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Before COVID-19, the single-family housing market in the U.S. was booming. Sellers were fielding multiple offers as buyers scrambled to find their ideal dream homes among limited inventory.
Now, amid social isolation, shelter-in-place orders, and quarantines, the housing market continues to be surprisingly strong, even as the economy struggles. First-time homebuyers have been able to find their ideal homes and to properly insure them.
However, the homebuying process has changed during the pandemic. As such, buying a home during COVID-19 requires ongoing preparations and careful decision-making during every step, to ensure that the discovery, negotiation, and closing processes — as well as putting into place the right homeowners insurance — have a positive impact on your financial well-being over the long term.
In this article:
State of the Real Estate Market During the Pandemic
What to Consider Before Starting Your Home Search
Top 5 Things to Negotiate For During a Pandemic
How Will The Pandemic Impact Your Homeowners Insurance
What Are The Experts Saying?
The Bottom Line
State of the Real Estate Market During the Pandemic
According to housing data company CoreLogic, overall home prices increased by 1% in June 2020, compared to the month before. The reason is demand, as “first-time buyers, and millennials in particular, have jumped at the opportunity to achieve homeownership,” said Frank Nothaft, CoreLogic’s chief economist, in a press release. Also, home-purchase applications submitted by first-time homebuyers increased 20% in June 2020, versus the year before.
There are a few reasons for this, with one being rock-bottom mortgage rates, which have led to more interested buyers. Then there are the demographic trends. According to Fortune magazine, the competition is heating up among homebuyers, especially those who are anxious to move from the more crowded cities, with a higher potential of coronavirus spread, into the less-populated suburbs, which allows more space to spread out.
Meanwhile, housing inventory continues to be limited. Sellers are finding they have to work harder to sell their homes by ensuring absolute cleanliness and sanitation for showings, walk-throughs, and inspections. Because of this, many are delaying putting their homes on the market.
To compete in this type of market, you need to be prepared to outbid other buyers who are also in search of their dream home.
What to Consider Before Starting Your Home Search
It’s essential to keep in mind there is more to snagging your house than outbidding those other buyers. Here’s a list of things to consider before you begin your search.
Understand your budget
It’s important to know how much you can afford to pay for your house at the moment, and to be aware of the factors that could impact your budget during the pandemic, like income stability and job security. Although there’s always a level of unpredictability, it’s better to start a home search when you’re reasonably confident your job and income are secure. Keep in mind the following list of homeownership costs and make sure you’re budgeting for them:
• Home maintenance. Plumbing repairs, annual furnace check-ups, lawn maintenance, and other costs need to be a part of your budget.
• Furniture and appliances. If you are moving to a larger space, or if you’re currently renting, make sure to consider the costs of buying basic appliances, like a refrigerator and washer and dryer, as well as some additional furnishings.
• Homeowners insurance. You will need proof of insurance before finalizing your home loan, and your homeowners insurance must be enough to cover expenses in the event of a worst-case scenario. Many lenders require that your home be insured for 100% of replacement costs, so make sure you’re prepared to protect your investment.
Target the right real estate agent
Your real estate agent is your partner in helping you find the right house and negotiating the best price. Rely on trusted recommendations (such as those from friends or colleagues) to help you. Be sure the agent knows the local real estate market in which you want to live. Evaluate their expertise by asking to talk to their references; an agent that won’t give you references is not one to work with. Before deciding who to use, chat with several on the phone first, and especially test their knowledge of the current COVID-19 real estate landscape. The rule of thumb here is to ask a lot of questions.
Get pre-approved for a loan
While loan pre-approval doesn’t guarantee financing acceptance, it can give you a leg up on other buyers, especially in a competitive market. To prepare for pre-approval, gather your proof of income, credit report, employee verification, driver’s license, and social security card.
Limit your COVID-19 exposure during your home search
An on-site visit might not be possible, so be prepared for virtual tours and document digitization. If you can tour the house in person, be sure the seller cleans before and after each showing. And, always bring — and wear — your mask.
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