If you've started the process of buying a house recently, you've probably noticed there's a hot real estate market where finding and successfully closing on a home has become much more challenging than within the last few years. As of April 2021, there was already a shortage of around four million homes versus ready buyers. This lack of supply and the presence of very high demand mean that competition has become very fierce.
From facing rising home prices to dealing with multiple bids, homebuyers need to change their strategy to have success in this seller's market. Here's what you need to know to have a better chance of getting your new home.
Understand the Hot Real Estate Market
Several factors have led to the seller's market that has made it harder to purchase a home. Not only are there not enough existing homes for sale for potential buyers, but new home construction has remained slow since the housing market bubble in the mid-2000s. Besides many people looking for limited homes, financing a home has become more attractive. Due to the very low interest rates that have prevailed during the COVID-19 pandemic, many more homebuyers have decided to take advantage and pursue homeownership.
Know What to Expect
As an aspiring homeowner, you can expect higher home values in this seller's market. As of April 2021, the median home price has increased by 19 percent within just a year to $341,600. Not only can you expect to pay more for a home, but you should prepare to have more cash on hand to appeal to sellers since more people now have become completely cash buyers. If you do seek financing, you can expect a higher loan amount – and a higher mortgage payment – as well as the possibility of needing a larger down payment and higher credit score to appeal to lenders.
Another challenge you can expect in the current housing market is having your offer accepted on a property. You might end up needing to wait for the inventory to increase or consider moving to a different area if the supply of houses is particularly low. It also will help to have a great agent and be flexible with your housing preferences to have more options.
When you're ready for an offer, it's common now to offer above the home's listed price. You'll often also encounter bidding wars with others who may be prepared to pay all in cash, have home inspections waived and forego common concessions to make the seller take their offer.
Boost Your Homebuying Success
To navigate the hot real estate market and have a higher chance of success becoming a homeowner, you'll find patience, flexibility and the ability to respond quickly invaluable. At the same time, you'll need to be cautious and avoid risky decisions that could hurt you later. Try some of these tips during your house hunt:
- Keep an open mind on potential houses that might not otherwise meet all your criteria. Further, understand it can take several attempts to win the bidding process on a property, so try not to let it discourage you if someone else gets the home you wanted.
- Choose your initial offer price wisely and consider that you'll likely want to go low at first so you have more room to negotiate, especially if you end up in a bidding war with many people.
- Think about how you'll finance the home early on so you can be ready to make an offer when a suitable place comes up. This means having access to any cash you plan to use and getting a mortgage pre-approval as soon as possible if you'll finance the home purchase.
- Consider asking for fewer benefits like home warranties or closing cost assistance from the seller to boost your appeal. However, avoid waiving important items like home inspections since you could otherwise end up with a home that needs costly repairs.
- Go beyond using real estate websites to find potential houses through sources like social media groups, people in the neighborhood and home building companies. Also, choose a highly experienced real estate agent who can keep you informed.
- Consider alternatives to in-person walkthroughs and open houses so you can be ready sooner to make an offer. Virtual open houses and tours have especially become popular during the pandemic and make it easier to check out a new home without leaving your current residence.
- The Wall Street Journal: U.S. Housing Market Is Nearly 4 Million Homes Short of Buyer Demand
- CNN: Home Prices Just Smashed Another Record
- Bankrate: Why Is the Housing Market so Hot? 4 Answers to the Question Vexing Homebuyers
- Forbes: How To Buy A Home In An Extreme Seller’s Market (That’s Occurring During A Pandemic)
- Rocket Homes: How To Start or Win a Bidding War
- The Columbus Dispatch: Want To Buy a Home? Here Are 10 Tips for Navigating a Difficult Housing Market
- Ramsey Solutions: Real Estate Trends 2021: What You Need to Know