Are you wondering who is buying a home during a coronavirus pandemic? I've often wondered the same given there is so much fear mongering in the media.
The housing market is now very strong as more people get vaccinated. However, right when the coronavirus pandemic hit in March 2020, transactions declined for several months.
The reality is that the demand for real estate is very strong due to record-low mortgage rates and more time spent at home. Naturally, the more time you spend using something, the more you value something.
Take a look at the chart that shows who is buying a home during a coronavirus pandemic. Apparently, the same number of people are buying homes during a pandemic than before a pandemic began according to the U.S. Census Bureau.
Now take a look at this second chart of who is buying a home during a coronavirus pandemic for more proof activity is high. There has been more than a V-shaped recovery in the pending home sales index. This means that even more people are buying homes 4+-months into the pandemic.
With more people buying homes, this also means the homeownership rate is going to tick higher.
Who Is Buying A Home During A Coronavirus Pandemic?
Now that we've got a good macro view of who is buying a home during a coronavirus pandemic, let us take a micro view.
Given the free Financial Samurai newsletter has over 45,000 subscribers, I went ahead and asked if anyone was buying a home during the pandemic. I also asked them to share their situation and why they are buying during a pandemic. Here are their answers.
An Apple Employee
The NASDAQ is up over 25% as of 3Q2020. Many of my tech colleagues are all looking to buy their first homes or upgrade homes. I work at Apple and Apple stock is up around 28%. We announced record 2Q2020 results and a 4:1 stock split. 50% of my wealth is in Apple stock and me and my colleagues are much richer now.
We decided to buy a bigger house for our family of five. The average 30-year fixed-rate mortgage rate at under 3% is just icing on the cake.
A Renter Who Is Sick Of Renting
For over 10 years, I’ve been saving between 20% to 50% of my after-tax income. My income has also gone from $80,000 to $165,000 during this time frame. But I’m still renting a studio apartment from when I was 25 years old. I'm sick and tired of hoarding so much cash. What's the point if I'm not going to spend it?
If I had just bought a property I was looking at back in 2010 for $300,000, it would now be worth more than $500,000 today. I would have also gotten to enjoy a nicer place for all these years as well. I want to live life now.
I’m 37 years old and want more space. I want to move on with my life and not keep it on hold. With mortgage rates so low, it's now worth it for me to buy instead of keep on renting.
Working From Home And Homeschooling
The main archetype of who is buying a home during a pandemic is a working parent. Many of my friends are buying a home that has a place for homeschooling and one or two office spaces.
We have two kids: ages 5 and 3. We plan to homeschool both of them until a safe vaccine is produced. We found a home with a 400 sqft garage that is bright and clean. We plan to turn the garage and driveway into the preschool area. The home also has two dedicated work areas for my husband and I.
Last year, we refinanced our existing primary home mortgage through Credible to get a 2.625% 7/1 ARM. Now that over a year has passed, we can rent out the home once we buy a new home.
For our new home, we've been able to lock in a mortgage rate of only 2.25%! Buying a home during a coronavirus pandemic may sound nuts. But the economics make sense now. And, we have a family needs more space.
Upgrading An Existing Home
Although rent prices might be down 5% – 10%, mortgage rates are down 25% – 30%. Therefore, it's cheaper to buy than to rent now in San Francisco.
I'm buying a larger and nicer two-bedroom, two-bathroom condo facing a nice park in Pacific Heights. The park will be my backyard where I can walk the dogs, lay outside, social distance, and enjoy life more during shelter-in-place.
I feel very fortunate that people are moving out of the city. Less people makes the city more desirable. There are more great deals for condos. But getting one right along a park is huge.
It took about two weeks to get preapproved for a mortgage at the end of July 2020. I heard that it was almost impossible to get preapproved back in April 2020, a month into shelter-in-place.
I locked in a mortgage rate of 3% for a 30-year-fixed. Not bad. I'm going to rent out my 1-bedroom condo for passive income.
The Rich Are Buying Multiple Homes
Me and several other friends are buying multiple homes. We feel this is the opportunity to take advantage of low mortgage rates and desperate sellers. Anybody listing a home during a pandemic must be a desperate seller because it's harder to buy a homenowadays due to no public open houses.
Without the buying frenzy of open houses, buyers can get a better price. Given this opportunity, several of us are buying one home for each child and each spouse.
When the economic rebound eventually returns, we expect to further grow our net worth compared to those who sold or couldn't buy. I've been buying homes for 30 years and have seen these opportunities time and time again.
Given I'm investing for another 30-year time horizon. If you want to be on the right side of the wealth gap, I suggest trying to buy some rental property today from a desperate seller.
I've Got An Adult Kid To Support
I've got a 30-year-old son who has been living at home for the past six years after college. Yes, he took six years to graduate.
Frankly, I want him out of the house. He's been too dependent on us for too long. We're buying a small apartment for him so he can live by himself and figure life out more.
We can't have him live with us for much longer. He's got to launch on his own.
Found A Home With Panoramic Ocean Views
A home with panoramic ocean views rarely comes up in San Francisco. If one does, even if it is a complete fixer, it gets snatched up right away.
We found a bigger panoramic ocean view home in the Golden Gate Heights neighborhood of San Francisco. It's a small neighborhood that's thankfully not well known. The house needs a total remodel, but once it's done, it's going to be worth millions.
When you can buy a home with a $4 million view on all levels for only $2.4 million, you can't pass it up. I'll put in $500,000 to make the home sweet and more than double my equity in just a year. Check out our view below!
Love Birds Who Will Get Married
I'm 26 years old and plan to propose to my girlfriend later this year. As a result, I am buying a two bedroom, two bathroom condominium for $560,000. The asking price was $580,000.
I met her while we were both working at Starbucks. I live with my mom and brother right now. She rents a room for $1,300 a month. The mortgage will cost $2,800 after putting 20% down. We are going to rent out the second bedroom for $1,300 a month.
Once we buy the condo I'm going to drive up to Lake Tahoe and propose. Many of my friends are buying property before getting married. They saw what the older millennials did and rent for 10 years after the previous financial crisis and got nowhere. My generation don't plan to make the same mistake.
See: Real Estate Outperformance Examples During COVID-19
We Were Planning To Move Anyway
Farnoosh Torabi, host of the So Money podcast were planning on moving to the New Jersey suburb of Montclair before the pandemic began. She, her husband, and 3-year-old were living in a 1,000-square-foot Brooklyn rental.
Luckily, her family was able to buy a home with little competition. She even got to buy the furniture already in the home, to make the transition easier.
Now her family has a backyard and more space. She shares her entire house purchasing and moving story in an article on NextAdvisor.
Investment Opportunity In The Midwest And South
Who is buying a home during a coronavirus pandemic? We aren't. Instead, we are buying distressed commercial real estate.
My partner and I have signed up with CrowdStreet, our favorite real estate crowdfunding platform, to get notifications on any distressed CRE opportunities. CrowdStreet is great because it focuses on secondary cities. It also enables investors to invest directly with the sponsor.
We think office spaces will eventually come back. If we can get office properties for 30% – 60% discounts now and sit on them for the next five years, we think we are going to make a lot of money.
We're also signing up with Fundrise, the largest platform today and creator of the eREIT product. It's free to do. We get e-mail notifications for new deals and analyze their potential accordingly. All are free to sign up and explore, so why not.
It's not very often you get such a big exogenous shock that provides investment opportunity. We made a lot of money buying CRE during the 2008-2009 crisis. We plan to make a lot more again for the next generation. Gateway cities and 18-hour cities are looking particular attractive.
Note from Sam: Personally, I've invested $810,000 in real estate crowdfunding in 18 projects across the heartland of America. My goal is to capitalize on the spreading out of America thanks to technology and work from home. Further, I want to earn more income passively.
Lots Of People Are On The Move
I hope this article has given you a good idea of who is buying a home during a coronavirus pandemic. The main reasons are low-mortgage rates, wanting more space for family, upgrading, and seeing investment opportunity.
I recommend getting either a 7/1 ARM or a 15-year fixed rate mortgage to get the lowest mortgage rate possible. Yes, a 30-year fixed mortgage rate can now be had for about 3%. But you can get a 7/1 ARM for 2.5% or less.
The average homeowner owns the hoe for 8.5 years. It's best to match the duration of your mortgage fixed term to the length of time of ownership. Paying more for a mortgage is a waste of money. Further, there is an interest rate cap on ARMs.
You can let the coronavirus pandemic put your life on hold, or you can get on with your life.
Shop around for lower mortgage rates. Credible is my favorite lending marketplace where qualified lenders compete for your business. When lenders compete, you win. It's free to get real quotes in minutes.
To be able to lock in a record-low mortgage rate and buy a home that has the potential to appreciate in value feels amazing!
