Too Many Risks Selling and Buying in March and Early April
In mid-March and early April, I cautioned my sellers and buyers that the market was very risky for a variety of reasons. In addition to the risk of virus exposure, lending was fraught with many challenges, securing vendors for inspections, repairs and appraisals were difficult, and lay-offs and employment changes were still percolating. There were a number of sales that were cancelled last minute during that time that put sellers and buyers in very difficult situations and often with significant investments lost.
The Dust Has Settled and Low Interest Rates Increase Buying Power
Banks have now had an opportunity to settle into a “new normal” and have implemented changes accordingly. While some of those changes will make lending more difficult for a number of borrowers, now that these conditions have been established, there is much more reliability in the process. In contrast, some lenders like Suncoast Credit Union have made very empowering improvements to their loan products. In addition, interest rates have dropped back down to historic lows, thus increasing buying power for qualified buyers.
To give you an idea of how lowered interest rates increase buying power: “Today, if you borrow $300,000 at 3.375%, the monthly principal and interest payment is $1,326. A year ago, with an interest rate of 4.375%, you would have gotten the same monthly payment by borrowing $265,000. The drop of one percentage point increases borrowing power by $34,400.” ~ Nerd Wallet
These interest rates present a great opportunity for buyers to get more home for their money. This additionally helps sellers as increased buying power has a positive effect on sales.
Historically Low Inventory and Pent-up Demand
Housing inventory was already very low before the pandemic, but now it is now even lower – locally, we have only 2.1 months of inventory. In other words, there are much fewer homes on the market with which to compete. Pulling local stats again today revealed that many homes listed these last couple of weeks are going under contract within only a few days. Strategic pricing is very important as buyers are not willing to overspend during times of uncertainty, but locally, I’m not seeing prices go down either.
Add to this the fact that we mostly missed our local early Spring buying season, and the pent-up demand, especially for families wanting to buy before the coming school year, far surpasses our supply.
Right now, the reliability of lending, low interest rates, low inventory and pent-up demand are empowering many sellers to get their homes under contract quickly and close reliably.
Safety First.
There are a number of safety precautions we can use to increase safety of buyers and sellers during the process. Contact me to discuss those details.
If you’re considering selling or buying, contact me today for a free, honest and informed evaluation of your options.
