In neighborhoods everywhere, would-be homebuyers are wrestling with a question key to their financial future. Should they join the frantic race to buy this spring or delay their purchase plans in hopes of a potentially less frenzied housing market?
On this thorny question, COVID-era buyers are of two minds. On the one hand, they now have access to phenomenally low mortgage rates. They’re also experiencing a burning desire to leave cramped quarters. Their urge is for a residence with ample space for a commodious home office and perhaps a dedicated room for exercise.
But on the other hand, a severe shortage of available properties means home prices are high. In popular areas where listings are scarce and competitive bidding is rampant, buyers who attempt to play are facing sticker shock. Yet given the uncertain economy, potential purchasers are pondering the prospect that prices could moderate or even decline slightly later this year or in 2022.
Take the case of a 30-something architect married to a therapist of the same age. Working remotely for the better part of a year, the couple are now feeling squeezed in their slender two-bedroom city townhouse built more than a century ago. They’re longing for a newly constructed suburban place with larger rooms and at least one acre of land where they can grow vegetables. But every time they’ve attempted to bid, they’ve been aced out by other millennials.
Ryan Fitzgerald, the broker-owner of two North Carolina realty companies, doesn’t know the couple in this true story. Yet he’s well aware that would-be buyers all over the country are now greatly troubled by rising prices and scarce supply.
One advantage of acting immediately is the certainty of capturing a low-rate mortgage, which enhances buying power. Obviously, you can obtain more house for the money if your financing costs are lower. Buying promptly also allows you to actualize your lifestyle plans more quickly.
No one knows for sure whether mortgage rates will rise significantly by 2022. But real estate specialists expect prices will continue to rise in coming months, given the strong demand from many millennial-age buyers.
“This spring market will be the most competitive market of all time. Supply is the lowest ever. Demand is at an all-time high,” Fitzgerald says.
One factor in favor of delaying involves the potential expiration of the federal moratorium on foreclosures. After this occurs, likely later this year, numerous homeowners who are delinquent on their payments may sell rather than face foreclosure. That could increase the supply of available homes.
Though many wannabe homeowners are now struggling with the issue of timing their purchase plans, most ultimately opt for immediacy rather than delay.
“As all we humans know -- and especially so in the midst of a pandemic -- life is not a dress rehearsal. Therefore, the idea of postponing seems very unappealing,” says Tom Early, a veteran Ohio real estate broker.
Rather than delaying a home purchase, he advises clients in ultra-competitive markets to use other strategies to find a property they could plausibly afford.
“Resourceful buyers sometimes find opportunities -- even in the most torrid market,” says Early, a past president of the National Association of Exclusive Buyer Agents (naeba.org).
Here are a couple of pointers for those plotting a near-term purchase:
-- Search for eager sellers.
The loss of a job is one common reason homeowners must sell; divorce is another. Also, an increasing number of older baby boomers would like to sell and downsize as they head into retirement.
As a potential buyer, you might feel awkward seeking out owners who are under pressure to sell or who simply want to do so to move on with their plans. But there’s nothing unethical about doing this, according to Early.
“Owners whose houses have long been languishing on the market, usually due to overpricing, might be extremely ready to negotiate,” he says.
How can you identify those who are highly motivated to sell? Early suggests you ask your real estate agent to draw up a list of properties in your favored area that have been on the market for an extended period. Also, he recommends you go to the neighborhood where you’d like to buy and talk informally to residents.
“Tell the local residents how much you appreciate their neighborhood and they’ll be more likely to open up with you as to which houses could soon hit the Multiple Listing Service,” Early says.
-- Research any neighborhood you’re considering.
Early says many novice homebuyers let emotion dominate their thinking about where to live. But he strongly recommends that you also factor in some statistical measures before finalizing your neighborhood choice. This should increase your odds of choosing an area where prices are likely to rise in the future.
One way to help identify highly motivated sellers is by crunching numbers. Ask your real estate agent to determine the average “days on market” (from list to sale) for properties in the area you’ve chosen. Then look for homes in that price range that have been sitting unsold for a longer-than-average period.
“In this head-spinning market of high demand, you’re not going to get a steep discount on any property in any popular neighborhood. But at least you can hope to be competitive with other bidders and stand a chance of success in fulfilling your dreams,” Early says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)