Hi, I'm hearing this question a lot. Should you buy a home during a pandemic or even look for one or should you wait and see what happens? Well, as with just about every question we try to answer here, the answer is, it depends.
So let me help you understand some of the questions you might be looking at and see if that gets you closer to that answer. The first question is, are you looking for a home or are you looking for an investment? Those are always very different, but particularly now.
So with an investment, there's one very clear goal. It is to make money on the purchase, whether that purchase is buy and hold something that you're going to buy and you're going to rent for years for income or something you might be looking to flip and buy and fix up and then resell.
So all of those are going to have a different answer, and for this particular video, we're pretty much just concentrating on those looking for a home. So do you live in the right space? That's the big question when you're thinking about moving. Something is compelling you to think about it and it's probably the answer to this question.
So if it's a matter of cost, the location isn't right, it's not in the right proximity to other things, or has the convenience that you need or is comfortable, and there's so many different things that go into those questions, but that's really what you want to look at. Are you happy waking up there in the morning, going to sleep at night, and are you comfortable making the payment?
So if it's not close to the people you love or things that you like to do or a job that you still maybe need to commute to, those are the things to look at.
This quarantine environment is really exaggerating a lot of these things and making people examine whether they're living in the right space.
So if you're not, we want to help. Is it safe? Well, you will be walking into other people's houses and houses that other people have walked into, so that means that there is some inherent risk.
If you are a person who is in the more vulnerable groups then we're going to want to take extra precautions, but we're going to take precautions for safety for everyone, including ourselves.
The first thing you're going to do is all of your homework upfront. So we always need a preapproval when we're looking at homes, but even more now. So this is not the time to kind of go around and get an idea of what you might be looking at, what interests you, what doesn't sort of I'm bored this weekend kind of stuff. This is not the environment for that.
If you have made a decision that you're going to move, then you want to speak to a lender, we've got a couple of great ones, and get that preapproval.
As a matter of fact, most sellers are actually requiring it before you're allowed to show these days. So you get that, then we're going to do all of the recon and research ahead of time. So you're going to look.
We always describe house hunting as a funnel, and when you start at the top, you have all sorts of options. Then you're going to eliminate, you're going to eliminate, eliminate, eliminate, and as you get to the bottom of that funnel, you're going to find what you're looking for.
Sometimes that happens really fast. Honestly, sometimes in a day. Sometimes it takes a while, but it's a process. We're going to ask that this process start all outside the homes.
So by the time we get down to actually making appointments and going into homes, you're not going to say, "You know what? I don't like this neighborhood," or, "I don't like this block," or, "This isn't the town I want to live in."
You're going to do all of that ahead of time, and then finally, once those decisions are made on the big scale, you're looking at area, location, neighborhood blocks, you're looking at types and styles of houses.
By the time you get down here, now we're actually ready to go inside. So there are also options for virtual tours. We've got great technology. We have a 3D video camera that we can do a virtual tour with. So that can be the next level.
But at some point you're going to have to go into a house and we want to make that as minimal as possible. So once you've eliminated everything that you don't want, and you've narrowed it down to a few things you do want, we're going to find a few houses that fit into that range.
When we've identified those, then we're going to figure out what the best option is for seeing them.
Some of them might be vacant. That means people don't live there, but it doesn't mean that nobody else is looking at it. So we still want to be careful, only decision makers are allowed on showings right now. So if you have children that normally we would bring along, we're going to ask you to find a solution for that, even if it is that one person goes in the house while the other person stays with the kids, and then you switch.
A little bit inconvenient, but it can be made to work. And we're asking only that decision makers are involved. So if you are by yourself and you make your own decisions, then that's you. If you are part of a couple or buying with someone else, then those parties should be involved in the showing. But that's it.
We're limiting showings to the shortest amount of time, wearing masks, shoe coverings, possibly gloves, but for the most part, not touching anything inside the house and just trying to keep everybody as safe as possible, our clients, the sellers and us. This is a question I'm getting a lot. Are the prices going to do down? Is there going to be crash? Is it going to be 2008 or 2010? We don't know. We don't know.
And it always sounds like kind of an unsatisfying answer, but it's the truth. And anyone who tells you that they know what's going to happen is not telling you the truth. So prices may come down after we feel the effect of all of the economic impact that's going on right now. I always tell people, "We don't know what's going to happen."
There could be something completely out of left field. A war could start somewhere or somebody could shut down trade with the United States and hit the economy.
There's just so much volatility going on. Things can happen in the political sphere. It could be a natural disaster. I never, ever, ever have said we could have a pandemic and everybody is going to have to stay home for a couple of months, but here we are. I want to go back to that slide.
Sorry, my presentation's getting impatient. That just goes to show how we really can't predict what's going to happen. What we know is that whatever happens will be based on supply and demand. Right now, supply is still very low. Demand is still pretty steady.
So we're not seeing house prices drop in most of our markets, and we don't know whether they will or not. However, I can tell you that part of the problem during the 2008 to 2014-15 era was the way that lending tightened. Interest rates eventually came way down, but it took a long time and loans were very difficult to get.
So lenders were looking for high down payments. They were looking for high credit scores. They had a lot of hoops to jump through. That may well happen again, if the economy starts to falter. Interest rates may go up. There are a lot of factors that that influence interest rates and we don't ever know really what's going to happen.
So this is just an example of what would happen if interest rates went up by one point and how that affects what you're paying for a house. So people tend to focus only on the purchase price, but interest rate is so important, and they are so low right now.
So, in this example, we go from 3.375% interest rates to 4.375% interest rates on the very same house. You have almost the same payment. $1414 a month, $1410 a month or $1417 a month. So without the payment changing, this house would have to decrease in value from $400,000 to $355,000. So it would have to go down $45,000 in value to make up for one point interest rate rise. That's how important interest rates are.
So when you're looking at the possibility that housing prices may come down, you need also to be looking at the probability that interest rates will rise.
So there's a lot that goes into it and really it just keeps coming back to that same question of, are you living in the right place? If you focus on that and you focus on spending your days and nights in a place that fits your lifestyle, fits what you do, what you love, what your family needs, that is where you win in any market. It doesn't matter whether it goes up or down because you've won the life game.
So if you feel like you should be living somewhere else, give us a call, contact us. All the contact information is ruthsheahan.com. You can reach out to any of our agents and we would love to help you figure it out.