As the dust settles from a chaotic June, July has still been an active market, including my fiance and I buying a new home. We have been looking for 6-8 months pretty actively, some weeks more than others. While we found a few that would work, we ultimately compromised on a few things with the home we chose and are very excited for the new place.
You may be thinking: why is there so much homebuying activity during a pandemic??? It doesn’t make sense intuitively. With a virus that’s spreading vastly and rapidly, you would think most people would stay home and not make any major life decisions.
However, there are a few things to consider:
- Many people still have to move. While we didn’t have to buy this place now, there are many others that had to get out of their place for one reason or another. Job relocation, expecting a new child, etc. They don’t have a choice and they have to buy something. Likewise, some sellers have to sell for similar reasons. But with historically low inventory, those that are looking to buy will still be fighting over the few good properties. More sellers waited to put their property on the market, but the buyers came looking first and snatched up what was available. There will always be people needing to buy and sell because of life changes.
- Supply and demand. People were calling for a housing crash and are still saying that 3-6 months from now. The thing is, if we don’t see a glut of inventory hitting the market, we will still have a lack of supply that is being properly met by demand, or even not enough to fulfill demand and then we will see prices rise. When the forbearance periods are up, and unemployment money starts running out, even if we were to see some foreclosures hit the market, it wouldn’t be nearly enough to crash the market and it would take 12-24 months to get through the system. We need to consider the demographics of those that are unemployed (homeowners vs renters, and what areas) and see how fast we can get everyone back to work. There are many factors at play, but the bottom line, at least for Chicago, is that there is a lack of supply which will keep prices steady as people keep moving.
- Interest rates at all time lows. You can’t argue with basically free money. It’s so cheap to borrow right now that it’s really too good to pass up, even if there is a market correction. We looked at the middle range of our budget and got a solid deal, and we were able to lock in a conventional loan on a 15 year mortgage at an incredible rate. I did not even consider it before, but once I saw the interest rate, it was too good to pass up.
- Compromising. For us personally, we decided on a place we plan to stay in for 3-5 years, but could stay in for 5-10 years if need be should anything catastrophic happen. It’s our contingency plan and finding a place that could go either way for us was key. We ended up looking just outside of areas we originally considered, and ultimately zoned in on what was most important to us: square footage and outdoor space. We will have plenty of room to work from home, enjoy the outdoors when we can’t leave our homes, and comfortable afford the home. I know many people are looking to size up right now because of work-from-home mandates, and due to the fact that we are just not going out as much. We didn’t want to sit on the sidelines any longer. A home was important to us so we compromised on a few items and found something that can fit a shorter or longer term life plan.
Even if the market crashed the day after we closed, we could comfortably stay in our home and enjoy it while paying it off. We will plan to rent it out in the future, or sell it if the market is healthy. There are also some updates we can put into it to help boost value. Lastly, we bought under market value to buffer any corrections in the market. Hard to do in this environment, but because we were patient, we were able to jump at an opportunity presented to us.
Everything in life is a risk, but you take the information you have at hand and make the best decision you can with it. If you are going to buy, buy smart in this market. Buy a place that can sell when there is a lot of inventory. Buy a place you can rent out if you need to, or add updates to help the value. Have a contingency plan should life throw some curveballs at you. And work on having a healthy emergency fund. It’s proven to be one of the most important financial aspects for this time. I expect prices to stabilize or continue to rise, at least over the next 6 months. After that, who knows. But we will be taking advantage of the opportunities presented to us right now.