An in-depth discussion on the state of affordable, fair housing in the time of Covid-19
By now, many people have most likely heard of the unforeseen outcome from the now 15-month-long Covid-19 global pandemic: the unexpected housing market boom. Perhaps you’ve heard about the crazy bidding wars happening all over the country. Maybe you even read about the home in Washington, D.C. that got a whopping 88 cash bids in less than two days. Or the fact that ultra-wealthy individuals and corporate landlords are snatching up properties with cash and either renting them out at exorbitant rates or flipping them for even more money to desperate homebuyers.
As scary as this might sound to someone with a low or moderate income looking to buy a home, there is a silver lining in all of this: an upside to the weirdness of the current housing shortage that might actually benefit low-income and minority Americans looking to buy their first home.
It is true, unfortunately, that in some regions of the country—particularly the suburbs of America’s biggest cities—buying a home now could be extremely difficult if you don’t have the cash on hand to make an offer and pay for the home out of pocket. Times like these are known as a “seller’s market” because buyers outnumber the amount of pre-existing homes for sale. This gives the sellers an upper hand because they can let potential buyers outbid one another until the highest offer usually far outnumbers the original asking price. And when a cash offer is made, even if you have made a conventional offer and are approved for a home loan, many buyers prefer the cash offer over the mortgage loan buyer because they don’t have to wait the usual 30-60 day average it takes for the entire sale process with a conventional mortgage to be completed.
So, yes, for those looking to buy a home now with minimal cash and a mortgage loan as the means of purchase, it can be discouraging to see a housing market like the one we are currently in.
But there is good news in the midst of the housing market turmoil that deserves to be outlined here. The news media’s focus on the shortage of pre-existing homes, slowed new construction due to the pandemic, and skyrocketing lumber prices makes sense because they want to sell news with the stories that are shocking and unexpected. After all, people have grown tired of the same negative stories of politics and sickness and economic devastation. When a person lists his home for $175,000 and gets $400,000, it is a story that has a good feeling to it, and we root for the seller. Because who wouldn’t love to sell a home for two or three times the price they paid for it? Who wouldn’t love to sell a home in a day or two, rather than the weeks or months a home usually sits on the market? But, of course, the unintended consequence of these stories is that low- and moderate-income families look around and become discouraged, assuming we won’t be able to afford a home and are locked out of the benefits and financial and social stability that comes from owning one’s own home.
It can be scary and depressing, indeed.
The news likes to unpack the reasons for this housing market boom, and they have largely agreed that it is because people are moving out of cities for larger homes in the suburbs and rural areas due to the pandemic. Now that people are working from home with much more regularity, they want more space to live and work. They are remodeling the homes their homes in record-breaking numbers, giving major profit boosts to virtually every home-improvement store in the country.
It is true: our homes are more important to us than ever before. If we have children schooling from home, or we are working from home, we are now realizing that the space where we are spending the most time is a place that we need to invest in to accommodate our needs.
For those looking to buy a home with moderate or low incomes, there is actually good news during this housing market boom. Before you count yourself out of the homeownership class, it is worth noting a few things that will shed light on the reality that now is a good time to try and buy a home in America’s most affordable communities.
The first and most important of these bits of good news is that federal interest rates, which are directly tied to the interest rates of a mortgage loan, are among the lowest they’ve been in decades. Because of the economic devastation that has resulted from the Covid-19 pandemic, the federal government has kept interest rates low to boost economic activity. This is a tactic often used to get people to spend money, apply for and utilize credit, and buy homes and make other large purchases. So, if you are able to apply for a home loan, now is the time to try and secure a mortgage through our ally company, AHP Mortgage Direct, with rates so low that you could save thousands of dollars over the lifetime of your mortgage.
The federal interest rate is likely to inch upward in the near future, but when that will happen is anybody’s guess. Many experts predict these rates will remain low for at least another few months, and likely through most of 2021, as vaccines roll out and the country begins to reopen its businesses and cultural activities that have been paused for the last year. The sooner you can apply for a home loan, the more likely that you will be able to lock in your interest rate while you shop around for affordable housing.
The second bit of good news is that because many people are fleeing cities for the suburbs and rural areas, many homes are available in affordable communities in our larger cities. This is because corporate landlords have shifted their focus from poorer communities to wealthy and luxury properties, betting on the fact that when people return they will be able to charge much higher rents and also resell the more expensive properties for a large profit.
What this means is that the areas where corporate and individual cash landlords were scooping up properties in droves are now being focused on less, and the result is that many of the properties for sale in affordable neighborhoods are not seeing the same sort of bidding wars as the wealthier luxury properties in the most expensive regions of the country.
The reason for this is fairly simple. Not only are cash buyers and corporate landlords hoping to turn greater profits on wealthy and luxury properties, but they also fear that once the CDC’s eviction moratorium is lifted, there will be a flurry of evictions, and the properties in more affordable neighborhoods will sit vacant or not be able to generate as much income as they had before the pandemic.
After all, the people hardest hit by the unexpected economic turmoil of 2020 are the very people who live in the regions where these evictions are expected to occur at the highest numbers once the moratorium is lifted. And it may, indeed, turn out to be true that a wave of evictions might occur later this year when landlords are legally able to remove tenants who are behind on their rent. But the upside is that this means properties in these areas won’t seem to be as good an investment, and so home prices will likely remain reasonable and shift less dramatically than those in more expensive neighborhoods.
All of this is to say that now is a time to be encouraged if you have a low or moderate means of income. Despite the media fervor over the housing market scramble all over the country, if you pay attention to existing homes for sale in our country’s more affordable communities, you might be surprised to find that now could be the perfect time to take steps toward finally realizing your dream of becoming a homeowner and reaping all the rewards that come with buying a home.
Our homeownership program at AHP 75 is specifically designed to assist low- and moderate-income families through the entire process of buying a home. We will usher you through the steps to remediate your credit so you can get fair and affordable terms on a home loan. We will pair you with a Community Impact Real Estate Agent—trained and vetted through the AHP 75 Academy—who is committed to making homeownership a reality for our most underserved communities. We can even help you qualify for a micro mortgage through AHP Mortgage Direct, with amounts as low as $5,000 up to $100,000, which can help you make an offer on a home under $100,000. Many national lenders choose not to finance homes priced below $100,000 because of the minimal profit associated with such a loan. However, our goal at AHP 75 is not to generate huge profits, but to raise the homeownership rates to 75% for all Americans, regardless of income or race.
Dig deeper than the headlines that are designed to make people think there are no homes for sale. Realize that in times like these, there are still ways to join the ranks of homeowners in America and reap the rewards that come with it. There is hope. And we are here to help you every step of the way.
Are you ready to make your move into the world of homeownership? Visit AHP75.com to learn about our homebuyer programs designed specifically to help low-income and minority Americans join the ranks of homeowners and get onto the path of financial stability and wealth generation.
Aaron Morales is the Social Justice Writer for AHP 75, based out of Chicago, IL.