The COVID-19 outbreak has bruised the housing market severely. As it is weak demands have forced prices down. The pandemic has further made things difficult. Buying a house now seems lucrative. Prices are down more than ever. But before taking a plunge, there are various things to take note of. Often to buy a house one has to take a home loan which is a financial burden in itself.

Buying a house in 2020 needs proper research and understanding.

Be sure to keep the following things in mind.

Severe Cash Crunch

The pandemic has rendered many people with significant pay cuts. Many have even lost jobs. In such circumstances, affordability has taken an obvious blow. Any wealth manager now will strongly advise their clients to save money. The takeaway point is to stop unnecessary spending. The cash crunch is forcing consumers to rethink their lifestyle. During such times a home loan is exceedingly difficult to pay off.

Consumer Sentiment

Consumer confidence collapsed to an all-time low in May 2020. This is according to a survey that RBI did to understand the situation that the market is in. The Current Situation Index has had to endure a severe battering. The same is the case with the Future Expectations Index. These indices are an indicator of several things. They gauge the perception of people regarding employment, income and price level. They also consider people’s views on spending and the overall economic situation. With decreasing confidence managing a home loan is no easy task.

Uncertain times

Life has never been so uncertain for most employees. This is due to the looming job losses or even substantial pay cuts. Even those with a little stability and an iota of job security are insecure. Those staying on rent are slightly better off. They can move to a new place where a pay raise is available. Also, if the rent is high, they can shift to cheaper localities to save money.

Homeowners are a little worse for wear. Job losses and pay cuts may force many to settle their home loan by selling assets. They often have to sell assets at the lowest value, which is a financial disaster in the making. At the time of the Great Recession, homeowners were the worst hit. They lost jobs but still had to pay mortgages. At the same time, the renters all moved to more affordable places.

Home Rates Have No Uniformity

The prices for houses have no set structure and uniformity. Recently in June, an online event held by Naredco had a queer moment. The Union and Commerce Minister, Piyush Goyal directed builders to slash prices so as to sell off their unsold units.

But such statements are causing buyers to have unrealistic hopes and aspirations. The comment is clearly contextual and serves more like hard guidance rather than command. Developers are well versed with the concept of imbalance in debt-equity ratio. The comment was obviously for builders who are at present overleveraged. Prices will drop only at certain places. However, in areas where quality work is going on under developers with no stress, it is unrealistic to expect price cuts.

If after all these considerations you feel you will manage to buy a home in these times then take note of certain things.

  • First and most important, be sure to have a fixed and steady job. If not, then another source of a steady income is necessary.
  • You have no debt whatsoever. If you do it should be small and that it gets cleared off quickly.
  • Savings is essential. Do not make decisions that will impact your savings. Any emergency and you should have the money to deal with it. So make sure that there are enough savings that you will not touch under any circumstance.
  • Have a good credit score. Of course, this is only possible if you make all payments on time. This will help in securing loans easily.
  • Buying a home is a huge purchase. Before doing so analyse whether you have any huge purchase coming up sometime in the future. If so it is advisable to not buy a house now.
  • When buying a home, you will likely go for a home loan. Be sure you are stable enough to pay off the loan. Use a home loan EMI calculator to understand your repayment schedule and then decide if you will be able to manage it.

That is about all that one needs to look out for when thinking of buying a home during these uncertain times in 2020. Please remember the present conditions are not ideally suited for purchasing a property. However, if you feel you are up for it, then go ahead as prices are low at many places.