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Last updated on December 23rd, 2020 at 10:30 am
The coronavirus pandemic is roiling the important estate market. Home sales have plummeted. Job losses have soared. Lenders have tightened mortgage requirements.
That’s the immediate fallout. This health scare and economic shock may additionally leave an enduring mark on how Americans buy and sell homes.
The longer the crisis drags on, the more the coronavirus could transform development patterns and buyers’ preferences. Here are five ways the pandemic’s legacy could survive even after the general public health threat ebbs:
1. Your next home could be within the 'burbs, not downtown
Urban living made a serious comeback in recent years. In NY, San Francisco, and Seattle, home prices soared, and job creation surged.
Sprawling Sun Belt cities like Austin, Houston, Miami, and Phoenix saw the construction of the latest high-rise apartments and condos in once-neglected downtowns.
However, with COVID-19 claiming an enormous toll in urban areas like N.Y. City, density might lose a number of its appeal.
“This crisis is that the right moment for the planet to reconsider the traditional wisdom that denser cities are better cities,” writes Joel Kotkin, a scholar specializing in urban issues at Chapman University in California.
For city dwellers cooped up in tiny apartments for weeks on end, suburban sprawl suddenly seems a viable alternative.
“People who sleep in the town could be looking to maneuver back to suburbia,” says Alan Rosenbaum, chief executive of GuardHill Financial, a mortgage company based in Manhattan.
New York City features a population density of nearly 28,000 people per area unit, consistent with the U.S. Bureau of the Census, making it the nation’s most crowded city.
Within the pre-pandemic boom, New York’s teeming masses were a point. Now, that demographic reality has pivoted from an asset to a liability.
“If you’re during a downtown high rise, it’s hard to socially distance on the elevator, where somebody might cough or sneeze,” says housing economist Brad Hunter, director at RCLCO land Advisors.
“On the opposite hand, within the suburbs, you’ll pull into your driveway and go straight into your house, and it’s easier to socially distance.”
A move toward telecommuting would play into that trend. If workers keep toiling from home, as they’ve been doing during the pandemic, instead of commuting to downtown offices, living within the suburbs makes more sense.
Some homebuyers might answer the cocooning instinct by moving to an exurb.
Buyers who don’t want wide-open spaces might choose a compromise, trading a downtown high-rise apartment for a townhouse during a close-in suburb, says Robert Dietz, chief economist at the National Association of Home Builders.
“It gives you that sense of space you maybe don’t have in an apartment community,” Dietz says.
2. you would possibly be renting for a short time
With paychecks shrinking and lenders making it harder to qualify for mortgages, more Americans might find homeownership has drifted out of reach.
A weak economy tends to lower homeownership rates as potential buyers prefer to rent instead of combat the hefty financial commitment that accompanies buying a house.
“We’re likely to ascertain wage declines. Therefore the purchasing power of consumers goes to be reduced,” Dietz says.
The U.S. homeownership rate peaked during the housing frenzy leading up to the mortgage meltdown of 2008 when loans were readily available. That rate dropped sharply during the good Recession before rebounding in recent years.
Even before the coronavirus pandemic, homebuilders were setting aside some new homes for rent, instead of purchasable, in their developments.
And a replacement breed of landlords, most notably Invitation Homes, has focused on renting suburban homes to the type of workers who once became homeowners as soon as they got married or had kids.
3. Maybe you'll need a bigger home
Before the coronavirus, most Americans slept reception then left for work or school. They visited the gym, to the films, to cafes and bars and restaurants.
Now, people are spending most or all of their time reception — and finding that home suddenly feels a touch cramped. A headquarters just got tons more important. So did space for understanding and storing stuff.
New homes are shrinking, partially because desirable land has grown scarce, and also because first-home buyers have struggled to afford the large homes that earlier generations took without any consideration.
“The new homebuyer of the past decade has been the millennial, and one among the items we found was that they were willing to simply accept a smaller home to urge on the ownership ladder,” Dietz says.
If today’s desire for more personal space turns into tomorrow’s trend, buyers will flock to greater homes, perhaps in lower-cost cities and farther-flung suburbs.
4. you would possibly start buying a second home
For those that have the financial means, owning a second home suddenly looks more appealing.
With NY City locked down, wealthy New Yorkers fled to their beach homes within the Hamptons, their cabins within the Poconos, or their condos in Florida.
Owning a second home isn’t an inexpensive option — mortgage rates on second homes typically cost more, and you’ll need to shoulder additional property taxes, homeowners insurance, and maintenance costs.
In general, Dietz says, demand for second homes is strongly correlated to the stock market’s performance — an indicator that doesn’t portend a flurry of buyers for second homes.
However, the coronavirus crisis could override the standard forces driving the marketplace for second homes.
In typical times, a wealthy New Yorker who wanted to escape the town could rent a dwelling, snaffle an Airbnb, or occupy a hotel. The pandemic closed down those options.
“It’s very hard to seek out rentals call at the country or at the beach,” Rosenbaum says. “People are definitely getting to search for a second home.”
5. You're getting to rely more on tech in the home buying process
In recent years, land transactions gradually grew more virtual. The coronavirus accelerates the trend.
Even so, a true estate transaction is the ultimate hands-on experience.
Before they commit, buyers want to smell out cat pee, listen for traffic noise, and usually immerse themselves within the sights, smells, and sounds of their potential new home.
Meanwhile, buyers and sellers typically receive reams of paperwork — state disclosure forms, contracts, mortgage documents.
And therefore the process ends at a closing table surrounded by a mountain of paperwork from various participants.
The coronavirus has disrupted business as was common. In-person tours have about halted.
Some land agents already had begun offering detailed virtual tours of properties, which marketing tactic looks likely to grow more common.
While nobody expects virtual tours to exchange physical walk-throughs, the paper-heavy transaction process had been poised for an overhaul.
In recent years, many land brokers and mortgage companies had moved toward a more virtual process.
Now, industry experts say, remote transactions, electronic signatures, and virtual closings are poised to require off.
Reference Source: Bankrate
