The other day I was having dinner with a few friends and one of them complained about the real estate market. He was outbid by multiple offers and the buyer who won the deal opened escrow significantly higher than the asking price.

When I heard this, I was shocked, and all sorts of warning signs rushed through my mind. How is this really happening during a pandemic?!? In a time that has resulted in one of the highest rates of unemployment—with a potential recession or correction looming?!?

This situation had me self-evaluate and look at the fundamentals to assess the situation.

Buying in the Pandemic Market

We have historically low rates—some rates as low at 2.25%—which is encouraging people to buy single family homes. In addition to this reason, there are a plethora of reasons to buying homes at this time though—(1) move to a desired location, (2) upgrade/downsize for family reasons, (3) school district for children, (4) safe neighborhood, (5) job relocation, etc. These are all legitimate reasons for buying a single-family home—even though we are in a pandemic with a possible correction soon. Will Rogers said it best, “Don’t wait to buy real estate, buy real estate and wait.”

But let us look at it this same scenario but from a different perspective—because mortgage rates are so low, values of homes are astronomical. Therefore, your mortgage payments are relatively higher than what you would have been paying for the same house ten years ago. No one can really predict the future, but with the global pandemic in hand, we may be scratching at the surface with the effects toward our economy and livelihood. We’ve had a historical number of job loss and many people are currently living off of unemployment checks. Are we going to be able to get our economy up and running before the government help runs out?

The Opportunity

With that being said, it is still a good opportunity to buy a single-family home. If you have a stable source of income—whether it be from your job or other investment vehicles—then take that leap of faith. If you can maintain the monthly mortgage payments, then enjoy the historically low rates for thirty years. Just make sure to keep reserves in the bank in the event there is loss of said income. Banks typically prefer 6 months of reserves—but I think a year of capital reserves would be ideal.

At the end of the day, whether it is a single-family home or a commercial building, the money is made upon the purchase. Just make sure you study and know the area and your comps so that you can make a safe and sound decision—whenever you choose to be in the market.