Buying a Home in a Seller’s Market: What to Expect
It’s homebuying season! Demand for homes started growing in 2020 during the pandemic and shows no signs of slowing down. This is excellent news for sellers, who can get top dollar for their homes in a competitive market. On the other hand, buyers are facing new challenges that stand between them and their dream houses.
What to Expect
A new survey by the National Association of Realtors shows that 43% of single-family home buyers in 2021 are buying for the first time. Inexperienced buyers may already be at a disadvantage to their seasoned competitors, but buying in a post-pandemic environment brings new challenges for everyone. Here’s what to expect:
- There Are More Buyers Than Homes On The Market
- Mortgage Rates Are Expected To Stay Low
- Virtual Tours and Closings Will Continue To Be Popular
- Sight Unseen Sales Are On The Rise
- Homes Are Selling For Over Asking
- Expect to be Outbid More Than Once
There Are More Buyers Than Homes On The Market
Although COVID-19 slowed the economy, it created a pool of hungry home buyers. After a year spent at home, many decided it was time to get a new house that better satisfies their needs. Many have also relocated for new careers after the pandemic disrupted the job market.
Likewise, the buying boom exacerbated an already low housing supply. Homebuilding has been stagnant for a decade and never recovered from the 2008 recession.
Mortgage Rates Are Expected To Stay Low
Mortgage rates for a 30-year fixed-rate mortgage reached a historic low (2.72%) in 2020, and they are expected to stay low. Thanks in no small part to the Federal Reserve cutting its target interest rate.
Mortgage forecasts by Fannie Mae, Freddie Mac, and the National Association of Realtors and Mortgage Bankers Association project a 3.31% average for 2021.
Nevertheless, buyers should still shop around for lenders and compare mortgage rates and fees. Especially since credit requirements are high and homes are selling for over asking.
Virtual Tours and Closings Will Continue To Be Popular
Born out of necessity during the height of the pandemic, virtual tours and closings are now solid options for home buyers. Virtual tours and closings may continue to be popular as buyers and realtors feel more comfortable with the technology.
Advancements in technology like drone footage, virtual home shopping assistants, ai staging tools, and digital transactions make the virtual home buying experience more accessible.
Sight Unseen Sales Are On The Rise
According to a report by Redfin, 63% of the home buyers in 2020 bought a home they had not seen in person!
Fierce competition for homes and better virtual tools have led to sight-unseen sales. Buyers feel a sense of urgency to act on homes that they like, even if they haven’t seen them in person. The trend is highest for out-of-town buyers, but even local buyers are tempted to place offers on a property without seeing it for fear of missing an opportunity to bid first.
Some homeowners are even forgoing requisite inspections. While this strategy may seem like a sure-fire way to WIN the house, it does come with considerable risk, and there are plenty of horror stories to make you think twice.
Homes Are Selling For Over Asking
Redfin analyzed a four-week period from April 22 to May 16, 2020, and found that 50% of homes sold over the asking price, some considerably so. The rest of the data, which Redfin has been collecting since 2012, paints a picture of the current state of things:
- Median home prices hit a record high of $352,975; up 24% year over year, a record high
- Median asking prices increased to $358,975, a record high
- 50% of homes sold for more than their list price, up 23% year over year, a record high
- The average home sold for 1.7% more than its asking price
- The average home was on the market for just 17 days, down by 18 days for the same period in 2020.
- 58% of homes under contract had an accepted offer after two weeks on the market
- 45% of homes under contract had an accepted offer after one week on the market
Expect to be Outbid More Than Once
If the data isn’t enough to put you off trying to buy a house in a seller’s market, it’s good to go in with a realistic attitude. That means be prepared to be outbid more than once and avoid getting too attached to the first, two, three, four, or more homes that you bid on.
Rebecca Ametrano and Dan Johnson are newlyweds that have looked at 40 homes. In their experience, each home got 10 to 15 offers and sold for way over the asking price in a matter of days.
“You show up at an open house, and they’re like, we already have an offer. You’ve got to beat it basically,” Johnson says in an interview with NPR.
The couple has coped by practicing non-attachment and being a little more aggressive and business-minded about the process than they would otherwise.
Should I Buy Now or Wait It Out?
Plenty of people who have stayed in the home buying game have ended up on the other end with a home they love. Doing so in the current climate takes patience, commitment, and a little luck, but they made it happen. If your finances are in order and buying a home is a high priority or necessity for your family, it makes sense to keep trying. Just make sure you don’t end up committing to a mortgage you can’t afford. And don’t skip a home inspection!
On the other hand, if you want to buy a house but waiting for the market to stabilize doesn’t disrupt or fundamentally change your life, waiting it out could save you time and money. It will help create a little more space in the market for more desperate buyers.