If you had been planning on buying or selling a home this spring, you’re probably concerned about the implications of COVID-19. Sure, there’s the practical problem of looking at properties and closing a deal while adhering to social distancing guidelines. But you may also be wondering about the state of Alberta's housing market, and how buying or selling a home fits into your overall financial strategy during this time of uncertainty.

Forecast for Alberta’s housing market

The reality is the housing market is still moving in some capacity and that real estate and mortgage services have been deemed necessary services by the Alberta government. Barring a full lockdown, it will remain possible to close real estate deals in Alberta during the pandemic.

But like most things right now, the housing market is being affected by the COVID-19 pandemic. “While home prices vary greatly based on the characteristics of individual properties, the average resale price has started to fall in the wake of the pandemic and oil price crash,” says ATB Financial’s Rob Roach, Managing Director of Research for the Economics team. “And while there may be a spike in activity after containment efforts are phased out, ongoing challenges in the oil patch and the hangover effects of the pandemic are likely to keep prices in check and activity somewhat muted. Given low-interest rates and other government efforts to ease the economic pain, a dramatic collapse of the housing market is unlikely (though with the pandemic and low oil prices in play, the risk level is heightened). Of course, all this depends on the pandemic receding as expected and containment ending this summer.”

This forecast may have you asking, is now the right time for me to buy or sell a home? Let’s take a closer look at both scenarios.

Buying a home during the COVID-19 pandemic

If you’re already in the process of buying a home, you need to be thinking about:

• the state of your personal finances
• where exactly you are in the process
• the additional time it may take to meet necessary conditions in a time of social distancing and decreased services
• how soon you would like to buy and how home prices might change

First of all, has your income changed, or do you expect it to change in the coming months? Your future ability to afford monthly mortgage payments is not only a major factor for you to consider when deciding whether to buy a house, it’s also a major factor for your mortgage provider to consider when deciding whether you qualify for financing.

If you are in the process of applying for financing and you’re sure you want to go ahead with the purchase, it’s important to make sure that you get your conditions waived and documents to your mortgage provider as soon as possible. Keep in mind that when applying for a mortgage, you must present proof of income that is less than 30 days old. If the application process drags on, a new credit report may be pulled automatically. Racking up credit card debt or making large purchases while your application is still pending could also impact your approval.

If you are worried about your ability to afford mortgage payments and have not yet signed a binding contract with the seller, you can decide to back out of the purchase. But, if you have signed a binding contract with the seller and want to back out, your best bet is to negotiate personally with the seller and hope that they are willing to return your deposit and relieve you of your obligation.

If you do decide to complete your purchase, make sure that the seller has set reasonable removal of conditions dates. During this time of decreased services, a reasonable period during which to fulfill the seller’s conditions is at least 10 days. Please be advised, unforeseen circumstances due to COVID-19 could potentially increase timelines.

If you are not already in the process but are thinking about buying a home for your family to live in for the foreseeable future, many of the same considerations apply. While it’s true that property prices and mortgage interest rates have dropped slightly, the uncertainty of the long-term financial forecast means that this is not the best time to purchase real estate with the hope of “flipping” it for a quick profit. If you are purchasing a home as a long-term investment, or as a place to live, short-term market conditions likely won’t impact your decision as heavily.

Selling a home during the COVID-19 pandemic

If you’re already in the process of selling a home, you may be worried about making a timely sale, especially if you are simultaneously in the process of buying a new home. These worries are valid, especially given the employment uncertainty many Albertans are dealing with.

Yes, you may have to accept a lower offer than you had planned to. And yes, your home may be appraised as less valuable than you were hoping it would. But people are still buying homes. The same factors that made your home attractive on the housing market before the pandemic (location, condition, character, etc.) are still going to register with potential buyers. If you are currently in the middle of closing a deal with a buyer, make sure that you’ve set a reasonable deadline (10 days) for the removal of your conditions.

If you’re concerned about making mortgage payments on two properties, you may want to reconsider buying and/or selling at this time. If one or both of your mortgages is with a bank (rather than a private mortgage provider), consider whether taking advantage of a mortgage payment deferral program is in your best interest.

If you are buying and selling and want to be more proactive, consider including the Sale of Property Condition in the purchase offer of your new home. This condition grants you the ability to back out of a deal and get your deposit back if your existing home does not sell within a certain period of time.

Finally, if your buyer feels forced to back out of their purchase due to loss of income, practice compassion to whatever extent you are able. Remember: we’re all in this together.

Renewing your mortgage during the COVID-19 pandemic

What if you’re not buying or selling, but your current mortgage is up for renewal?

Home-owners with mortgages up for renewal may be able to take advantage of the low rate environment. If you have a closed mortgage with ATB, you can renew within 90 days of maturity with no prepayment penalty. Open mortgages can renew early at any time without penalty.

It is good practice to shop around to see which lender has the best options for you. However, if you do switch mortgage providers, you will be required to requalify for your mortgage. This is something you should consider if your income has been adversely affected by COVID-19. With most lenders, you do not need to requalify if you are renewing your mortgage with the same provider.

Regardless of whether you’re buying or selling a home, or renegotiating your mortgage, call or email us any time to discuss your options with one of our mortgage specialists.