Amber (Mortgage Advisor with AXIA Home Loans MN, CO, & IN )
Spencer (Real Estate Advisor with Engel & Volkers MSP)
Why are there so few homes for sale right now?
Amber- With interest rates hitting their historical low at the start of January this has encouraged buyers to get in the game that otherwise may not have been able to afford a purchase. Each time the interest rate drops it allows for more buying power toward a home purchase. In addition, the average single family home sale in January according to MAR was $330,000. These shoppers are likely candidates of the multiple stimulus checks that have been sent out over the last few months. Add in less travel expenses, less eating out, less in store purchases these buyers are prime candidates to believe this is a good time for them to get in the homebuying game because their cash is plump and their ability to be approved for a higher purchase price is prime. As a result, the eager buyer pool is larger than ever before which means more qualified buyers shopping within an already low inventory market.
Spencer- There is no one real solid answer as there are many factors. Part of it is a log jam that is kind of feeding itself, many sellers are waiting to list their home until they find a house, but they cannot find a house so they aren’t listing, but the house they want is waiting to list until they can find a house, so they aren’t listing, etc. We also have the largest generation (Baby Boomers) staying healthier longer and holding on to their homes longer, while also wanting to downsize into many of the same homes the next largest generation (Millennial’s) are trying to purchase as their first home. Many other factors play a role, but these are a couple.
How can I be more competitive in the offer I am submitting?
Amber-Working with a strong Mortgage Advisor who will do their due diligence when building your approval is essential. This will allow them to advocate on your behalf in a multiple offer situation. I would suggest that it is more important to have an Advisor who can successfully close your loan on time than finding someone with the lowest fees and interest rates. I believe reputation of your Mortgage Advisor is most critical than ever before. With the intensity of the market having a strategic team advocating on your behalf is going to help set your offer apart during multiple offers.
Spencer-Some buyers are doing things like guaranteeing the appraisals, removing inspection periods all together, allowing sellers to have free “rent back” periods post-closing to allow them to find a home, etc. However, these are “risk/reward” scenarios and only you can decide how much risk you can stomach for the reward of winning the home.
Will we see a more balanced market soon?
Amber- Interest rates are on the move. This is going to help everyone. I know buyers may feel the crunch as they might have been approved for a home price in December, but now that they are shopping in March, they no longer qualify for that home price because the rates have increased. This is likely to happen. These will be hard conversations to have, but it is for all of our benefits. When the rates increase less buyers will qualify. It will narrow the path just a little bit. The rates are not going to rapidly increase, but they will slowly climb in 2021 as more and more people trust the opening of our communities. More spending will stimulate the economy and less funds will be readily available by consumers to spend on their next home.
Spencer-It is a way off from happening, outside of an “event” that quickly moves it the other direction. However, if that type of event happens large portions of the population will be negatively affected economically so none of us should want a “quick turn”. A more balanced market would be better in many ways, but we do not want to get to that balance by “force”. Ideally, we get to a balanced market by a slow increase in supply and/or a slow decrease in demand. A balanced market is 6 months of inventor available for the buyers. As of January, for a single-family home the supply was less than .8 months of inventory. This same time last year it was 1.8 months of inventory available to purchase.
Should I just rent for now with how few homes there are?
Amber- I recommend you determine how much endurance you have. If you are ready to run a marathon then I say go for it. If you need something fast this market is likely not going to make that possible. If you have the capacity to potentially overpay for a property or throw all your marbles at something you love while still staying grounded financially then I say jump in and look to purchase. If you do not feel you have the capacity to run a marathon then renting might be your best option for the time being. It is a hot sellers’ market, and it will be for some time. Whether you buy in 2021 or in the next few years it is important to recognize the sellers’ market could be around for some time.
Spencer-This is a very case by case scenario with no one right answer. You could wait two years and if the market balances, or pulls back, be in a better position. Or in two years values could be up 20% and you paid $50k in rent over that time and wish you would have bought. I would say make the best decision you can for yourself and do not second guess it. Everyone can live in the would have/could have/should have world but at the end of the day you make the best decision you can with the information you have at the time.
I am scared to sell because there are no homes. What do you recommend?
Amber- I recommend being flexible. If you can not be flexible in this process due to the low supply high demand economic condition you are best to just wait it out. Being flexible with what you want in your next home, where you might live temporarily, how your terms will be negotiated, where you will be located. All these conditions need to be assessed before you look to sell. I do believe more homes will be coming on the market, but it will be a while before the process of finding your next home does not require a high level of flexibility.
Spencer- This is a real-world example of the log jam we are seeing, and it is a valid one. Yes, sellers are getting more money for their homes because of the lack of supply/high demand. However, there are real stresses that come with that for sellers too. Money is not everything. A balanced market would allow sellers to still make good money for their homes AND have reduced stress on their next move. However, that is not our reality right now. Right now, many buyers are willing to allow sellers either some rent back period, or a delayed closing to give sellers time to find a home. However, you still need to be prepared to maybe find some temporary housing if you do not find what you are looking for. You may have to take some of the extra equity you make from selling your house high and put that towards temp housing, or you wait it out, but it could be a while.
If you have any questions about how the current market would or would not benefit you please send myself or Spencer an inquiry email at:
"What I can preapprove you for is different than what you can afford."