Tips for homebuyers during a seller's market
A combination of factors, including low interest rates and a pandemic-driven decision by many city dwellers to look for houses in the suburbs, has created a housing boom for much of 2020 and 2021. That boom has created an undeniable seller's market in real estate.
Just what is a seller's market? The financial resource Investopedia defines it as a marketplace in which there are fewer goods for sale than there are interested buyers, giving sellers the ability to dictate prices. Since mid-2020, there has been an extremely low inventory of homes for sale but a very high interest among purchasing parties.
Data from the National Association of Realtors indicated that, by the end of February 2021, housing inventory fell to a record low of 1.02 million units. These factors have led to a surge in competition from buyers, including bidding wars on homes and all-cash offers to entice sellers. In December 2020, the median listing prices for single-family homes shot up 13.4% from the same time the previous year, according to Realtor.com, and it hasn't slowed down much since. Jeffrey Mezger, a 40-year veteran of the real estate industry and CEO of KB Home, says it's the best seller's housing market he's seen in his career.
So where does this leave buyers interested in relocating? Here are some tips.
• Consider areas with slower overall price growth. Experts say the South and Midwest United States offer the best value for home shoppers because of their meager price growth. ClearCapital, which tracks housing values, says San Antonio, St. Louis and the Dallas/Fort Worth areas experienced the least price appreciation from 2019 into 2020.
• Get preapproval or have your funds ready. Speed is the way to go if a buyer is interested in a property and wants to make an offer. Real estate professionals say buyers should be "offer ready," which means having a mortgage preapproval letter or proof of funds for a down payment ready to go. Failure to have funds in check can slow down the process or compel sellers to reject an offer.
• Work with a real estate agent. These are complicated times and it pays for buyers to have a professional working in their corner. A real estate agent uses his or her knowledge to make a timely offer and negotiate on the buyer's behalf. He or she also will provide insight into specific neighborhoods, amenities and school districts.
• Eliminate certain contingencies from the equation. Contingencies are factors that must be met before a sale can go through, according to the relocation site Moving.com. A common contingency is the need to sell one's current home before closing on another. Asking for extended closing periods or certain home repairs are some additional contingencies that can make buyers less attractive to sellers.
• Make it personal. Buyers can offer a personalized note with the offer that may connect with the seller emotionally and set one them apart from others who have made similar offers.
Buying in a seller's market can be challenging. But some strategies can set buyers apart from the pack.