What a time to be alive! Seeing that you are in the home-building business, I expect you’ll begin to field many questions from family and friends about the housing market. Watching the news will not help you field these questions because most talking heads are too politically biased these days to give a straight answer. I want to reach out and give you some information that we trust will be helpful and give some context to the goings-on. There is no doubt the markets are being affected by the implications of the coronavirus. Yesterday, the stock market saw its greatest one-day loss in over 30 years only to gain it back today. This volatility can have two effects.
First, it can cause concern among home buyers because many of them use funds from their 401K as a down payment. Fortunately, we offer mortgage solutions to address the need for low (or no) down payments, so the buyer would not be required to withdraw large amounts when the market is at a low point.
Second, a down market can cause people to think it may be best to wait on a home purchase. However, this is counter intuitive. When considering that homes appreciate at an average of 3%-5% annually, waiting gets expensive. On a $250,000 home, that equates to losing $7,500 by waiting one year. Add that to the additional interest that will occur, and the decision to wait will cost $17,000 over five years and $26,000 over ten years. Today’s mortgage interest rates are at historical all-time lows. Most “experts” are predicting rates to rise in the coming year; predictions range from .75%-1.25%. Let’s put that into context. A buyer purchasing today at 3.25% will have $29,000 more purchasing power than if they purchased at 4.25%, based upon a $200,000 mortgage! Think of the options and upgrades that represents, or they could have a payment that is $114 lower than at the higher rate.
Even with today’s low mortgage rates, there are people who think that the rates will go even lower. But take note – this does not mean waiting for lower rates is necessary. Every preferred lender offers a one-time float down, which means that if rates do go lower, the buyer will get the lower rate.
As for the risks associated with the coronavirus itself, our executive team has had several conversations with infectious disease specialists to ensure we are following the right processes for our safety. Fortunately, Mississippi and the surrounding states have had little exposure. In fact, at this point, MS has zero CDC-confirmed cases of the virus. We will continue to monitor any new developments; the safety of our team and customers is of the utmost importance to us.
Our entire focus this year is preparedness. We are focused on being prepared so that when economic uncertainty affects our market – we can take advantage of the opportunity and come out on the other side on fire. Whether or not the current conditions cause a downturn or not, we are achieving our goal of being prepared, and we will win.
Matt Collins, COO