2020 has been a wild ride, and it’s not yet halfway over. Already we’ve seen the scare of a global pandemic, a huge spike in unemployment and massive civil unrest. The coming national election promises to foment political diatribe.
Yet, the stock market remains strong and nationwide sales of new homes rose a bit in April, despite dire predictions and lower prices. Many housing markets, including our greater-Greenville, SC market, remain strong despite lay-offs, furloughs, and health concerns. Here’s the million-dollar question: Is buying a home in 2020 likely to be a good or bad experience?
This year certainly presents home-buyers with challenges. Major hurdles include:
Very high unemployment
According to the US Bureau of Labor Statistics, unemployment in April ranged from a low of 7.9% in Connecticut to a whopping 28.2% in Nevada. Compare this to the nearly-historic nationwide low of 3.5% unemployment in December of 2019, and you get an idea of the challenge new home buyers face.
If your home-ownership dream required 2 stable incomes in your household, you may have seen that dream vanish into thin air over the past few months. Even a short-term furlough is likely to disrupt a loan process.
Mortgage requirements in constant flux
If you’ve begun the mortgage process, you know that meeting your lender’s minimum credit score is essential. Without that prerequisite, you won’t be able to finance your purchase. Period.
Minimum requirements traditionally vary a bit among lending institutions and fluctuate some to accommodate changing market conditions. However, since the beginning of 2020, some lenders have kept their minimum score about the same, while others have raised theirs significantly. Lenders that have raised the score dramatically have effectively eliminated a significant portion of home buyers who planned to use their services.
Rapidly-changing availability of homes
Increasing numbers of urban dwellers—especially seniors and millennials—are exiting the city and looking for homes in the suburbs. If you want to purchase a condo within the limits of a large city, you’re happy. If you want to find a home in the suburbs of the same large city, you’re likely to find that the level of difficulty in locating your dream home has increased exponentially since the start of 2020.
It may be hard to believe that 2020 offers any benefits of prospective home buyers. The list isn’t long, but the housing market does have a few strengths.
Very low interest rates
In May of 2020, 30-year mortgage rates hovered around 3.5%, defying many gurus’ expectations that rates were bound to jump. That’s good news because it means that home buyers can 1) buy a home for a smaller monthly payment that they had anticipated, or 3) purchase a slightly more expensive home without increasing their mortgage payment.
Less competition, overall
Tighter mortgage requirements mean that fewer people are able to actively look for a home. If you want a low-priced, move-in ready home in the suburbs of a large city with a strong economy, you’re apt to face stiff competition. In nearly every other scenario, you’ll probably find relatively more homes available and fewer purchasers looking at them.
This year could be a great year to purchase your first (or next) dream home. Successfully buying a home in 2020 will mean:
Keeping a tight grip on your finances so that you can afford a monthly mortgage payment even if your income slips a bit.
Monitoring your credit score carefully, and making sure that you meet the lender’s requirements when you are ready to begin the mortgage process.
Prioritizing your home wish list so that you immediately recognize a home that has what you need the most and can act quickly--especially if your local housing market is strong.
Shopping around for a lender with rates and terms that fit your situation.
Albert Einstein said, “In the middle of difficulty lies opportunity.” Opportunity wrapped in a blanket of difficulty is a fitting metaphor to describe the interesting parameters of buying a home in 2020.