term investment that will build wealth for your future.
Brandon Wells is president of The Group Inc. Real Estate, founded in Fort Collins in 1976 with six locations in Northern Colorado.
See related story from BizWest’s May 2020 edition.