While we continue to navigate adjusted conditions under COVID-19, we are starting to see some light at the end of the tunnel. Many states are starting to re-open in phases, which is allowing businesses to open with restrictions.
What's new with RON and RIN?
Where remote online notarization (RON) is concerned, some states have extended original temporary RON legislation and passed emergency legislation orders to allow these types of closings to continue longer than expected. Additionally, an increased number of states have started to allow remote ink-signed notarization (RIN). Overall, the real estate industry has risen to the occasion and allowed technology to keep closing transactions possible under unprecedented circumstances.
What does the future hold for the housing market?
As we begin to look at what the future holds, according to a recent industry survey, 53% of homebuyers are more likely to buy a home in the next year because of the COVID-19 pandemic. While that number may seem high, there are various factors at play to keep in mind, such as:
- Buyers are tired of the small spaces they currently live in. People have been quarantined at home for a long time now and are looking for a larger space.
- Working remotely opens up more affordable housing options. Many employers plan to allow employees to continue to work from home. Buyers can consider different areas to purchase homes when they don't have to factor in commuting times.
- We are seeing low rates — the mortgage rate for a 30-year-fixed mortgage fell to 3.15%.
- Quarantine decreased spending and many buyers now have down payments and increased savings.
- There are decreased home prices, meaning many markets that may have been out of reach for some buyers are now more affordable.
- iBuying is slowly coming back, and both Zillow and Open Door have started back in many markets.
Despite these glimpses of a brighter future, there are still some issues to consider, like:
- Buyers will be facing historically low housing inventory due to COVID-19. Nationally, there are only about three months of inventory right now as opposed to the "norm" of 10 months' worth of inventory.
- The housing inventory was starting to get low before COVID-19. With more homebuyers in the market, we will likely start to see bidding wars and significantly competitive prices in "hot markets". Inflated prices due to low inventory mean some buyers will be unable to qualify for a mortgage with a higher price.
What negative effects has COVID-19 had on the housing market?
While mortgage applications are rapidly rising, lenders have had to raise standards due to the surge of delinquencies, defaults, and forbearance requests from the COVID-19 economic slowdown. Tightened requirements mean fewer buyers are able to qualify for a mortgage, including factors like:
- Credit scores are more critical than ever, and higher minimum scores mean fewer buyers will qualify.
- Debt-to-income ratio requirements are lower.
- Reserves are becoming more important — the Mortgage Forbearance Effect.
- Verification of Employment is required within 24 hours of funding due to the current economy. With many people being temporarily out of work, lenders require the most up-to-date information.
- Self-employed applicants are required to provide more information, such as income verification 10 days prior to closing rather than 120 days. Additional forms are also required by Fannie Mae and Freddie Mac.
Overall, the real estate market is expected to make a fairly quick rebound. Some areas will come back faster than others, but nationally we hope to see real estate transactions continue to rise. Title and settlement agents have been a huge factor in keeping the real estate market moving through the pandemic. Coming up with creative ways to stay safe while still conducting closings has allowed transactions to continue to close and kept the real estate market moving. Here's to hoping our new "norm" becomes our old "norm" soon.
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