The Coronavirus pandemic has disrupted every industry, and real estate is no exception. Many of the programs offered in the early days for payment deferrals and government stimulus are no longer available. This leaves many homeowners in a precarious position, and realtors busier than ever.
Here are five of the ways COVID-19 has changed real estate, both temporarily and for the foreseeable future.
Forced Sales and Mortgage Defaults
An unfortunate side effect of COVID-19 has been the mass layoffs and continuous underemployment around the world. Many businesses will never re-open, meaning many employees are back in the job market during a mass hiring freeze. While banks have provided various solutions, the lack of income has forced many homeowners to sell their homes or default on their mortgage.
While this is a terrible situation for homeowners experiencing financial hardship, it’s also creating an opportunity for those who wish to move to high-demand areas. For example, Denver has been in a boom scenario over the past decade, with home prices skyrocketing. The forced sale of homes— sometimes below market value— makes moving to Denver more accessible for qualified buyers.
Exodus From the Cities
Another shift in the real estate market has been the mass exodus from the cities and into suburban and rural areas. Numerous factors are playing into this trend, not just fear about the virus.
Many people are faced with unemployment for the first time in their lives, allowing them to venture outside of their usual stomping grounds. Additionally, as cities tend to be more costly, many people are forced to move outward to cut costs. If their job was in the city, they no longer have the roots that once held them in place.
After being sheltered in place for an extended period, some people are re-evaluating how much space they need. The shift toward remote work is also impacting where people choose to live, as the daily commute is no longer a factor.
While many people are rethinking urban life, it’s not a fear-driven mass exodus like some reports have indicated.
Changing Mortgage Rules
Mortgage lenders around the globe are tightening the eligibility guidelines on their mortgage underwriting. For example, JPMorgan Chase just upped their required FICO credit score to 700 with a down payment of 20%. Many non-bank lenders are also raising their minimum credit score requirements.
With expected defaults in the near future, it’s not likely that these requirements will loosen any time soon. While first-time homebuyers will be the most affected, those trying to refinance will also experience challenges.
Remote Home Showings and Closing
The tasks associated with buying a home are also changing in light of the pandemic. Many realtors report challenges in showing homes during this time, pushing some sellers to use a for-sale-by-owner listing. The realtors who have kept working during the pandemic have become innovative in their practice.
Remote home showings and virtual tours via live streaming are expected to last after the pandemic has passed. Additionally, the closing paperwork may permanently shift to a digital file-sharing approach rather than pen and paper. As digital signatures are legally binding, electronic document signing could streamline the closing process now and in the future.
Lower Consumer Debt and Higher Mortgage Demand
One surprising statistic from the pandemic is the reduction in consumer debt. While people are struggling financially, they’ve also had less temptation to use credit cards as restaurants and shopping malls were closed. Many consumers paid down their consumer debt and started the road to credit repair and mortgage eligibility. It’s expected that these individuals will be in the market for a home within the next few years.
The long-term implications of the pandemic are yet unknown. While some markets are struggling, others are experiencing an unprecedented surge in home sales. Staying informed is essential for real estate agents, homeowners, and prospective buyers in 2020.
On a brighter note…
More Tech Savvy
The real estate industry has been slow on the uptake of new technologies but COVID-19 has pushed many businesses into action. Sales agencies and property managers use video and AI chatbots and the whole sales transaction can now legally happen online including notarization.