It’s no surprise, America has entered a recession as the coronavirus pandemic has continued to impact not just businesses but the individuals they employ.
Though the economy all but shut down completely, this recession doesn’t feel like previous ones, as many markets that you’d expect to crash have remained strong.
While market volatility in the midst of the pandemic is almost guaranteed, most financial analysts agree many markets may have already made it out the other end, including the housing market.
As with any big financial decision, when trying to time the market and decide if now is the right time to purchase a home, there are numerous pros and cons to consider, so here are some of those tips gathered from some of the Santa Clarita Valley’s financial analysts.
Strike while the iron’s hot and interests rates are low
“The (housing) market has continued to be strong in Santa Clarita,” said Jerrod Ferguson, vice president at Vance Wealth.
With interest rates at historic lows and financial analysts expecting them to stay that way for the months to come, all agree that the housing market will remain strong.
“Affordability has gone up, and with rates going down, people can actually afford more house,” Ferguson added. “With rates at all-time, historic lows, the million-dollar house that was never affordable, now all of a sudden is … (as) their budget’s a little bit higher because they’re able to borrow more money at cheaper rates.”
Here in the SCV, home sales have continued at a fast pace, quickly recovering since the downturn in May. According to the SRAR’s July snapshot, realtors have closed on 272 single-family homes, which was 3.4% ahead of a year ago and up 36% from June.
“Once again, just like in June, low interest rates fueled the July upsurge in activity, combined with a pandemic influenced desire to own a home,” Louisa Henry, the chair of the SCV Division of the SRAR, said in a prepared statement. “Rates at or below 3% also helped to offset home prices, which continue to rise.”
This economic turmoil has left the national debt at nearly $26.7 trillion and climbing, according to the U.S. Treasury.
“Although mortgage rates don’t align perfectly with the rates that are set by the fed, I think we’re going to have low rates for a while,” added local financial adviser Erick Arndt.
The bubble won’t pop this time
“This recession that we’re going through now is different than the last one at the core, so to confuse the two is a mistake,” Arndt said. “The last one was a banking crisis, which meant the money wasn’t flowing … (but) the banking system is moving fine — this is a business issue, (where) businesses can’t sustain themselves. So I don’t see the impact on real estate like last time.”
Financial analyst Peggy Williams agreed, adding, “This scenario is much different. Credit terms have tightened, meaning that those who buy homes are more likely able to afford them.”
Though millions have lost their jobs, leaving them unable to pay their mortgages, Williams and Arndt both agree that any forbearance, or pause on payments, for X number of days, won’t all be due at the end of that period of time. Instead, that sum will simply be tacked onto their existing loan term.
“It’s not hitting the housing market as hard as people may think when they see unemployment numbers simply because those most affected are renters, who don’t have those loans in place,” Williams added. “That’s where you’ll see the most struggle with these forbearances.”
That being said, Arndt says for those who are prepared to buy, it could be the perfect chance to do so. “There could be some really good opportunities that pop up because every time the economy shifts, there is opportunity.”
Regardless, it’s up to your personal situation
“If you can afford it and it’s more of a longer-term purchase, then the timing of it shouldn’t really matter,” Ferguson said. “I think ‘time horizon’ is a big thing.”
Someone’s time horizon is specific to their financial situation and the clarity they have on their financial future, such as the stability of their job and their partner’s.
“Obviously, you can’t plan for everything; so I think having a really good understanding of your budget and having a good safety net in case there is some income disruption is important,” Ferguson added. “You want to make sure that you can afford the house.”
For a large purchase like this, Ferguson suggests having a savings of at least six months’ worth of non-discretionary expenses, such as mortgage payments, utilities and insurance.
In any case, all three financial analysts suggest speaking to an expert about your personal situation.