Al's Jan. Home Buyer News And Insights
Tips For Buying In A Seller's Market
For those in the market to buy a home, it is no secret that we are in the throws of a seller's market. The inventory of homes available for sale has been tight, measuring under 3 month's supply for the past few years (anything under 6 month's is considered a seller's market), creating a market where the inventory of homes cannot meet supply. Couple this with historically low interest rates and buyers are competing for nearly every listing. And looking ahead into 2019, the market is forecasted to look much the same and favor sellers.
This does make the voyage into buying a home a bit rockier. But working with an experienced real estate agent like myself and following a few simple concepts can make navigating these waters easier.
Prequalification vs. Preapproval. Sounds the same but they are different. Consider a prequalification as a preapproval light. Being pre-qualified means a lender has decided you will likely be approved for a loan up to a certain amount, based on your current financial situation.To get pre-qualified, you simply tell a lender your level of income, assets, and debt.There are no guarantees you will actually be approved for the same amount. Being pre-approved means you’ve actually been approved by a lender for a specific loan amount. When pre-approved you will receive a letter that states your approved loan amount. Unlike getting pre-qualified, when getting pre-approved you provide documented financial information (pay stubs, statements, obligations, credit report, etc.) to be reviewed and verified by the lender. Preapprovals are more attractive to sellers since it means the buyer is more likely to get the loan. It does provide a competitive edge.
Interest Rates. Although the Fed has recently sent out mixed messages regarding the direction of interest rates, most experts still predict a few increases in 2019. Higher interest rates do affect a homebuyer's purchasing power. One rule of thumb is that for each increase in the mortgage rate by a point, purchasing power decreases by 10%.This is a key reason for not procrastinating your home buying.
Low Inventory. Yes, inventory is low and during the winter months it tends to get lower. But that does not mean it is a bad time to search for a home. Sellers during the winter months may be more open to negotiating offers since foot traffic may be light. In addition, buyers will face little or no competition, and multiple offers, for a home and may get their home at a better price. And always remember that sellers have change of life moments as well, a job change, retirement, where they may be anxious to close the deal. Winter is a great time to find a home.
Speed. It is important to be aware of new listings, schedule a showing quickly and if you do like the home make an offer. Speed is critical in a seller's market.
Make the Best Offer. A seller's market is no time to be cagey about your offer or plan some grand negotiating strategy. Know what you can afford, and put your best offer in front of the seller and fast. You want to quickly stand apart from the other potential buyers/offers.
Buying a home in a tight market can be a challenge, but working with a knowledgeable agent, like myself, who understands the local market, the right home at the right price can be yours.