The real estate market is hot right now!
Home prices are up from last year, and 50% of homes are selling for more than asking price – $ 20,000, $ 50,000, or even $ 100,000 more in some cases. This is causing buyers all over the world to do crazy things to get the homes they want. More than half made an offer last year without seeing the house in person. Many are even willing to skip a home inspection if their offer is accepted.
In case you were wondering, both are really bad ideas.
There’s nothing mysterious about a bustling real estate market. This is what happens when you have more buyers than homes to buy. Demand is high, but supply is low, which drives up prices. I’ve heard a lot of people say that we’re actually in a real estate bubble. That’s when demand drives home prices so high, so fast, that buyers can’t keep up. Houses stop selling, flooding the market and causing prices to drop like a rock. But I don’t think that’s what’s going on.
We have a housing shortage, fueled by a shortage of building materials – another thing to thank COVID-19 for. With less choice of new homes, buyers are turning to used homes, but few people are selling right now. Plus, many buyers are moving to areas where the cost of living is much lower, so they have the cash to make those crazy deals on available homes. It’s the perfect combination for the binge eating we are seeing now. And while I think the frenzy is going to slow down and prices will level off, I don’t think house prices are going to drop significantly anytime soon.
What does a boiling real estate market mean for sellers?
This is great news for sellers! With more motivated buyers than sellers, the competition is fierce and the sellers have the edge. You can sit back, let the deals come in, and choose the best one. But you shouldn’t take the leap to sell until you are sure that you are financially and emotionally ready. If you are, the next step is to find a reputable agent and discuss your situation:
Do you sell and buy? Sell your home before you buy. You will likely be able to sell your home before you find a new one, but you never want to risk having to pay two mortgages.
Use your advantage in your favor. In a booming real estate market, buyers will be more inclined to agree to your terms. Take it to your advantage!
A multi-offer game plan is essential. Be on the same page with your agent about the price, types of financing, and contingencies you’ll take, so it’s easy to pick the best deal.
Higher priced homes don’t move that fast. Homes valued at $ 500,000 and more may take a little longer to sell, so don’t be discouraged if it takes a few extra visits to get offers.
What does a boiling housing market mean for buyers?
It might be a sellers market right now. But buyers aren’t completely unlucky. One thing’s for sure: Buyers need a seasoned real estate pro on their side. Between crazy offers and fewer housing choices, this is not the time for amateurs.
Here are some tips for winning in a seller’s market:
• Stick to your budget. Don’t let emotion or lack of time lead you to make bad financial decisions. Home fever causes 20% of first-time homebuyers to go over budget. It’s a bad idea.
• Know what it takes to have a competitive offer. If you’re buying with a mortgage, get pre-approved – not just pre-qualified – for a conventional loan. I always recommend a 15 year fixed rate loan where the monthly payments do not exceed 25% of your take home pay.
• Make a cash offer if you can. Cash is king, and it will set you apart from other buyers in a good way!
• Know when to step away. Before you blow your budget or settle for a home you don’t really want, stop and let things calm down for a bit. Waiting a few months may seem like an eternity, but it may be just long enough to let a boiling real estate market calm down.
• Be prepared for a longer search. This is especially true if you are a first time home buyer.
Most real estate professionals agree that this seller’s market is here to stay for a while. As home prices have exploded nationwide, every market is different, so be prepared for anything. Either way, play smart. A new home should be a blessing, not a burden, both emotionally and financially!
Dave Ramsey is a bestselling author, personal finance expert and host of “The Ramsey Show”. Since 1992, he has been helping people take back control of their money, build wealth and improve their lives. He is also CEO of Ramsey Solutions.