Much has already been written about 2020 — a year that was like nothing we’ve ever seen — and more will be written as we continue to learn from all that we went through.
Like most challenging times, I believe it will also be the reset that many of us needed to “declutter” our lives and focus on what’s most important. I also think it was the time we needed to produce real change that will catapult us decades ahead of where we might have otherwise been.
Naturally, I think about the housing market, and I’m excited about the pandemic’s forced innovation that has bettered the whole transaction for buyers and sellers.
I’m also excited about the new ideas that will exponentially expand the success ferocious real estate professionals will continue to achieve. I look forward to the industry as a whole embracing this time of change as something we needed. No turning back.
And yes, a home continues to be one of the best investments we can make into our future, especially when we now know it can be a shelter, an office and a school. As a whole though, we’re waiting and watching to see what other short- and long-term results 2020’s events will bring, some which will require us to proceed with caution.
1. Homebuying vs. homeownership costs
Despite a global pandemic, buyers rushed to buy homes this year among low inventory and skyrocketing home prices. What gives? The shrinking inventory of the past two to three years simply continued, further emphasizing supply-and-demand issues.
Mortgage rates also continued to drop to record lows. Many took advantage, doing cash-out refinancing to purchase a “Zoom home” or second or third home, a new RV or boat for some safe adventuring, or new cars with no payments for six months.
But the frantic spending pace this year, despite economic uncertainty, has many watching intently. Do homebuyers still understand the actual cost of homeownership in the long term? Furnace replacements, HOA costs and property management fees can creep up on even the most diligent budgeters.
Real estate professionals are a trusted resource beyond the transaction. Focus on being a resource to your network as an honest adviser, and your guidance will pay dividends.
2. Are home values accurate?
Very few would have expected bidding wars in the housing market when unemployment rates surged and small businesses shuttered. Multiple offers on homes make experts leery of the accuracy of home prices.
Real estate professionals want to set up new homebuyers for success, and lenders obviously want to prevent future loan defaults. We all have to work together to ensure this happens. Doing our due diligence on pricing homes and comping neighborhoods can make a difference.
3. Same, but different: this year and the 2005 recession
These are very different times, but it’s worth reflecting on the 2005 recession when borrowers were offered cheap loans that quickly turned expensive once they settled into their homes. We know now — and maybe we even did back then — that buyers couldn’t afford those homes.
As borrowers defaulted, home prices fell, and the economy inevitably softened. So, while this was a recession caused by a pandemic, not the housing market, we have to ask if consumers are self-aware and managing their cash.
We have leagues of real estate professionals who have weathered good and challenging markets. They can be a resource to all of us. As a network of Realtors, we are also consumer advocates.
4. Getting right on mortgages
There’s no doubt Americans needed help and were grateful for it. From entrepreneurs and small business owners to one-income families who find it difficult to survive in a good economy, the government needed to step in, and it did.
COVID-19 bailout programs were essential in staving off a complete implosion of the economy. Homeowners were allowed to defer mortgage payments, while focusing on feeding the family and buying essentials. But as the pandemic extends longer than most of us would have thought or hoped, will borrowers ever get current on their loans?
The mortgage industry has also massively staffed up to manage the wave of refinances. What happens to these jobs when refinances decline in 2021? Working with lenders every day offers Realtors an opportunity to keep a finger on the pulse on the mortgage industry and be compliant partners in this process.
5. Climate continues to falter
One flash of good news during the pandemic was an ever-so-slight reprieve of climate damage as traffic came to a halt. But this was short-lived, and sadly, we’ll continue to experience a continued risk of floods, fires and wind.
This unavoidably increased the cost of a home with higher insurance rates and uninsured losses. And again, it’s important to remember that as costs increase, the value of a home decreases.
To offset this impact, we, as real estate professionals, can be stewards of both the environment and homebuyers. We can help them adapt their homes to be more environmentally sustainable and, as a result, save them money.
First things first: The pandemic needs to end, and the introduction of the vaccine gives us all immeasurable hope. Soon after, we’ll watch to see how our world recovers — from the environment to the economy to our everyday lives. Like others, I continue to have faith over fear and am always eager to see positive change become permanent.