It’s no secret that our economy is taking a major beating right now. Everything is shut down. We’re limited to essential services only, and many of life’s luxuries are not currently available to us. Many events have been postponed or cancelled, and I would expect more cancellations to come. Even though the Canadian National Exhibition is still four months away, I would be surprised if it ended up moving forward. We’ve already seen cancellations of major events into August.
As more cancellations are announced, the economy will continue to take its lumps as the pandemic progresses.
But how will this affect the housing market?
While our lifestyle has certainly changed as we all adapt to a contactless society, the real estate industry adapts as well. With social distancing in full force, open houses have stopped, and real estate showings are now ‘virtual’. Lawyer signings are also done virtually, and mortgage lenders are now accepting appraisals without physical home visits.
New real estate listings are down substantially. This is no surprise. SALES are down 69%. After all, who would think to themselves… “hmmmmm, I think now would be a great time to sell!”. This doesn’t mean that there are no new listings being released. There are, just in far fewer numbers. There are some that need to sell, just as there are some that need to buy. For this reason, the market will not stop, and all real estate related services have been deemed essential services.
While home values are down, they have not plummeted. As long as the number of buyers and the number of sellers are proportionate, the real estate market will not crash. We are still receiving daily inquiries from prospective homebuyers who are looking to get preapproved to see how much they qualify for. We also have many clients who are not only actively searching for a new home, but are eager to purchase ASAP. These are largely first–time homebuyers.
While the most motivated buyers and sellers are out in force, the majority are sitting back and waiting to see what happens with the market. The longer the pandemic continues, the larger the list of eager buyers and sellers sitting on the sidelines will become.
Mortgage Rates and Their Effect On The Post COVID-19 Housing Market
Given the significant disruption to our economy, mortgage rates are expected to remain low for years to come. When we get towards the end of the pandemic, the pent up demand for real estate will be significant. Given that mortgage rates are expected to be at near historic lows for some time, the housing market will then start to soar. Any dips on the real estate market during the pandemic can be expected to reverse quickly.
Is Now a Good Time To Buy Real Estate?
Inventory has diminished substantially, but so has buyer competition. Even amid the pandemic, we are still seeing desirable properties go into multiple offers. As with any market pull back, it’s just a matter of time before it’s restored. It’s likely that the market will start to rebound later this year, and will be thriving once again in 2021.
This will be a crazy time, as all who were sitting on the sidelines, both buyers and sellers, will come back in full force. The pent up demand will be significant, and buyer competition will be fierce… but inventory will be far greater as well. The housing market will then start soaring once again. This will be further fueled by low mortgage rates.
While it’s likely that home prices will fall further, this does not mean that active buyers should be holding off until we hit rock bottom. That’s tantamount to one saying that they are going to wait for the stock market to hit the bottom before they start buying. No one knows when this will be, and there is no way of knowing the exact time. If we knew, then EVERYONE would be fighting to get in at that specific time. I believe that late spring and summer of 2020 is a big opportunity for buyers to get into the market ahead of all the craziness that we can expect at the end of the pandemic… and it will end. It’s just a matter of time.
Regardless of how long it takes, we’ll adapt, and get used to this new way of life. Society will find a way. The real estate market has evolved and adapted to the changes, and other industries will as well. We will eventually get back to normal, but this will take time. The housing market will not wait for our previous way of life to be restored. As we evolve, it will continue to as well.
By Paul Meredith
Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank
– How to Win The Mortgage Game in Canada, and has ranked as one of the top
75 mortgage brokers in Canada since 2016