With the current COVID-19 outbreak, many buyers are considering waiting until 2021 to buy a house and no one can blame them. The impending recession is a major concern for buyers and sellers and the real estate market will be affected. Whether you should buy a house now or wait until 2021 will depend on a lot of factors that we break down in this article.
The only real certainty right now is that there is uncertainty – homebuyers and sellers alike will be hesitant to make major moves in months to come. So, should you buy a house now or wait until 2021?
Consider Your Financial Situation
Real estate market conditions now will be vastly different than a few months ago due to the spike in unemployment caused by COVID-19. James Bullard of the Federal Reserve Bank of St. Louis recently stated that the US unemployment rate could go up to 30% by the next half of 2020, with the number of unemployed being 22 million at the time of writing.
Your personal situation is the biggest factor in whether you should buy now or not; if you feel confident that you are able to maintain the same level of income you had pre-outbreak, you could still invest successfully this year. However, if you feel that your future employment and income are at risk, it might be better to wait until 2021 when you have more certainty and to focus on building savings instead. This is even more true if you have any pre-existing debt or if you might have to take on debt in the coming weeks.
Consider Home Price Trends
Your local real estate market and prices will also be a deciding factor in whether you buy a house now or in 2021 instead. You will want to research the most recent home price trends in your area – if they’ve been consistently rising over the past few years then the market there will be less at risk of a downturn that could sucker your investment. If the prices have started to dip instead, it is more likely that they will continue to fall and that decline can still accelerate.
Fluctuating house prices cause a “wait and see” reaction in buyers who will prefer to get more certainty before making big decisions with their money. Areas with affordable properties that are friendly to buyers with average incomes are least likely to experience huge pricing drops in the face of a recession.
Consider the Market
The supply of houses on the market will very likely dry up in the next few weeks as sellers put their sales on hold – they would rather try to collect a higher asking price at a later date than compromise and sell right now. If there are fewer houses on the market overall, the opportunity to invest becomes much smaller. This is becoming a reality for many local housing markets and is causing some sellers to turn to tech to overcome these challenges. Some of these solutions include offering virtual or online tours, or signing documents remotely, but the sellers offering these services are still in the minority.
Altogether, this means that if you are in the market for a property right now, you may not be seeing all the options that could become available later in 2021 when circumstances will be more clear.
Consider Future Projections
It’s clear that the seller’s market of 2019 has turned into a buyer’s market in 2020. A recent survey of real estate agents and other property experts found that nearly half of respondents believed the market would continue to soften throughout 2020.
If you plan to buy a house this year, it’s key to be prepared in terms of your finances and how well you know the local market conditions. Trying to predict how your local real estate market will perform in the face of lockdown repercussions will be a challenge, but there won’t be a lot of time to hesitate and think about it if an opportunity to buy does become available. We can also expect to see more foreclosures in the coming months, which can be good deals for investors looking for lower prices.
Final Thoughts
Should you buy a house now or wait until 2021? That will entirely depend on your financial situation and the performance of the local market throughout this period. The real estate market is cyclical in nature – if there is a downturn now we can expect to see an upturn in given enough time. If you plan to buy now, make sure to do your due diligence before making any offers. That being said, there are great deals to be had in volatile markets, so if you are able to, take advantage of the lower prices while you can.
Keen To Figure Out What Your Property Is Worth?
Our free online ARV calculator can help you assess the current value of your home, and similar properties in your area. It’s a simple tool designed to help real estate investors make informed decisions.