Essential Guidance for Renters and Buyers in a Hot Housing Market
After a year of unpredictable times for homeowners and renters, the housing market is officially back. The government created plans to restart the housing market in 2020 and ever since then it’s been continually growing. Now, some professionals claim that the housing market may be over-heating and headed towards another shift. In the midst of unpredictability, people are left confused, anxious, and unsure of how to take the next step forward. The mortgage rates dropped to a record low during the peak of coronavirus infections, hitting as low as 2.72% for a 30-year fixed-rate mortgage. This drop caused many homeowners to refinance and many first-time home buyers to enter the market. Now, real estate is hot and it’s leaving people with questions. To help, here is some essential guidance for renters and buyers in a hot housing market.
What is a Hot Housing Market?
A hot real estate market is a market where home inventory is low and the competition to buy a home is high. There are many reasons that this occurs, and the current state of the market can be best attributed to low mortgage rates, a shift towards changing lifestyles that prefer open space, and the resurgence of the economy following the pandemic. In most parts of the country, supply is falling below demand, which pushes up prices. In March of 2021 alone, the median price for a single-family home rose roughly 18%.
Hot markets in real estate are great for those looking to sell their home, but sellers should be prepared with an alternate place to live. A hot market is a seller’s market, especially if they already have a new place to call home lined up.
Status of the Current Housing Market
Currently, as of the summer of 2021, the market is hot. There are housing shortages across the countries and high prices of lumber have slowed down construction of new homes. According to the National Association of Realtors, April 2021 was recorded as having only a 2.4-month supply of existing housing available (down from a 4-month supply in April 2020) and continues to head in a downward trend. For comparison, the ideal market has a 6-month supply of housing available.
8 Tips on How to Navigate a Hot Housing Market
While the market is hot, it doesn’t mean that you cannot find a home to rent or buy. Rentals are still in high-demand and high-supply, making it simple and straightforward to find temporary housing. If you’re trying to buy a home, the best way to do so is to navigate the housing market strategically.
1. Scan the Market for Options
Start by slowly dipping into the housing market to see what’s available and what the median home prices are in your desired location. Do this regularly to get an idea for how fast homes are selling and whether there’s anything available in your budget. Look at homes that have been recently sold to compare the listing price to the closing price and get a better understanding of the true cost of buying a home in a hot market. This allows you to explore your options without the pressure of having to make a decision.
2. Find a Good Real Estate Agent
If you’re serious about buying right now, you need a good real estate agent. Having a trustworthy real estate agent on your side is one of the only ways that you’re going to be able to navigate a hot housing market without getting in over your head. Real estate agents have early access to houses that are going on the market, allowing you to make an offer early and sometimes before others even see it.
3. Be Prepared to Compromise
Most people have a dedicated list of wants and needs when shopping for a new house. If you’re absolutely determined to buy a new home while the market is hot, be prepared to make some compromises on your “dream” home. Having more flexibility with desired housing features will give you more options and help you close faster. Consider making a top three list of the non-negotiable items and use that. If you don’t want to compromise, it may be better to wait a few years until the market cools down.
4. Prepare Your Finances Early
Another key factor in navigating a hot market is making sure that all your finances are prepared early. Make sure that you’re preapproved and have the documentation to show sellers. This reassures them that you’re serious and can help expedite the entire process. If you try to view a home and aren’t preapproved, they may not bother to waste their time as other buyers have likely already shown interest. Larger down payments can also help improve the appeal of getting chosen by the seller.
5. Keep Things Simple
While home inspections are essential, they don’t have to be burdensome. Keep things as simple as possible and limit your inspection to a standard, informational only inspection. This means that you’ll still get the home inspection done, but if small problems are found you’re still committed to moving forward without trying to ask the buyer for repairs. While this isn’t an ideal situation, it’s one way to help you get more leverage in a hot market. If repair costs exceed $1,500, only then should you consider discussing repairs or lowering the selling priced. Trying to nickel and dime a buyer while there is an astronomical amount of competition in the market is not going to lead to a good result.
6. Get Ready for Competition
With that being said, prepare yourself for some serious competition. Work with your real estate agent to determine a few ways that you can sweeten your offer and really stand out from other interested buyers. There are plenty of ways that you can strategically position yourself for success.
7. Try to Be Patient
The inventory of available houses on the market is reaching an all-time low. This means that it might be more difficult to find a house that you like and even harder to get in with an offer before it’s too late. In fact, the housing market is so hot right now that some houses are on and off the market in a matter of hours. If you’re in a rush to buy a home, work with you real estate agent and be prepared to go over asking price. Otherwise, be patient. The housing market is a volatile market and it’s likely that it will change soon. To make sure that you don’t overpay for a house that doesn’t meet your needs, talk to your real estate agent about considering rental options until there are more houses available for sale.
8. Consider Rentals
While home prices continue to increase, it may be more beneficial to rent for another year or two and hold off on the buying process. That’s not to say that buying a reasonably priced home is impossible, but it may be more difficult to find something within your budget or desired neighborhood. Talk to your real estate agent about the best course of action for your situation and if you need to continue renting, don’t worry. First Star Realty has plenty of beautiful, affordable homes for rent in Northwest Arkansas.
Many people are astounded by how well the housing market bounced back after the pandemic, but that doesn’t mean it’s perfect as is. Prices for the average home are increasing and mortgage rates are rising again. For many, it seems like a scary time to purchase a home. It’s also a great time to sell. To help navigate the intricacies that are associated with renting or buying in a hot housing market, utilizing a real estate agent is your best option. This allows you to get insider access to listings before they skyrocket in price. Finding the right real estate agent also means having someone you can trust on your side, regardless of the uncertainty that you may feel. First Star Realty is here to help.
When you’re ready to work with a real estate agent who’s going to put your needs first and prioritize giving you honest advice, First Star Realty is here. We’re committed to providing five-star realtor services to Northwest Arkansas and work with you throughout the entire buying or selling process. We also have many available rentals throughout the area. We aim to bring you peace of mind when renting or buying in a hot housing market so that you can feel secure in your decision. If you’re ready to buy or sell a home, or are interested in available rentals in your area, contact us today. Our team of highly seasoned real estate professionals provides exceptional, personalized service to all our clients. Call us today at 479-267-1600 or fill out a contact form on our website.