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Anyone buying a home right now is facing an uphill battle.
This spring, homes are shooting up in price and selling quickly as buyers compete with each other to have their offer accepted. “It has not slowed down for us. I’ve had the best 12 months of my career,” says Xio Sandoval, a 16-year industry veteran and licensed real estate agent with Century 21.
Demand for housing is strong as buyers rush to lock in today’s exceptionally low mortgage rates. That, combined with fewer homes for sale, has created a robust seller’s housing market.
So as we head into the summer buying season, let’s take a look at how it’s shaping up—and what buyers can do to navigate it successfully.
Why Is It So Hard for Buyers Right Now?
While the market has been exceptionally hot, there are indications that it may cool down, although the change will be small.
“This doesn’t mean that buyers will be getting a bargain,” says Lawrence Yun, chief economist with the National Association of Realtors. “Instead of competing with 10 to 20 other buyers for the same property, maybe they will be competing with 5 to 10.” So even if conditions for buyers moderately improve this summer or fall, the real estate market is likely to remain strongly in favor of sellers.
Start your home search with properties that are under your budget so that you have room to negotiate.
Right now, it looks like housing inventory will remain low. And even if demand does taper off ever so slightly, it won’t be a big change for the market. “There are more buyers than sellers right now,” Sandoval says. This means that housing prices are unlikely to drop and could easily continue to increase during the 2021 summer buying season.
Not enough homes for sale
In recent months, the number of homes for sale has inched up but overall remains extremely low. However, builders have been ramping up construction. And as vaccination rates rise, we could see people who didn’t sell because of Covid fears begin to list their homes, Yun says.
Even with the possibility of having more homes for sale than we’ve had in recent months, buyers will still face bidding wars. Building homes takes time and is only becoming more challenging thanks to supply chain issues which have greatly increased the cost of building materials.
High demand for housing
As we enter peak buying season and look into the fall, we might see demand weaken.“Some buyers will simply be squeezed out by the higher prices,” Yun says. Mortgage rates have also risen from their all-time lows, which further increases the cost of homeownership. And the long-term trend for mortgage rates is up not down, Yun says, “given the rising budget deficit and with inflation likely to pick up.”
But even if demand wanes, it will still far outstrip the current supply in most areas. And while rates may inch up, most experts don’t anticipate them skyrocketing. So buyers should still have access to historically low mortgage rates for the foreseeable future.
3 Ways to to Increase Your Chances of Getting a House This Homebuying Season
When it’s the right time in your life to buy a home, you can’t get hung up on trying to time the market. “The timing is yours,” Sandoval says. “It’s your personal timing.” Right now interest rates are low and prices are rising. If you wait for prices to come down or level off, that better price could be offset by higher mortgage rates.
So regardless of where the real estate market is going, you should focus on finding a home with a monthly payment that’s affordable for you. “What I tell my clients is math doesn’t lie,” Sandoval says.
If you’re shopping for a home right now, it will take patience to find the right house for you. But you can take steps to increase your chances of success.
1. Be ready to move quickly
Before you begin your house search or put in an offer for a home, you should be prepared. That means getting preapproved for a mortgage ahead of time and knowing how much house you can afford. A loan preapproval shouldn’t be just a cursory prequalification, you need to make sure “…the banker reviewed and approved [your] financials,” Sandoval says.
You’ll also want to ensure you have adequate documentation showing that you have the money for the down payment or closing costs. “We need to show that seller and that agent that we have the financial ability to make this offer,” she says.
2. Make the best offer you can afford
When you’re putting in a bid on a home you want to make the best offer you can — without committing to a deal you can’t afford. You should also plan to have some wiggle room to negotiate. Sandoval advises the homebuyers she works with to start by looking for homes less than the price you are preapproved for. “We’re starting off at about $25,000 below [the preapproved loan amount], because then I have leverage to negotiate,” she says.
Sellers can be selective in today’s market, so the less a buyer is asking for the better. But you need to understand the risks to waiving contingencies. If you waive an appraisal contingency and the appraisal comes in lower than your offer, you could have to pay the difference or risk losing your earnest money deposit.
3. Expand your search
To increase your chances of eventually having an offer accepted you may want to cast a wide net and should expect that you’ll need to make multiple offers before one is accepted. It’s also helpful to expand your housing search to areas you hadn’t previously considered.
And with the increase in remote work, you may be able to find a home in a more affordable area without having to sacrifice your ideal morning commute. “People can live further out [from the city], and from a homebuyers perspective they can get more affordability … home prices tend to be cheaper,” Yun says.
Correction: An earlier version of this story incorrectly stated that it’s a good idea to consider and make offers on multiple houses. The story has been updated to clarify that you shouldn’t make multiple offers at the same time.