The widespread effects of the novel coronavirus have finally started impacting our northern Michigan community. As grocery stores are facing widespread shortages on everything from ground beef to toilet paper, you might also be wondering how this pandemic will impact our already tight housing market.
Our team of veteran REALTORS has been closely monitoring the situation, preparing for how this is going to affect home buyers and sellers in our community. Here are some of their thoughts:
Coronavirus-driven Mortgage Rates Are Making Borrowing Very Cheap
The extreme volatility in the financial markets isn’t good for our Wall Street or Front Street economies. A tool the Federal Reserve uses to try and stem the tide and stabilize markets is interest rates. As many of you have probably seen, the Fed dropped interest rates to zero in response to the looming financial contraction.
While it’s tempting to think that this means you could get a mortgage at a zero percent interest rate, that isn’t actually what that rate indicates. The Fed-set interest rate controls the cost for banks when they’re borrowing money from each other or from the federal government. These cheaper rates usually translate to drops in mortgage rates too, which is why we’ve seen historically low offerings in the market. Some local buyers have even reported locking in interest rates under 3% in mid-March.
What does all this mean? Team Co-Lead BJ Brick encourages home owners to explore refinancing an existing mortgage, and buyers to sign the dotted line. Buying now could give you the opportunity to get into more house than you could afford even just 90 days ago.
Current and Future Home Sellers Should Be Thoughtful About Timing
Separate from the current public health crisis, northern Michigan has been growing in popularity, which has contributed to the rapid shrinking of the available housing inventory. More buyers in our market mean more competition for quality homes, investment properties, and short-term rentals. This competition has been evident to Team Co-Lead Tommy Corbett who has repeatedly seen offers well over asking price, time on market measured in hours instead of days, and sight-unseen purchases becoming commonplace in Traverse City.
Indeed, there was a noticeable uptick in business in the first months of 2020 compared to the same time in 2019.
Now that we have COVID-19 and the market effects that come along with it to deal with, sellers and anyone considering a sale may want to rethink their strategy..
If you own a home, now is a great time to consider taking advantage of the historically low interest rates and refinancing your mortgage. If the coronavirus lingers and puts a damper on housing demand, you could pay down the principal of your loan more quickly, build equity, and comfortably wait for the right buyer to come along. Completing the sale of your home with more cash in hand is always a good idea, and it can give you more flexibility when considering your next home.
That’s not to say there aren’t great opportunities for sellers whose time is right now. It’s clear there is still buyer demand in our local market, especially for quality houses in certain neighborhood and price points. However, if you have some flexibility in your timeline, you’ll want to make sure to have a good understanding of where your house fits into this fast-shifting market. In addition to finding the right next home, you’ll want to ensure you are making the best decision for your long-term plan. Always keep an eye on your financial future!
Sellers who are currently on the market or are considering entering putting their home on the market now may get a boost from hungry buyers who have been waiting for the right house and now have a budget that’s a little bigger than it was before thanks to the aforementioned low interest rates.
Home Buyers are Likely the Primary Benefactor of the Expected Market Shifts
Smart buyers can definitely benefit from this market volatility. Were you operating within a certain price range? With the lower interest rates, you can now explore wider financial parameters for your dream home. If you were looking at a $300,000 house, with a 3.5% loan rate, you could feasibly explore a home at a higher price point for the same monthly payment as you had previously calculated. Explore the options with your lender or real estate agent.
Both BJ and Tommy recommend that first time home buyers also be looking for opportunities in this shifting housing market. Stick-built, single-family homes are always appealing as a result of the lower interest rates, but don’t ignore manufactured homes that require little or no money down. A USDA loan can finance 100% of the purchase price, no down payment required.
Brick & Corbett is Here to Help
Our team is here to assist you with all your real estate needs. Whether you’re buying or selling, have questions about investment properties, are a first-time home buyer, or are looking to level up to your dream home, our group of dynamic professionals has the skills and experience to get you the answers you need in order to make the best decisions possible for your future.