2020’s Biggest Surprise Is a Homebuying Boom—Here Are 3 Things to Know If You’re Buying This Year

At the start of this year, Marin Austin and her fiancé began thinking about buying their first home together. When the pandemic hit, their homebuying plans were put on a fast track. Interest rates were plunging to all-time lows and the pace of life generally had slowed down some, giving the couple ample time to make a move. So in May, three weeks after their realtor gave them a virtual video tour of a house in Austin, Texas, they closed on their first home sight unseen, scouting the neighborhood on Google Earth from their apartment in Santa Monica. 

Historically low interest rates have spurred a surprise homebuying boom amid the coronavirus, opening the door to homeownership for many first-time buyers. Even with the devastation wrought by COVID-19, more than one million Americans became homebuyers in the first half of 2020, which is 4 percent higher than a year ago, according to a housing market study by Genworth Mortgage Insurance. 

First-time buyers accounted for 35 percent of existing homes sold in June 2020, according to a survey from the National Association of Realtors, or NAR. The share of first-time buyers increased in March through June—right into the thick of the pandemic period and the surge in unemployment, NAR points out—and is now trending higher than the 29 percent to 32 percent average in past years since 2012.

Because mortgage interest rates are so incredibly low—the 30-year fixed-rate has been dipping down close to 3 percent—the typical mortgage payment, estimated at $1,036, fell below median rent, which is $1,045, according to NAR.

For Austin, a news anchor, the combination of low rates and moving from California to Texas, is translating to a monthly mortgage that’s several hundred dollars less than the rent she was paying. She also has more outdoor space, a prime amenity these days.

“Compared to California, we have a huge backyard in Texas,” she says. “We have already installed a stock tank pool.”

Thinking about making the leap from renter to homeowner, as so many have already done this year? Here’s what real estate professionals say you should know about buying in this unique real estate market. 

If you’re considering buying a fixer-upper, know this: The cost of lumber is skyrocketing due to wood shortages amid the pandemic, a factor that can drive up the cost of your remodeling project, says Jeff Falkowski, founder and CEO of House Report Card, a real estate market review site “So if you want new kitchen cabinets, to redo the floors, finish the basement or put in a new bathroom or a deck, plan to pay up to 60 percent more this year than last,” Falkowski says.

New appliances are also hard to find—refrigerators and stoves have widely been on backorder this year, thanks to the increased use of older appliances (thus necessitating replacements) and more frequent home renovations.

Buying a house during a pandemic and an economic downturn can come with its own set of challenges, real estate experts caution, with lenders triple-checking your employment, raising credit requirements, and eliminating some loan programs. Borrowers with lower credit scores and smaller down payments may find it harder to qualify for loans, explains Linda Bell, a personal finance expert with NerdWallet. 

“Not only are there stricter requirements for mortgages, but buyers are also relying more heavily on virtual tours to view homes,” Bell says. “Low interest rates mean a lot of interested buyers, so be prepared for competition. Homes are getting multiple offers and selling above list price in many cities.”

Even with low interest rates, mortgage brokers caution that it’s important to purchase what you can afford—and to avoid overextending yourself.

“Remember that the total cost of home ownership includes insurance, taxes, utilities, HOA fees, regular maintenance, plus money set aside for occasional repairs when needed—all in addition to the monthly mortgage payment of principal and interest,” says Glenn Brunker, president of Ally Home. 

And don’t let the perfect be the enemy of the good when you’re searching for a home.

“I advise my buyers if a home checks off 85 percent of what they are looking for, they should consider making an offer to purchase,” says Ryan Christensen, a mortgage broker in Anaheim, Calif. “The only way to achieve 100 percent of what you want is to custom build a home.”

Thinking about buying? Here are nine signs you’re ready to take on homeownership.