The housing market is in a frenzy, with homes selling almost immediately upon being listed, often well above the asking price. Homebuyers are tasked with increasing their budgets or decreasing their expectations, even waiving standard contingencies like a home inspection.
The state of the market is in part due to a housing shortage of nearly four million units, according to Freddie Mac. Home prices soared by 17.2% between March 2020 and March 2021, with no sign of slowing down. Plus, historically low interest rates make it an ideal time to take out a mortgage.
Regardless of the cutthroat housing market, it’s still a good financial strategy to buy a house, as long as you plan to live there for a long enough time to see home values rise while building equity.
When will the real estate market cool off?
Experts predict that the real estate market won’t slow down until late autumn, and even then home prices will remain high, according to Dr. Lawrence Yun, chief economist at the National Association of Realtors. By then, more new construction homes will be coming onto the market, evening out supply.
“For those who are willing to wait, more choices will be available, but home prices and mortgage rates are likely to be higher,” Yun said.
5 tips for buying a home in today’s competitive market
If you’re looking to buy right now, you’ll need to move quickly, and with a competitive offer in hand. Follow these tips on setting yourself apart as a home buyer in a seller’s market.
And if now’s not the right time for you to buy, consider refinancing to take advantage of record-low mortgage rates. Compare offers on Credible to make sure you’re getting the best rate.
1. Find a real estate agent who has a good reputation in your local market
In a hot real estate market, you’re going to need all the help and connections you can get. Work with a realtor who has built a rapport with other agents in your community. They may be able to show you homes before they’re even listed on the market.
2. Come prepared with a mortgage preapproval letter
Getting preapproved for a mortgage shows the buyer that you have the funding necessary to complete the transaction and you’re ready to make a move. To prepare for the mortgage preapproval process, gather your recent paystubs, bank statements, proof of identity and information on any assets you have.
Just like you would shop around for the lowest price on a new car or laptop, you should make sure you’re getting the best deal — i.e., the lowest interest rate — on a mortgage.
Home values are rising more quickly than ever before, so that house you fell in love with six months ago may not be in your price range anymore. You might consider looking at smaller homes, or looking further away from town, to find a house you can afford.
And since so many homes are selling above the asking price, it’s a good idea to leave a little wiggle room in case you need to make a higher offer.
“Have an absolute maximum on how high to go up on an escalation clause and do not go beyond what was pre-set as emotions could get excited after seeing the property,” Yun said.
See how much home you can afford by using a mortgage payment calculator, keeping in mind that housing costs shouldn’t exceed 30% of your gross income, ideally.
4. Make sure you’re available to tour as soon as a home is listed
A few hours can make the difference between closing on a home and missing out on one. During the home buying process, you should make yourself available as often as possible, so you can schedule a tour and put in an offer before other buyers get a chance to see the property.
One more thing to keep in mind: “See the property with keen eyes as a home inspection may need to be waived in a competitive market,” Yun said.
5. Be flexible with your closing date
Buying a home can seem like a rushed, time-sensitive process, but it’s advantageous if you don’t have a set deadline for when you need to close. Giving the sellers the flexibility they need to move on their timeline may help to set your offer apart from the rest.
By following these tips, and with a little bit of luck, you may be able to buy a home within your budget without having to sacrifice what you want. And if you have any questions about the mortgage process, get in touch with a loan officer at Credible.