Buy house with coronavirus uncertainty?

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markfaix
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Joined: Sun Jul 06, 2008 5:47 pm

Buy house with coronavirus uncertainty?

Post by markfaix » Wed Mar 25, 2020 3:15 pm

DW and I are looking for a house in Maryland near our kids' school. The neighborhoods we are targeting generally have low inventory, and appropriately priced houses get multiple offers within days of listing.

DW is very nervous about buying a house with the uncertainty surrounding the coronavirus pandemic, the concern being that housing prices could fall with an almost certain recession and increasing unemployment in the coming months. (We're not worried about getting the virus by seeing houses since no one else will be in the house when we are there.) Our finances are stable, less net wealth due to the market decline recently, but our jobs are reasonably stable, etc. I anticipate a temporary 2-3 month decline in my income unrelated to coronavirus, but stable thereafter.

How much would you factor the coronarvirus related uncertainty into buying a house? One view is that good houses in desirable neighborhoods and historically low interest rates still make this a sellers' market, despite coronavirus. Another view is that fewer potential buyers, fewer showings and general fear of spending will depress real estate prices, so we should wait or make only lowball offers.

We can't predict the future, but how would you approach this decision?

Tigermoose
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Re: Buy house with coronavirus uncertainty?

Post by Tigermoose » Wed Mar 25, 2020 3:24 pm

I too have been looking at buying a house in SOCAL the last month or so, but now I have put that plan on hold. My plan is as follows:

1. Invest my down payment money in the Wellesley Income Fund and stay put
2. Wait
3. If the stock market and economy rebounds, I stay invested and stay in my own home for a few years and house hunt later
3. If the economy goes into recession and housing prices decline, I might buy one of these overpriced homes if they fall 10%.

In our market, i have seen some price cuts and inventory building up slightly. I am also seeing some people taking their houses off the market.
Institutions matter

The Broz
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Re: Buy house with coronavirus uncertainty?

Post by The Broz » Wed Mar 25, 2020 3:25 pm

If you are confident that your income will be consistent (or are planning to pay cash for the house) and you are not planning to be house poor by the level of your purchase, I am not sure that I would be too wrapped up in wondering if house prices will fall. They may and you may end up paying a little bit more than you would have if you waited a little bit (or maybe not), but in the grand scheme how much does it matter? There's also nothing wrong with being a little aggressive with your offers - the seller can say no.

senex
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Re: Buy house with coronavirus uncertainty?

Post by senex » Wed Mar 25, 2020 5:03 pm

A large price drop could occur. During the last crisis (admittedly, quite a different scenario) some houses dropped 50% and took many years to recover.

If you want to buy, you could attempt to hedge some risk by buying long-term S&P500 put options. The S&P is not necessarily a good proxy for your local housing market, but it might be "good enough" to provide some downside protection.

Marlon Marlin
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Re: Buy house with coronavirus uncertainty?

Post by Marlon Marlin » Wed Mar 25, 2020 6:13 pm

I would hold off for about six months. The banks are suspending mortgage payments for three months now. Around three months after that, we'll find out how many people default and have to walk away from their houses. If prospective buyers cancel their plans, too, values could really dive.
Some people are so poor, all they have is money.

tawebacon
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Re: Buy house with coronavirus uncertainty?

Post by tawebacon » Wed Mar 25, 2020 6:14 pm

Would you be able to afford the mortgage payments if one or both of you were to get infected and needed multiple ER visits and/or ICU stays? Would one of you be able to afford the payments if the other were to die from the disease? Do you have backup plans if one or both of you lose your job(s)? What if a combination of these occur: one of you gets ill, followed by 5-day ICU stay and survival, yet the other gets laid off (recession) or fired (taking care of someone takes a toll)?

These are usually low probability risks when taking on substantial debt. They are high probability realities during a pandemic like this.

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F150HD
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Re: Buy house with coronavirus uncertainty?

Post by F150HD » Wed Mar 25, 2020 6:27 pm

tawebacon wrote:
Wed Mar 25, 2020 6:14 pm
Would you be able to afford the mortgage payments if one or both of you were to get infected and needed multiple ER visits and/or ICU stays? Would one of you be able to afford the payments if the other were to die from the disease? Do you have backup plans if one or both of you lose your job(s)? What if a combination of these occur: one of you gets ill, followed by 5-day ICU stay and survival, yet the other gets laid off (recession) or fired (taking care of someone takes a toll)?

These are usually low probability risks when taking on substantial debt. They are high probability realities during a pandemic like this.
doesn't all of this apply to any current homeowner as well? should everyone reading this thus sell their home?

tawebacon
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Re: Buy house with coronavirus uncertainty?

Post by tawebacon » Wed Mar 25, 2020 6:31 pm

F150HD wrote:
Wed Mar 25, 2020 6:27 pm
tawebacon wrote:
Wed Mar 25, 2020 6:14 pm
Would you be able to afford the mortgage payments if one or both of you were to get infected and needed multiple ER visits and/or ICU stays? Would one of you be able to afford the payments if the other were to die from the disease? Do you have backup plans if one or both of you lose your job(s)? What if a combination of these occur: one of you gets ill, followed by 5-day ICU stay and survival, yet the other gets laid off (recession) or fired (taking care of someone takes a toll)?

These are usually low probability risks when taking on substantial debt. They are high probability realities during a pandemic like this.
doesn't all of this apply to any current homeowner as well? should everyone reading this thus sell their home?
OP is talking buying a house (taking on new obligations given the high risks), rather than continuing their mortgage payments (complying with obligations already taken on). I would treat these two differently. In the former situation, I wouldn't take on the new obligation. In the latter, since I cannot realistically get out of it, I would plan for what I would need to do if these scenarios were to be realized.

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Nate79
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Re: Buy house with coronavirus uncertainty?

Post by Nate79 » Wed Mar 25, 2020 8:12 pm

You should be comfortable owning a house thru good times and bad. If you had bought the house 3 months ago would you be in an ok position today?

Wricha
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Re: Buy house with coronavirus uncertainty?

Post by Wricha » Wed Mar 25, 2020 8:49 pm

Bought and sold a house in the past 8 days. I am very fortunate to have cash, to buying a house and not yet sold my house. Closed on my house yesterday. With the market volatility of past couple of weeks I must admit it was a bit unsettling. I thought the buyer for my house would back out (he did not). I have bought maybe 40 pieces of real estate in my life time, my net worth had never been higher and yet this sudden market drop while buying a house on Sanibel gave me pause. My advice if you can extract a Premium for buying now (house price or Morgage rate) I would do it. If not I would wait a couple months.

oldfort
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Re: Buy house with coronavirus uncertainty?

Post by oldfort » Wed Mar 25, 2020 9:46 pm

IMHO, everyone should shelter in place. Are they really letting you see a house with no one else there, either home owners or a real estate agent? Assuming they do, will you be able to close without any in person interaction with any real estate agents, banks, or lawyers? If you need to sell a home as well as buy, do you really want potentially infected individuals coming into your residence to tour it?

Katietsu
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Re: Buy house with coronavirus uncertainty?

Post by Katietsu » Wed Mar 25, 2020 9:53 pm

I am not sure you will be able to see any houses. I have a friend in real estate in an area with similar risk as Maryland. They stopped doing showings on Monday for the foreseeable future. They are continuing with sales already in progress and with “digital tours.”

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celia
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Re: Buy house with coronavirus uncertainty?

Post by celia » Wed Mar 25, 2020 9:59 pm

I’m selling property in another state as part of an estate liquidation. We were getting ready to close next week while I was pushing escrow to send papers for me to sign while I could still access notary services. (A family member works in a hospital and just started having virus patients this week.). Now my notary access worries have disappeared as the buyer decided to walk away from the deal today and lose his deposit and sunk costs. He was already getting a good price as it is still snowing on-and-off in the area and not many buyers are looking. So now I’m back to square one.

Theses are my long distance observations for a northern state. The state just implemented stay-at-home but the virus was not a concern in the US when we started escrow.

Essential services are defined differently for each state. In that state realtors are not considered essential workers (implying it may be hard to get into see the property now). Public storage units and movers are ok’ed to work in that state (to put the remaining furniture in storage for me). Title companies need to observe social distancing so they may ask you to stay in your car and bring the paperwork to you or at least keep the buyer and seller separated by having each show up to their respective title companies for signings while the title companies interact online. Escrow had both of us acknowledge that due to the pandemic, county offices may not be fully operational and the deed might not be recorded for a while. In that area I think they may be skipping final walkthrough although, in my case, the property is almost vacant. I suspect my buyer is a first time buyer, single person who just turned scared since so much of it was new to him and, after all, the mortgage looked scary in this environment, compared to a month ago.

So, even if you want to buy right now, even by paying cash, you may not be able to unless you’ve already seen the property and are comfortable not seeing the usual steps that go on during escrow. On the positive side, you won’t have much competition against other buyers and if the seller needs to sell ASAP, that may give you a price break.

Valuethinker
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Re: Buy house with coronavirus uncertainty?

Post by Valuethinker » Thu Mar 26, 2020 1:23 am

markfaix wrote:
Wed Mar 25, 2020 3:15 pm
DW and I are looking for a house in Maryland near our kids' school. The neighborhoods we are targeting generally have low inventory, and appropriately priced houses get multiple offers within days of listing.

DW is very nervous about buying a house with the uncertainty surrounding the coronavirus pandemic, the concern being that housing prices could fall with an almost certain recession and increasing unemployment in the coming months. (We're not worried about getting the virus by seeing houses since no one else will be in the house when we are there.) Our finances are stable, less net wealth due to the market decline recently, but our jobs are reasonably stable, etc. I anticipate a temporary 2-3 month decline in my income unrelated to coronavirus, but stable thereafter.

How much would you factor the coronarvirus related uncertainty into buying a house? One view is that good houses in desirable neighborhoods and historically low interest rates still make this a sellers' market, despite coronavirus. Another view is that fewer potential buyers, fewer showings and general fear of spending will depress real estate prices, so we should wait or make only lowball offers.

We can't predict the future, but how would you approach this decision?
Houses are 10 year + decisions.

As long as you believe you will own for that long I would buy.

If they drop 20% from here they will recover eventually. Good neighbourhoods seldom go out of fashion. So even in a slump there will be buyers.

Coronavirus is a 2 year problem. Even if we have the apocalypse we will get through this. Law and order and key public services will still be in place. Most of us will still be among the living.

snowox
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Re: Buy house with coronavirus uncertainty?

Post by snowox » Thu Mar 26, 2020 5:02 am

I would agree with alot of the comments on here but primarily these two.
1) you should be comfortable to buy or own your house in both down an up markets
2) wait and see with what is going down in the mortgage industry.

I dont think now is a good time to buy a home even if you can get a realtor to show you one. And just because the house would be empty doesn't mean its safe. Despite that , worse case scenario you wait and you have a market the same as it was. You wait you might have an opportunity to purchase a house at a better deal.

Just imo...good luck either way

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Go Blue 99
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Re: Buy house with coronavirus uncertainty?

Post by Go Blue 99 » Thu Mar 26, 2020 8:11 am

We are currently house hunting, as our current home is set to close next month. We are going to slow play the search though, as my wife expects to lose her job soon. We are looking for an apt rental, but that's been tough as apts here have banned in-person tours.

Our agent said things have never been so busy though- it sounds like sellers who were planning to list later in the spring are pushing up their schedules. And the buyers have continued. She has 4 homes for sale and 3 went under contract quickly. Our metro area has a big corporate relo scene, and she says those moves haven't stopped yet.

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