If you’re thinking now might be a great time to buy a home, you’re not alone. According to Business Insider, 2020 “broke” the housing market -- and existing home sales skyrocketed to a 14-year high in August of last year. With so many homebuyers and fewer homes available, the U.S. has been experiencing what’s called a seller’s market.
It may initially sound odd that so many people decided to make a major purchase like a home during a pandemic. But the economic fallout of the coronavirus pandemic led to the lowest 30-year mortgage interest rates in history, hitting a new record low of 2.65% in January 2021. It was the 17th new record low in the previous year.
If you’re looking to buy a home right now, competition remains fierce. Learn about what it means to be in a seller’s market, and five tips for buying a home.
What Is a Seller’s Market?
A seller’s market is what it sounds like: the power is in the hands of the seller, rather than the buyer. Investopedia defines it this way:
“A seller's market is a market condition characterized by a shortage of goods available for sale, resulting in pricing power for the seller. A seller's market is a term commonly applied to the property market when low supply meets high demand.”
Low interest rates are a major contributing factor that causes a seller’s market, though it’s not the only one. Housing assistance programs, population growth, or economic growth can also lead to higher demand for housing in certain areas, which can cause a seller’s market -- though it may not be as geographically widespread.
In a seller’s market, it’s often much more difficult for homebuyers to purchase a house because there are so many buyers and so few houses available. It’s not uncommon for a newly-listed home to be off the market within a matter of days. This can be frustrating when all you want is to find the perfect home for you and your family, but it seems like they keep getting snapped up quickly.
Like in other situations where demand is greater than supply, the prices of homes available also increase in a seller’s market. There is so much competition for each house that buyers must put their very best offer forward in order to stand a chance of their offer being accepted. That means that, not only are fewer homes on the market, but the ones available are likely to be much more expensive.
5 Tips for Buying in a Seller’s Market
Buying a home in a seller’s market is difficult, but it’s not impossible. If buying a home is important to you, don’t give up. Try these five tips to help increase your chances of buying a home during the current seller’s market.
1. Choose the Right Real Estate Agent
While it’s not absolutely necessary to hire a real estate agent to help you buy a home, many people benefit from working with one -- especially when they’re first time homebuyers, or when the real estate market is as tough as it is right now.
If you’re not a real estate professional, trying to keep on top of newly-posted homes within your budget and scheduling tours can be an extremely stressful and time-consuming undertaking. With the right real estate agent, they can do a lot of the work for you and ensure you don’t miss any great homes that are hitting the market.
2. Get Prequalified for Your Mortgage
Getting prequalified for your mortgage can go a long way toward establishing a good relationship with home sellers -- so when you find a home you like, you’re ready to start making moves. A prequalified letter will show the sellers that you’re serious and motivated to buy, and that you’re financially solvent.
That means the current homeowners will be able to trust that selling their home to you will be a smooth process. There’s no waiting around for approval or the potential that the transaction could fall through due to a lack of funds on your part.
3. Keep on Top of Your Search
In a seller’s market, homes don’t stay listed for too long. This is when working with a real estate agent can come in handy because they can help you keep on top of your search. But if you’re doing it yourself, be prepared to check the listings very frequently in order to maximize your chances of finding a new, still-available listing.
Then, if you see a home you like, it’s important to act fast. You likely won’t have the luxury of waiting until the weekend to schedule a showing. Be as flexible as you can throughout the whole process -- and be ready to submit an offer on the spot if you find the right home for you.
4. Understand the Reality of the Situation
You may begin the homebuying process with the vision of your “perfect” home in your mind. But a seller’s market favors the seller, not the buyer. That means that you may not find a home that checks every single one of your boxes.
Remember that you can only work with what’s available, and it’s important to keep a realistic perspective on the whole situation: There are more interested buyers than there are homes. And many of those other buyers are likely interested in the same features you are.
It might take more time and work than you expected, but if you keep trying, you’ll eventually find a place that meets most of your requirements and doesn’t break your budget.
5. Make it Personal
When the homebuying competition is fierce, you’ll want to find a way to set yourself apart from the other potential buyers. One great way to do this is by making a personal connection with the sellers.
Consider writing them a letter about who you are, why you want to buy their home, and what it would mean to you. You could include photos of your family, or do the whole thing in video format. Selling a home is often an emotional experience, and the sellers will likely want to know that their home full of memories will be treasured and taken care of by its next owners. It could be enough to tilt the scales in your favor.
Academy Bank Is By Your Side
Whatever stage of life you’re in, Academy Bank is by your side. We provide personal, business, and commercial banking services, as well as help with the home buying process.
Learn more about how Academy Bank can help you buy a home.
Subject to credit approval.