Erica Sweeney – Writer – Realtor.com
Every day, our conversations online and off are filled with “did you hear this yet?” news about the coronavirus pandemic. And, alas, not all of what you hear is true—particularly when it comes to real estate.
For instance: Do you assume, as many do, that it’s a terrible time to sell a home since real estate prices are plummeting? On the contrary, the latest data shows that home prices and buyer demand are through the roof. Or have you heard that the coronavirus has forced all city dwellers to flee to the burbs? Some have, but the mass exodus you might envision is by no means the reality.
There’s a potential cost to these misguided beliefs: missing out on some profitable opportunities. For instance, home sellers sitting on the sidelines might be passing up the chance to make tons of money on their sale. Meanwhile, home buyers who wrongly assume they can’t schedule home tours right now might be forfeiting their chance to snag their dream home this summer—at record-low interest rates no less.
To help you separate the truths from the half-truths from the utter falsehoods that might be filling your social media feeds, here are five prevalent myths about real estate during the COVID-19 pandemic—and some much-needed reality checks.
1. It’s a terrible time to sell your home
Many home sellers who may have hoped to put their house on the market this summer have put those plans on hold. In early July, new home listings dropped 14% compared with a year ago, and total home inventory was 32% lower, according to realtor.com®’s Weekly Housing Trends report for July.
Fear of coronavirus exposure is probably the main reason people are keeping their homes off the market, but many might also assume that selling a home right now is just a futile endeavor, plagued by few home buyers and low prices.
But on the contrary, the latest statistics suggest that now is one of the best times in years to sell a home for several reasons.
“Given the pandemic and uncertainty it’s caused, the general sentiment [among some owners] is that now is not a good time to sell your home,” says Danielle Hale, chief economist at realtor.com. “Yet so far, the data suggests the opposite—that buyers outnumber sellers in the housing market, which means it’s better to be a seller than a buyer.”
The aforementioned low housing inventory is one reason why those who do list their homes will enjoy a strong seller’s market, characterized by bidding wars that could fetch them a high price.
“Multiple offers could be fairly common over the next few months,” predicts Lawrence Yun, chief economist at the National Association of Realtors®.
“As long as buyer demand remains strong, I expect the market to remain tipped in favor of sellers,” says Hale.
2. Home prices are plummeting
Data shows just the opposite: Home prices are actually rising.
According to the NAR, the national median price for single-family homes grew 7.7% during the first quarter of 2020, to $274,600.
“We’re seeing home prices grow faster than pre-COVID-19,” Hale says. “In fact, they are on pace with the home price growth we saw this time last year.”
The reason is record-low mortgage rates.
“Record-low mortgage rates boost buying power,” Yun says, “and, when combined with a lack of supply, will result in higher and higher home prices.”
3. Buyers are holding off on home purchases
According to NAR’s Pending Home Sales Index (a forward-looking glimpse at home sales based on contract signings), pending home sales jumped 44.3% in May, the largest month-over-month increase since the index’s inception in 2001.
Record-low interest rates are driving much of the buyer demand, Hale says.
Mortgage interest rates dipped below 3% for the first time in 50 years, to 2.98% as of July 16, according to Freddie Mac.
One caveat: Not all borrowers will qualify for the lowest interest rate, Jacob says. A borrower’s debt-to-income ratio and credit score typically affect the type of loan and interest rates, so someone with large amounts of debt or a low credit score may be offered a higher rate.
And although the market is booming now, it may not remain that way for long depending on what unfolds.
“If [COVID-19] cases worsen and that leads to a broad reversal of reopenings, this could cause longer-term job loss that would put a dent in buyer demand,” says Hale.
4. Homes can’t be viewed in person
As states issued stay-at-home and social distancing mandates to stop the spread of COVID-19, many in-person home showings and open houses were put on hold temporarily in favor of virtual home tours. But by now, most of these restrictions are being lifted across the country so homes can be viewed in person—and real estate agents are taking extra precautions to protect buyers and sellers.
Hale says she’s also heard some real estate agents are requiring potential buyers to have pre-approval letters or review a home inspection report before they can see a home in person.
“These extra steps also weed out the nonserious buyers,” she says. “If someone is willing to go through all those steps and then schedule a physical tour, you know they are serious.”
Important to note: With infection rates in some parts of the country rising, some restrictions on home showings may take hold again. Check with your local real estate professionals for current guidelines.
5. Everyone’s fleeing cities for the suburbs
This is probably the most rampant myth of all, and it certainly makes sense from a pure impulse level. Since urban centers like New York City make social distancing far more challenging than in less densely populated areas, why wouldn’t city dwellers flee en masse and try to buy a house in the burbs?
Well, this is only partly true. Yes, listings in the suburbs are drawing more attention these days. In May, the number of views on properties with suburban ZIP codes increased 13%, almost double those in urban areas, according to realtor.com data.
“We have seen home-buying demand recover faster in the suburbs and rural areas than urban areas,” Hale says. “There’s also evidence of home shoppers in cities that were hit early and hard by COVID-19, such as New York and San Francisco, seeking homes in nearby smaller communities at a higher pace, like the Poconos.”
That doesn’t mean everyone is fleeing to the suburbs, though.
For one, unless you’re extremely wealthy, it’s not that easy to pick up and move. This is particularly true since, while a few companies have announced that their employees can work from home indefinitely, most firms haven’t decided yet whether their employees will one day have to return to the office.
As a result, many of those people surfing suburban real estate listings might not be all that serious about following through. They might fantasize about moving, but when it comes to making an offer on a house and packing up their belongings, many may prefer to stay put and see how the coronavirus pandemic shakes out first.
“This pandemic, although bad, will eventually pass,” points out Jacob. “And when it does, are people really going to stop wanting to be in a city? I just don’t think that’s the case. Even though you can get delivery from Grubhub every night, it doesn’t mean you’re never going to want to go out to a restaurant, and if you have to drive 30 minutes to a restaurant versus being able to walk around the corner, that’s a different lifestyle.”