The year 2020 has been a roller coaster ride for the entire world. That’s putting it mildly. With the pandemic fears and harsh restrictions crippling the ordinary course of life, people are confused and baffled regarding how to go about things. With that in mind, what would you say if I told you, “Now is a great time to invest in real estate”?
Think about it, business is down. Profits are lower across most markets. This has resulted in an increased number of people getting laid off. For example, as a result of the ban on air travel during the pandemic, numerous workers were sacked by various commercial airlines. These are times when economic activity is at a dangerous low, generating severe consequences for the public at large.
Current conditions have forced many people into a state of fear. The bulk of consumers are now saving as much of their money as they can due to the lack of job security. In many markets, lower activity has brought some prices down while others have gone up.
The first step when considering investing will always be to judge your capacity to spend. That means, most importantly, you should have enough money to afford the cash outflow. Additionally, you should have sound job security to ensure that you will still have enough to sustain yourself in the future if you spend all your savings on buying property. Keeping these prerequisites in mind, let’s dig into why this may be the perfect time to invest your money in real estate.
1. Home Prices Expected To Remain Steady
Contrary to most long-term real estate trends, current real estate prices are likely to stay steady or even decline during the pandemic. According to experts, it will take some time for real estate prices to come back to their ordinary course and start to rise again. That means, for now, purchasing property is a smart investment.
2. Real Estate Investments Offer Stability
In these trying times, if there is one thing that is missing, it is a certainty. In “normal” times predicting the future is fraught with peril. What’s going on now is a far cry from normal. Uncertainty leads to chaos, which further leads to instability. However, real estate is one investment that offers better stability than most other options, especially compared to places like the stock market.
The effect coronavirus had on the stock market gave us a forewarning of how unpredictable it can be. Therefore, the best strategy is always to have a diversified investment portfolio that disperses the investment risk across multiple products.
3. The Presence Of Motivated Sellers
A motivated seller, by definition, is someone willing to sell their products at below market value. This motivation is a direct consequence of the uncertain market conditions such as in current times of COVID-19. The seller wants their property sold and cash in the bank. But if they cannot find a quick buyer, they decide to drop to price to sell it faster. This is a wonderful opportunity for individuals to purchase property at lower than expected prices.
For example, let us assume you are a private company that provides corporate housing facilities to its employees. Assuming you are not suffering from losses due to COVID-19, it will now be the most appropriate time to purchase houses for future utilization since they are available at lower prices. Make sense?
Due to the pandemic and instituted restriction, the majority of people are moving towards saving their money. Fewer buyers means a slower market. Therefore, you will have increased negotiating power which is always good when investing.
4. Historically Low Interest Rates
Even before the pandemic, the US real estate market was going through a phase of low mortgage rates. However, after COVID-19 was declared an epidemic, the Federal Reserve jumped in to help improve the economy when they lowered the Federal funds rate on March 15, 2020.
In light of these developments, the Committee decided to maintain the target range for the federal funds rate at 0 to 1/4 percent. [source]
This effects what banks will charge for their interest rates. While COVID-19 has certainly shaken up the mortgage market, interest rates for personal and investment properties are at historical lows. This may be the top reason why it a great time to invest in real estate.
The spread of the coronavirus has affected our lives deeply. The mandated restrictions by our elected officials have tremendously hindered economic activity and brought about the collapse of many businesses. People are scared and reducing financial spending to save for an uncertain future.
However, people who have the means to make strategically smart decisions in these times can do quite well for themselves.