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- Personal finance expert Suze Orman told Business Insider she doesn’t think people should rush to buy a house during the coronavirus pandemic.
- As some companies tell employees they can work from home indefinitely, Orman expects people to leave big cities, so a neighborhood you move into now might not be as valuable in a few months.
- She also pointed out that if a neighbor loses work and can’t make mortgage payments, a foreclosure will affect your property value.
- Economists expect mortgage rates to stay low for the foreseeable future, so you shouldn’t stress about snagging a low rate before it’s too late.
- Lower your monthly bills and stay on top of your financial life with TrueBill »
Thinking of buying a home during the coronavirus pandemic? You might want to pump the brakes.
“I think I would absolutely wait until September, October, November of this year, before I bought a home,” Suze Orman, author of “The Ultimate Retirement Guide for 50+: Winning Strategies to Make Your Money Last a Lifetime,” and host of podcast Women & Money, told Business Insider.
Wait to see how the neighborhood holds up during the pandemic
Before jumping to buy a home in a certain area, Orman suggests waiting to see what happens to the neighborhood as the pandemic plays out.
She used San Francisco as an example. San Francisco is home to big companies such as Twitter, Square, and Facebook, which have told employees they can work from home indefinitely.
“So now that they get to work at home, why in the world would employees live in San Francisco?” she said. “Why wouldn’t they move from San Francisco to a place that they can afford and get out of California, actually, so they don’t have to pay 13% state income tax?”
Before buying a home, Orman suggests waiting to see how the masses react to remote work. “What neighborhoods last, what neighborhoods don’t last?” she said.
Your neighbors’ financial problems could affect your real estate value
Home value relies on more than how well you take care of the place — Orman said it also depends on whether your neighbors foreclose on their homes.
Your new neighbors may have deferred mortgage payments for a few months, but unless they have a federally backed mortgage through a company like Fannie Mae or Freddie Mac, they could have to pay their deferred payments in one lump sum pretty soon.
Orman points out that many people will have to make up their missed mortgage payments around the time federal unemployment is scheduled to stop on July 31. This puts them in a difficult financial position, especially if they’re still out of work. It’s not impossible that your neighbors might have to foreclose on their home.
Here’s the problem: Let’s say you paid $300,000 for a home today, and your next door neighbor is out of work due to the coronavirus and can’t afford to make mortgage payments, so they foreclose on their home.
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“That house goes for $150,000,” Orman said. “Do you know what that just did to the property value that you just bought? Your property now is worth $150,000. Because when somebody goes to check the latest comp, they’re going to see, ‘Oh, well the house next door sold for $150,000. The house down the block just like yours sold for $150,000. There goes the price of real estate. And that’s exactly what happened in 2007, 2008.”
Low interest rates are here for foreseeable future
Mortgage rates are at historic lows right now, and Americans want to take advantage of low rates. And there’s no denying that when it comes to buying a home, rates matter.
“Interest rates aren’t going anywhere,” Orman said, “let’s just see what happens.”
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