A Guide to Buying or Selling a Home During Covid-19

Things to consider when buying a home during a pandemic.

At Flagstar, it’s our job to provide customized solutions that can help you reach your goals. We know that our customers have big dreams, like owning a home, and we want to help make your financial dreams a reality. If you’re ready to take the leap into homeownership, there are things to keep in mind as you navigate the COVID-19 housing market, knowing that we’re here to guide you along the way.

Are we in a recession?

Yes. With an average of 1.5 million unemployment applications filed each week in June and the expectation that U.S. GDP will likely shrink by 40%, we’ve entered into one of the fastest recessions in history, one estimated to be the worst since World War II. And just because it started swiftly doesn’t mean we’ll recover swiftly. It’s important to educate yourself about the current economic landscape so you can make informed decisions that will keep your financial goals on track. That includes weighing the pros and cons of buying (or selling) a home.

How is COVID-19 affecting people’s finances?

Layoffs and furloughs have forced many to fall back on savings, and nearly 50% of Americans are worried about paying for food and bills. According to financial counselor Todd Christensen, we “can expect high unemployment … to continue along with lower wages as more job seekers compete for fewer … jobs. However, given the broader stability in the economy prior to the pandemic, long-term recovery seems certain, although what it will look like is still up for debate.”

What does this mean for the housing market?

With the combination of financial uncertainty and the new safety precautions for home viewings during COVID-19, the housing market has taken a hit. A Zillow survey reported that sales tend to drop drastically during pandemics. But unlike in a regular recession, it would appear that in one caused by pandemic, the market tends to recover quickly.3 And while it remains unclear whether this will hold true in the aftermath of COVID-19, web traffic to real-estate platforms like Zillow and Redfin has fallen by 40%, new sales listings have dropped as much as 70% in some markets and weekly mortgage applications by 17.9% in April alone. It’s currently projected that housing recovery will be gradual and tend to fluctuate due to the virus.

Preparing to buy in a COVID-19 landscape.

While COVID-19 has driven down sales volume and leaned into a sellers’ market—with new safety and social-distancing protocols making the process trickier—it’s still possible to buy right now.

Pros and cons of buying now
  • A slower market may mean less competition in the area where you want to live.
  • Sellers may be extra-motivated and more flexible on price.
  • You can start your search remotely, touring homes virtually.
  • You may have more time to be thorough in your search while sheltering at home.
  • The Great Recession of 2008 proved that mortgage rates can be extra-competitive during a recession.
  • There may be stricter criteria for qualifying for a loan during the pandemic.
  • Virtual tours are always possible but can make it harder to determine whether or not a home meets your needs.
  • Appraisals may be “drive-by only,” leaving buyers nervous about the thoroughness of the inspection.
  • “Coronavirus clauses” are often part of current transactions, which can mean sellers (or buyers) can back out of a sale or extend closing with no repercussions.
Do your homework

Pandemic or not, buying a home is a big move, so make sure you’re financially and emotionally prepared before you jump in. Shop for the best rates you can find and reach out to us to gauge what you can qualify for. Flagstar Bank can help you remotely obtain pre-approval before you begin your hunt, to show sellers you’re serious.

It’s important to remember that COVID-19 hasn’t necessarily made the market competitive—while there are fewer buyers, there may be fewer sellers in your area as well. Prepare yourself for the work and don’t be discouraged if it takes time to find your dream home at your dream price.

Stick with the basics

There are smart things to remember when buying a home, with or without a recession. Think about how long you plan to stay there and whether the location you love is likely to increase in value.

Equally important is cost: Don’t buy property that’s above your means and hope it will retain or increase its value. An uncertain market is just that: uncertain. So, hedge your bets and buy a home you can afford right now and will be happy to stay in for at least five years, should the market fluctuate or go down.

Consider the house you want in terms of the future: Will you have to make lots of repairs or renovations to get it just right? Is it in a neighborhood you love? Think about the school district, as homes in strong school districts tend to maintain or increase their value. If you can buy your perfect home in your price range, wonderful. But also remember that a fixer-upper at a low price could leave you with enough extra money to make the renovations you want, if you’re willing to make them.

What about selling during COVID-19?

Yes, the sellers’ market has slowed in the wake of the pandemic. But if you want to sell, there are factors working to your advantage. The most important thing to do is be prepared.

Pros and cons of selling now
  • Even with the economic downturn, market demand has remained relatively strong while supply is at an all-time low, which could mean a faster sale or a higher asking price.
  • Virtual showings are on the rise, so you can show your home safely and remotely.
  • With ongoing unemployment, there may be a reduction in demand.
  • The repercussions of rising unemployment may mean that more buyers are willing to grab a bargain than pay top dollar.
  • While virtual showings have made it possible for remote tours, they’ve also made it more difficult for buyers to feel confident enough to take the leap.
  • Negotiations have changed, as have closings. It’s become increasingly unsafe to conduct. transactions in person, which can negatively impact a buyer’s desire to purchase.
Be prepared

Even in a sellers’ market, overpricing your home can work against you. Despite the fact that there are fewer houses on the market, the economy is suffering and unemployment rates are on the rise, so buyers might be less inclined to enter a bidding war.10 And with mortgage rates at an all-time low, buyers are not desperate to purchase anything they don’t feel is priced right. Do your research to make sure you’re asking (and getting) a fair price.