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By May 25, 2020
Buying a home isn’t easy, even under normal circumstances. The COVID-19 pandemic has disrupted our daily lives, throwing off our routines and schedules, and forcing priorities elsewhere. With negative information inundating the daily news cycle, it can seem like too uncertain a time to make the financial decision of homebuying. Costello Real Estate and Investments is one of the ten largest residential real estate agencies in Charlotte, and they want you to know that even with today’s uncertainty, it’s still an opportune time to close on a new house. In fact, if you close on a house in the coming months, they are donating $60 with their partners at Fortified Title to Feeding America, a national food bank dedicated to ending hunger in the United States. Just one closing can provide up to 600 meals for people in need.
With two offices in the Charlotte area and one in Raleigh, Costello REI sees the trends of the market on a day-to-day basis. Steve Lonnen, a realtor at Costello, says “that despite the surprise of the COVID-19 pandemic, the Charlotte market is still poised to be a top three market of 2020, and could potentially stay favorable for another three to five years.” The reason is due to pent up demand for housing amidst an influx of growth, coupled with a limited supply. In other words, people are still selling and many more want to buy.
Here is some essential information and tips you need to know on buying a home during the COVID-19 pandemic.
Recessions and the Housing Market
The general consensus is that a global recession is incoming, if not already here. It can be easy to equate recession with a poor home market, especially since that’s what caused the last recession. UC Berkeley’s Institute for Research on Labor and Employment shows how the Great Recession of 2008 was fueled by the risky practices of lenders who offered subprime mortgage loans in the pursuit of bigger profits. The result was an artificial pricing bubble in homes which eventually burst, taking the US and global economies down with it. Since the events of 2008 are still fresh on everyone’s minds, it’s fair to be cautious when we’re facing yet another downturn. That being said, a recession isn’t necessarily a harbinger of a poor housing market.
Nelvia Bullock is an ABR® certified realtor and the new Director of Culture at Costello REI. She thinks that despite the current economic conditions, housing will remain strong, stating that “the housing market will be what carries us through this recession.” A report by title insurance company First American echoes that sentiment, arguing that this housing market may actually be a “recession buster,” due to high levels of “tappable home equity” (from mortgage payments and price appreciation).
Even historically speaking, the US housing market has survived “all recessions since 1980, with the exception of the Great Recession,” according to Jefferies Financial Group in a 2018 CNBC article. Jefferies added that on aggregate, recessions since 1980 have seen the Federal Housing Finance Agency (FHFA) house price index rise by an average of 2.7% from beginning to end of the recession period, (with the exception being the Great Recession again). This is undoubtedly good news for the weary buyer.
The Charlotte Market
Despite COVID-19, the Charlotte market remains favorable. A press release by the Canopy Realtor® Association showed a 20.8% decline in April home sales from the previous year. Additionally, pending contract activity declined 17.6% from last year and overall contracts declined 15.7% from March of this year. In the same press release, John Kindbom, president of the Canopy Realtor® Association/Canopy MLS blamed the year-over-year and monthly declines on the state and local orders that were in effect.
“Given the state and local stay-at-home orders, we knew that contract and new listing activity would be impacted and that sales would be slower and not as strong as they normally would be during this time.”
Despite the unexpected drop, there were some good trends to be reported. The report shows that the median sales price was $275,000, an 8.1% growth from 2019. Additionally, Kindbom pointed out that buyer demand has been “historically strong” for the Charlotte region, which he believes will make a market recovery easier during the reopening process.
Charlotte’s market is a sellers market right now, meaning there’s a shortage of houses compared to demand. The hottest areas of activity have been off of I-85 into Gaston County (Belmont and Gastonia), Cotswold, Myers Park, Sedgefield, Steele Creek, and neighborhoods around Uptown like South End, Plaza Midwood, and Wilmore. Other trending areas are in neighboring South Carolina, which include Fort Mill, Rock Hill and the areas right across the state line.
The Charlotte metro area has seen exponential growth throughout the last decade. According to Lonnen, “three key demographics in particular are responsible for the rapid growth: millennials, individuals relocating for work, and older adults who want to be closer to their grandchildren.” Within these groups, Charlotte is considered a top city in the United States.
Generally speaking, the area is seen as attractive by a multitude of demographics, thanks in part to favorable living conditions and high levels of desirability. The US News and World Report currently lists Charlotte area in the top 25 “Best Places to Live” in the United States, driven by top scoring categories like value, desirability, and the job market. Specifically, Lonnen credits the diversity of industry sectors within the job market as a contributing factor for growth; particular sectors include banking, energy, fintech, healthcare, and startup ventures. Other factors he sees as desirable are the low costs of living and lower levels of traffic compared to other large metro areas.
Individual Agencies and COVID-19
The real estate industry has now been deemed an essential service and is still operating, but must comply with new guidelines on social distancing. Some of the changes include virtual tours of available listings and allowing listing calls, agent consultation, and buyer agreements through video call instead of in person. If the buyer would still like to see a listing in person, it is still allowed under the new guidelines; however, there can only be three people at a time inside the listed building to maintain compliance. Bullock sees the pivot toward more virtual interaction as an “opportunity to be in front of clients like never before,” calling it a “disservice” to the seller not to include virtual service components.
Along with individual agencies, the NC REALTORS® association has issued a COVID-19 addendum for real estate transactions. The addendum addresses the logistical and financial difficulties that have arisen from the pandemic. Some of the key provisions include loan denial protections, a good faith effort agreement to maintain obligations, and a one-time contract extension option if needed. The addendum can be added onto new or existing contracts. Any questions about the form can be answered on NC REALTORS® website.
Essential Steps to Consider Before Buying a House
According to Bullock, Lonnen and the Costello Real Estate and Investments’ First-Time Buyers guide, there are several key steps to consider before you buy.
1.) Get pre-approved by a mortgage lender
Bullock says it’s always a good idea to get pre-approved for a loan. In a pre-approval, the buyer applies for a mortgage and receives a written commitment in writing from a lender. This process lets a seller know that you’re serious, and sellers are typically more receptive to buyers who’ve been pre-approved. Some lenders are requiring more money down on FHA and VA loans at the moment, but generally lenders will allow you to pay them when you close your loan.
2.) Interview an agent
Specifically, find out what the agent is knowledgeable or specialized/certified in. For Bullock, she has a track record in representing the buyer as an ABR® certified realtor.
3.) Know what you want in a home
Make a list of two things: items in a house you must have (like bedrooms, bathrooms, number of stories, etc.) and your wishes (like a pool, den, etc.). You may not get everything you want as a first-time buyer but listing what you want can help keep track of what you’re looking for.
4.) Have a game plan for when you find a home
In an active market like Charlotte, homes are going fast, but it’s a bad idea to move too quickly. Be objective when considering a house and to make sure the specific house you want meets your needs before making a decision.
5.) Know what you can afford
Before you buy, make sure that you’re able to afford the home that you want. Investopedia’s homebuyer’s guide recommends a three to six-month savings cushion to cover up down payments and closing costs. In addition, the guide recommends tracking your general spending and debt obligations so there is room left over for essentials after paying your mortgage.
If you need more assistance, Costello Real Estate and Investment’s website features a mortgage calculator to help determine how much home you can actually afford and qualify for.
6.) Explore Your Loan Options
When it comes to loans, Lonnen’s advice is to look to all of your options to know what’s best for you. There are several different loan options to consider, from fixed rate loans, adjustable rate mortgage (ARM) loans, FHA and VA loans, and more. Ask your lender about what loan options are available for you and what you’re qualified to receive.
General homebuyer information and guidance:
Check out additional COVID-19 information and resources:
- https://www.hud.gov/coronavirus
- https://www.nchfa.com/about-us/covid-19-information-and-resources
- https://www.forbes.com/sites/advisor/2020/04/06/home-buying-and-selling-in-the-time-of-coronavirus/ – 711132b72d3b
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