Lately there has been an abundance of questions related to the current housing market. In today's article, I wanted to take some time to provide helpful information for you or someone you know who may be deliberating the options of purchasing a home.
Sure, we have all heard the stories about the current seller market: people paying excessively over asking price, multiple offers that listing agents and sellers review for “the winner”, and the inability to take time to consider a property because “it will be gone”. Moreover, questions surface like is the market going to cool down? Are prices going to sharply decline in response to rapid appreciation? Many buyers may consider putting off homebuying to avoid the stress of the buying process.
Because of the apprehension, I continue to remind my clients that it is well worth the effort. Today’s market is not as scary as it may seem, albeit difficult to navigate. In a macroeconomic sense, purchase volume is currently constrained by the available inventory (there are only so many houses available). At the same time, there is a massive influx of buyers in the market. So what does this mean for current buyers and where is the market going? Here are some important factors to consider when answering these questions.
The usual summer selling season is coming to an end. Many choose to delay moving once school starts and the holidays approach. Buying today means closing sometime in October or November for most, and who wants to move around the holidays? Answer: only those that HAVE to. As the winter months draw near, sellers typically must entice buyers and supply can begin to stabilize with demand.
With the moratorium on foreclosure and evictions coming to an end, we expect there will be a flood of foreclosures. This can in turn create supply to potentially match the demand. Of course, there is a queue of expected foreclosures that will be hitting the market around the same time as the pent-up foreclosure queue is processed. One by-product of this unusual inventory push will be a healthy slowdown of price appreciation. Currently, appreciation overall is up 18% year over year. This number historically is not sustainable. More inventory will result in more competition for sellers when they aren’t the only listing on the street.
So, should buyers continue their perilous journey in this seller’s market?
Yes. While it is difficult to buy, it is worth the long-term wealth. The appreciation the market is experiencing currently may slow down as supply catches up with demand but should not reverse towards depreciation. Interest rates will be favorable over the next year.
If you are a buyer, equip yourself with the best, most accurate pre-approval you can. Make sure you have a clear and accurate view of your optimal price range, what down payment you can afford, and monthly payment/closing cost details. The more prepared you are for the negotiations with a seller, the more likely you will be “the winner” and end up with one of the best investments you can make in yourself.
Never lose sight of the wealth building effect of home ownership. If you don’t currently own, ask your friends how they’ve done with the value of their home over the past few years, even decades. I tell people all the time that as much as your home is your haven, it’s also an investment that is providing a return to you in the form of appreciation.
Next time, we will discuss what to look for to find the right Realtor, what to expect from the good ones, and how to balance the online search with finding your dream home.
As always, if you have any questions related to this information, or just want to chat about your housing options, I am here to help!