Friends, Neighbors and Clients,
I hope you are well amidst the uncertainty and chaos. Between the devastating tornado that swept through Middle Tennessee and the economic unpredictability surrounding COVID-19, it’s been a challenging start to 2020. If you are experiencing financial, emotional or physical effects from all that is happening, you are in our thoughts and we are here to support you in any way we can!
A lot of people have reached out with questions about the real estate market and what to expect in the weeks and months ahead. While we are living in uncharted times and no one knows exactly how things will play out, we wanted to answer the following frequently asked questions.
If you have any further questions don’t hesitate to call or email. We will continue to produce our monthly Middle Tennessee Real Estate Report video and weekly social media updates to keep you abreast of any important changes.
Question: In general, what’s happening in the local real estate market?
Answer: Things have slowed down. Some buyers have chosen to put their search on hold and some sellers have decided to pull their home off the market or wait to list. However, real estate was deemed an essential business. Therefore, real estate transactions are still occurring. While some transactions were canceled due to uncertainty in the market, most deals that were already under contract have proceeded to close. As our monthly real estate report shows, key real estate statistics at the end of March improved when compared to the previous month and the same time period last year. However, this is a trend that we don’t expect to continue in the coming months alongside the lengthened stay at home order and overall uncertainty. It’s unlikely we’ll see a normal spring increase in available homes for sale or an increase in total home sales until things begin to return to normal.
Question: How long will it take the real estate market to get back to normal?
Answer: Nashville’s real estate market was incredibly strong prior to the COVID-19 pandemic. If the stay at home order is lifted at the end of the month and businesses can return to normal operations, we will likely see the local market pick up where it left off. However, if the spread of the virus worsens, businesses continue to remain closed and unemployment climbs throughout the remainder of the Spring and Summer, then a recovery will take longer. The length of the economic shutdown will also determine whether the impact is limited to a decreased number of home sales and increased days on market, or whether it also leads to a decrease in home prices. So far, prices have remained stable. However, if the government’s relief efforts don’t work as intended or things continue longer than expected, many people will struggle to pay rent and mortgages. If this happens on a large scale, it could put many homeowners and investors in a position where they need to sell at a time where fewer buyers are looking to purchase. This will cause prices to drop. We’ll know a lot more in the next 30-60 days.
Question: I’m having trouble paying my mortgage, what should I do?
Answer: Contact your mortgage company. Most mortgage companies have forbearance (payment deferral) programs in place. These programs typically require you to fill out a short application and describe how your income has been affected. Oftentimes, they will approve a reduced payment or no payment for a period of 90-180 days. Typically, no additional interest beyond your regular principal and interest payments will accrue and no fees are charged to participate in the program. If you were current on your mortgage payments prior to the forbearance agreement, lenders should not report your loan as delinquent and participating in the program should not have a negative impact on your credit. Depending on your situation, lenders may require a lump sum repayment at the end of the forbearance period or they may allow you to enter into a payment plan to make up the delayed payments over a lengthier period. You can also inquire about a loan modification where the lender rolls the balance back into the mortgage or a loan extension where the balance is added to the end of your mortgage. Your lender should work with you to figure out the best solution for your needs. Applications and information are often available on your lender’s website.
Question: I’m having trouble paying my rent, what should I do?
Answer: Contact your landlord. In Tennessee, landlords are currently prohibited from evicting tenants for nonpayment. Therefore, everyone is motivated to work together to find equitable solutions. Landlords may allow reduced payments or no payments for a few months if your income has been impacted. However, don’t expect a complete forgiveness of rent. Rent is technically still due. You should expect to make up any reduced amounts at an agreed upon date or over the remainder of your lease. Extending your lease may allow you to pay back the amount owed over a longer timeframe.
Question: Is now a good time to buy?
Answer: If you feel confident your income will not be materially affected, there are some opportunities in the market. Interest rates are currently low and some motivated sellers have reduced prices on listings they may not have reduced under normal market conditions. Many buyers that are relocating for work or have leases that are terminating soon are choosing to proceed forward with their home search. However, inventory of available homes is limited. If your job is not secure or you have trouble finding the right home to purchase, you may be better off waiting to see how things shake out over the next 60-90 days.
Question: Is now a good time to sell?
Answer: While some buyers have delayed their home search and the pace of transactions has slowed, the inventory of available homes is also unseasonably low. Showings on available homes are still taking place albeit at a reduced rate. If you are still living in your home, it is important to consider whether you are comfortable having agents and buyers tour your home. Most buyers and agents are requesting sellers vacate the home during scheduled showings and many sellers are restricting the total number of people present during the showing. If you are comfortable having others tour your home or your home is vacant, you can take advantage of the low inventory and reduced competition. If you prefer to wait to list, now is a great time to take care of home repairs and improvements and begin to de-clutter and de-personalize. There will be pent up demand for homes when things return to normal, so being ready to list quickly will have benefits. If you want a list of our top indoor and outdoor home improvements and staging tips to maximize the value of your home, email me and I’ll send it over.
Question: What’s going on with mortgage rates?
Answer: Rates have jumped around. In the last three weeks rates were as low as 2.7% and as high as 4.5% (which is still pretty darn good) for a 30 year fixed mortgage. Mortgage rates are currently around 3.2% (but can be higher or lower depending on your loan type, credit score and debt to income ratio). However, just because the economy is struggling, doesn’t guarantee mortgage rates will remain low. Mortgage companies are bracing for a significant increase in mortgage default rates. If default rates kick up, lenders and banks will have a decreased appetite for new mortgages and rates will rise. Many FHA mortgage originators are also requiring higher credit scores and lower debt to income ratios in order to approve a buyer for an FHA loan. Several banks and even some of the large national lenders have also stopped offering jumbo loans (which in our area is any loan over $563,000). There are currently still options for Jumbo loans. However, borrowers must meet more stringent guidelines and be prepared for higher interest rates.
Question: I’d like to buy or sell now, but I am worried about health risks and the transmission of COVID-19. What safeguards can be put in place?
Answer: While there is no way to eliminate risk, steps can be taken to reduce the risk of transmission. We are currently riding separately from clients to and from all showings. During showings, we work to maintain a minimum of 6′ to uphold social distancing guidelines. Many buyers and agents are wearing latex gloves during showings and changing gloves between showings. Best practices include having only one person in the group open doors, not touching any other surfaces in the home, and sanitizing after each showing. We aren’t showing homes to anyone experiencing flu-like symptoms or that has a fever. For out of state buyers, we offer a virtual tour of the home via FaceTime or other comparable software. We are completing most of our work for Sellers remotely. Sellers can give us a tour of their home remotely and we can review all comparable sales data, home preparation tips and marketing plans via virtual meeting software like zoom. Our professional photographer and videographer can complete their work at a time when you can be away from the home and can wear gloves and remove shoes during their time at your home.
Question: If I choose to buy or sell now, how is the stay at home order affecting the mortgage, inspection and closing processes?
Answer: Since real estate is deemed an essential service, lenders, inspectors, title companies and other vendors that support the transaction are still working. Most service providers were already set up to provide their services virtually and others have adapted their protocols to allow for virtual interactions. You can complete the entire mortgage process without ever meeting your lender in person. You can sign your inspection agreement, make payment and receive the detailed inspection report online without ever meeting the inspector at the property. When it comes time to sign closing documents, the closing company can deliver the documents to your home and wait outside while you review and sign. If you prefer to go to their office, they are cleaning conference rooms between each closing and providing a new pen for each person signing.
In times like this, it is important to remember that this too shall pass. Things will likely improve faster in Nashville than many other markets around the country. Our company is set up to move quickly as things change. We successfully helped families navigate the 2008 housing market crisis. While the underlying factors differ in the current environment, many of the strategies are the same. Stay in touch and let us know how we can support you.