Pandemic Continues to Transform How Real Estate is Bought and Sold

While job losses mount and home sales plummet due to COVID-19, lenders are tightening mortgage requirements, making it more difficult to purchase a home. In addition to stricter mortgage requirements, the virus may change how Americans buy and sell homes in the future. 

As the pandemic continues, it could end up transforming how real estate is bought and sold as well as change buyer preferences and development patterns. Let’s have a quick look at how the real estate market could change thanks to COVID-19.

People May Move Back to the Burbs

Urban living has skyrocketed in recent years, but the suburbs may become much more attractive thanks to the pandemic. Home prices in New York, San Francisco, Chicago and Los Angeles have gone up dramatically in recent decades as younger workers have flocked to city living.

However, as COVID-19 has decimated large urban areas such as New York City, the sprawl and space of the suburbs may end up being more enticing to home buyers of the future. After spending weeks stuck in tiny apartments in the city, home buyers may reconsider the larger homes and lots that suburban living offers.

“People who live in the city might be looking to move back to suburbia,” says Alan Rosenbaum, chief executive of GuardHill Financial in a recent BankRate.com article.

New York City is the most crowded city in the U.S. with over 28,000 people per square mile according to Census Bureau data. While population density may have been a selling point for young workers, that same density makes the city very dangerous during the pandemic.

High rise buildings make it hard to properly social distance, especially if you have to ride an elevator every day to get to your apartment. Most suburban homes on the other hand allow homeowners to drive into their garage and head straight into the house. 

As more and more workers do their jobs from home the dreaded commute into the city may go away, making suburban living more attractive.

Potential Homeowners May End Up Renting Longer

Job losses and pay cuts combined with the fact that lenders are tightening lending requirements may push homeownership out of reach for renters who were getting ready to shop for a home. 

A weaker economy, which is absolutely headed our way, usually leads to lower homeowner rates as potential buyers drop out of the market due to uncertainty about their income and a fear of making the big commitment that a home requires. 

The fear and uncertainty that the pandemic brings will most likely result in some potential homebuyers renting for longer before they are uncomfortable making the commitment a house purchase requires. 

If You Have the Means, a Second Home May be in Your Future

If you can afford a second home, now may be the time. A vacation home out in the country gives you an escape if the virus accelerates or comes back even stronger in the fall. If your urban area ends up locked down, a second home can be a much needed escape. 

A second home is never a cheap option, prices tend to be more expensive in beach or mountain communities where second homes are typically located and mortgage rates for vacation homes are usually higher than for a first house. In addition, you will need to consider the cost of property taxes, insurance and maintenance for a home in the country. 

However, due to the economic downturn, current vacation homeowners may suddenly find their second home unaffordable, forcing them to put it on the market. This could lead to price drops in areas where second homes are popular. All of this means it may be a great time to buy a second home if you can afford it.

Home Buying is Going to Change

Even before the coronavirus, real estate closings were becoming higher tech and virtual. This trend will continue and even accelerate in the future. 

In many states, home showings have been virtual only for the last few months with some buyers purchasing a home after seeing it only online. As states reopen and showings are allowed again, this trend will probably fade away as most people will want to see a home in person before signing on the dotted line. 

The closing process in a real estate deal will probably be changed for the foreseeable future. Electronic signatures and virtual closings are most likely here to stay as the process of buyers and a closing agent gathering around a table with a mountain of paperwork is not really social distancing friendly.