For homebuyers entering the current seller’s market, there is an expectation that you will be facing competition for the homes available on the market, and you will need to make your offer stand out to get accepted. As a homebuyer, it is easy to get emotional when you find your dream home, and in today’s market, transactions are moving fast. It is easy for homebuyers to get caught in bidding wars over the scarce supply of homes in these situations.
When is the Time to Buy?
For many first-time homebuyers, buying a home is often due to getting married and starting a family. Owning a house comes with many benefits for these families: more space, better control over housing costs, and building wealth. However, the pandemic accelerated this process for many first-time homebuyers, seeing it as the prime opportunity, as remote work became commonplace and people spending more time at home in general.
As the demand for homes surged across the country, the market quickly became a seller’s market. The supply of homes has not been able to keep up with the demand, creating a shortage in many markets, leading to aggressive competition for the available inventory. Obviously, this is not an ideal situation to be in for homebuyers. However, with the correct preparation, homebuyers can avoid some of the associated pitfalls.
Understanding Your Market
Nationwide, the overarching trend is a low inventory with soaring prices, causing a decline in home sales. However, when looking regionally, there is variance among the different parts of the country. Therefore, it is vital to research the current trends of your local market and to identify critical factors such as:
- How long are for-sale homes on the market?
- How much over the listing price did the homes sell?
- Age of homes and renovation history
Understanding these aspects of your market will give you a better idea of what to expect as far as local competition and the overall cost of the homes available.
Setting a Budget and Sticking to It
The next part of preparation is to determine your budget. You will need to factor in the mortgage, insurance coverage, continued maintenance, and closing costs to get an accurate number. Calculate how much you can afford to pay per month and nail down what your budget for your home will be.
Determining your budget is the easy part but committing to it is the tricky part. When viewing homes, is it easy to let emotions get involved, often when you have found your dream home. Depending on the local competition, you may have to go over your determined budget to get your offer accepted. When looking at listings, you will want to browse at the mid to lower range of your budget. Finding a home at this range will provide you a buffer for any bidding you engage in while staying within your budget. Additionally, this buffer can also account for any surprise costs you may encounter throughout the process, if you have to waive any protective contingencies. Some homebuyers need to act fast and will forgo the home inspection contingency, leaving them vulnerable to unforeseen home defects and repairs down the line.
Understanding your market, developing a realistic budget, and sticking to it give you the best strategy to buy a house that works for you and, most importantly, can afford it. However, it is vital to realize that some homebuyers will be priced out with low inventory and will have to wait for the market to shift as price drops or more supply becomes available. Though some are concerned that there may be a housing market crash because of the demand-driven price surge, there is optimism that the market will cool eventually. With your preparations all set, you will be able to handle whatever the market throws at you!