For many of us looking to buy, the market has been fiercely competitive as supply in the Boston market remains low. COVID19 may be the silver lining that alleviates the demand.
How will Corona Real Estate Be Different?
😷Social Distancing Means Fewer In-Person Transactions
Listings are staying on the market MUCH longer. This is not surprising as non-essential social activities are discouraged. This includes group showings, and even private tours. Sellers in this marketplace must either be deeply motivated or they have very serious debt issues. Buyers can expect greater seller concession in this environment.
😷Unemployment Disqualifies Many Potential Buyers
Unemployment numbers are record high (35 million and counting). This has inevitably shrunk the qualified buyer pools. Even temporarily furloughed employees may no longer qualify for a loan anymore.
😷When It Rains, It Pours
Despite the drop in federal reserve rates, lenders cannot service the demand for financing. Many borrowers deferred their payments, causing lending reserves to decrease significantly. This means your loan underwriters (and investors) will be paying extra attention to your employment status and ability to service your debt!
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Main point here is that the potential buyer pool has significantly decreased. The average sellers have removed their listings. However, for the motivated sellers with listings on the market for more than 60-90 days, well qualified buyers are positioned to negotiate a discount.
What’s the outlook for Corona Real Estate?👀
The immediate outlook appears bleak. Although federal reserve is preparing to inject unlimited capital into the economy, until a vaccine is developed, social distancing measures can only go so far. Recovery will also depend heavily on how quickly employment will bounce back. The proposed phased-plan to return to work means we’ll see more of a U shape recovery. This also indicates that the buyer pool will slowly expand (rather than the V shape recovery we hoped for). There is also the added psychological harm done to the psyche of potential buyers. I presume more buyers will be looking to save for a rainy day as opposed to going out to spend $$ right away. In the long run, the economy will rebound and housing prices will rise again. In fact, the trillions of dollars infused into the economy will have inflationary implications for real assets. But that won’t happen for at least a little while…
At worst, this will be a great time to brush up on old hobbies or learn a new skill. 🤓
Stay safe and be well!🌱🌱🌱
Lastly – if you’re a new homeowner dipping your toes into the landlording for the first time, check out our free Massachusetts Landlord Toolkit.