A friend recently reached out to me. He wanted to know how to buy a house in this market. He’s heard all the stories: Lack of Inventory. Prices Increasing. Multiple Offers.
This might seem like 2021 all over again. Indeed, we are in a very similar, if not worse, market. Inventory is currently at record lows. Across the entire United States, there are only 271,913 homes for sale! The median price for an American home is up nearly 20 percent in a year. Couple the lack of supply with the impending rise of interest rates, and buyers are scrambling to break into the market. It’s a clear case of FOMO: Fear Of Missing Out!
All of these forces can lead to making a rash decision. Here are my top tips for buyers in 2022:
1) Have patience.
Buying a house is an emotional roller coaster. It was already one of life’s most stressful experiences before the pandemic. Expect the unexpected. Since March 2020, it has only gotten more difficult for first-time home buyers to break into the market. Supply chain issues have further exacerbated the stress on inventory. This has caused quite the frenzy. It’s the perfect time to sell a lemon: that house on the busy street or property with water drainage issues. It’s important to keep everything in perspective. While updates and improvements can be made, some things, like low ceilings, will always be an issue. Currently, we have the most housing units under construction since 1974. With time, this inventory will move into the market. First American, Chief Economist Mark Fleming gives great advice. While we may have FOMO (Fear of Missing Out), because of rising rates, don’t forget about FOBO (Fear of Better Options). There may be a better option or options when there’s more inventory.
2) Create a spending plan. Know your boundaries. It is tempting to place high-priced bids indefinitely. But buyers’ regret is a real thing. Consider residing in the house you purchase for three to five years. When the time comes to sell your home in the future to property investors like Crawford Home Buyers, you will have enough time to cover closing costs and absorb any price reductions. By then, you can also remodel your house to increase the price at which it is sold. You could probably raise the value of your property by doing the renovations.
3) Get your ducks in order. Check your credit. Get pre-approval for a loan.
There are a lot of forces outside of your control: interest rates, inventory, competition. Focusing on those elements will only lead to increased stress. Instead, focus on the things in your control: Pay down debt and improve your credit score. Save for a down payment and closing costs. Meet with a real estate agent and lender. Get pre-approved.
4) Establish top 3 priorities for a house. At any price point, you won’t find everything you want, especially in this market. Before beginning your house hunt, decide the most important things to look for in your new home. Chris Herbert, the managing director of Harvard’s Joint Center for Housing Studies advises, “You ought to be making this as a housing decision and not an investment decision,” he said.
5) Find an agent you know, like, and trust. Work with an agent who will invest the time to help you. Chances are you may be working with them for a while.