Top tips for landing a house in an ultra competitive market
You know what they say: The early bird gets the worm. The same goes for the real estate market. Given the ongoing shortage of houses - particularly those that are reasonably priced, such as starter homes - those who vigilantly keep track of what's percolating among newly available properties tend to be in the best position to buy their dream home, assuming they've been prequalified for a mortgage.
Just about everyone knows the housing market really comes to life when the flowers are back in bloom and hope "springs" eternal. Did you know it is also wise to keep an eye out in the dead of winter? A recent study from ATTOM Data Solutions found some of the biggest discounts across the U.S. are between December and February.
No one knows exactly how spring will pan out in terms of buyer activity and property availability, but an uptick in housing starts suggests competition will be white hot. According to the most recent statistics available from the Department of Housing and Urban Development, housing starts nationwide in November rose to a seasonally adjusted annual rate of 1.3 million units, up more than 3% from one year ago. Additionally, among single-family dwellings specifically, the number reached 938,000, a healthy 2.4% rate of growth.
National Association of Home Builders Chief Economist Robert Dietz noted in December that property development in 2019 started off slowly, but finished strong.
"Since the rebound in housing took hold earlier this year, single-family starts have posted a steady improvement in the pace of construction," Dietz explained.
This is particularly true in several regions of the country, as single-family and multi-unit starts jumped nearly 7.5% in the South and almost 9% in the West, the Commerce Department reported.
The pluses and minuses of more inventory
An uptick in supply is a double-edged sword. On one side, more inventory equals a greater amount of potential places to buy, something that would-be buyers haven't had much of in recent years, as supply levels have been limited for quite some time. This is particularly true for families operating on a budget.
But on the other side, growth in volume also brings more competition, especially in springtime, which is hands-down the busiest time of year for both sellers as well as buyers. More competition means a greater chance that your picture-perfect home ends up claimed by someone else who got to it first or made an offer the seller couldn't refuse.
If buying a new place tops your to-do list in 2020 and you want to improve your odds of landing the house you'll come to call your own, here are a few ways you can put yourself in the best position to succeed in an ultra-competitive housing marketplace:
It's been said before in this space, but you can never hear it often enough: Prequalification is extraordinarily important when it comes to improving your odds of becoming a homeowner.
This status provides certain assurances to a seller, by indicating you have the financial capability to close a deal, usually within a certain price range. While prequalification doesn't meet the precise definition of loan approval, it can help the seller make a more informed decision about your intentions and seriousness of your bid. It can give you an upper hand on your competition, since some people opt not to pursue prequalification in order to save time. In reality, such a letter saves time and hassle, and may be the deciding factor if the competition doesn't have one. Talk to your lender about what you need to do to get one, but at the very least, you'll be asked to provide details about your income, in terms of salary as well as available funds.
Save up for a sizeable down payment
Of course, the main reason people pursue a mortgage is it allows them to come up with a large sum of money immediately, which is then paid down over time. Most loans, however, require a down payment, meaning a certain percentage of the house's list price. Generally speaking, down payments typically range between 3.5% and 20%, although the average runs between 3% and 5%, according to the National Association of Realtors.
If at all possible, try to save up as much money as you can to put toward the down payment. Aside from enabling you to borrow less - which can help you spend less in interest by paying off the loan principal - the size of the down payment may be something the seller takes into account when assessing one offer over another. Simple ways of saving include setting up an account specifically for the down payment and contributing a certain percentage of your paycheck each pay period.
Work with the experts
Mobile apps and online mortgage calculators, which weren't always available, have revolutionized the homebuying process by making it faster and simpler than ever before. One thing that hasn't changed is the importance of surrounding yourself with professionals in the real estate industry. From loan officers to a real estate agent, the more trusted resources you have available to you, the greater your odds are of being in the right place at the right time when it comes to finding and buying the house you want.
Have a back-up plan
The Rolling Stones sang it best: You can't always get what you want. No matter how hard you try or how early you are inquiring about a house that goes up for sale, there's no silver bullet to buying your dream home when competition is fierce.
That's why it's important to have a fall back if Plan A doesn't pan out. What was it about the house that you liked the most? Was it the price that was right or was it the house itself, meaning its physical makeup or location? Understanding what made your dream house special can provide you with the context your team can use to search for a house that may be even better than the one that got away.
Don't let an intense housing market deter you from pursuing your homeownership goals. Residential Mortgage Services can help you achieve them. Contact us to learn more.