It’s an unnerving, disorienting time for would-be homebuyers. In many popular neighborhoods, prices are still rising, and competition for scarce properties remains intense. This is causing some to postpone a purchase.
Take the true story of an income-limited couple in their late 20s who desperately want to move from a fourth-floor apartment to a detached house with a fenced yard for their dog. Indeed, they recently found a place to their liking and put in an offer. Yet after losing out to seven other bidders, they felt so discouraged they dropped out of the market entirely.
“These buyers have moved to the sidelines for six months at least,” says Ashley Richardson, the Long & Foster real estate agent representing the couple.
Is it wise for most motivated buyers to step back from the market in hopes that prices will at least plateau for a while? Richardson thinks not.
She reasons that given demographic trends -- and the reality that millennials are now in their peak homebuying years -- demand for property will remain strong and prices should continue to advance, even if currently low mortgage rates rise.
“Yes, the market is super-tight, but more listings should be available this summer for those who hold out,” says Richardson, who is affiliated with the Residential Real Estate Council (crs.com).
Economists who track housing markets are uncertain whether price gains will ease somewhat as inventory levels gradually begin to improve. One such economist is Danielle Hale of Realtor.com, the home listing company.
“Prices are still continuing to rise, and homes are selling quickly, thanks to still-limited inventory,” Hale says.
Given the conflicting trends in the overall housing market, it’s not surprising that aspiring buyers are conflicted in their own assessments as to whether now is a good time for a purchase.
According to a Gallup Poll conducted this spring, 71% of U.S. adults expect the average price of houses will increase by next year. Only 10% believe home values will decrease.
At Fannie Mae, the national mortgage company, a survey index that tracks homebuyer sentiment reflects a recent decline in optimism
“Unsurprisingly, respondents overwhelmingly cited the lack of supply and high home prices as primary reasons for their pessimism,” says Doug Duncan, Fannie Mae’s chief economist.
Of course, all buying decisions are personal, and market conditions vary depending on the target community where you hope to buy. That’s why real estate specialists urge would-be purchasers to factor in their own preferences before deciding when to seek a home and how much to spend.
Here are a few pointers for buyers:
-- Consider your household economics before setting buying plans.
Would buying a well-priced home in a strong neighborhood be a good financial bet for your household if your monthly mortgage payments are more than you can afford? Absolutely not, says Eric Tyson, a personal finance expert and co-author of “Home Buying for Dummies.”
Despite stiff lending standards, he says it’s still possible for many buyers to qualify for a larger mortgage than their family finances warrant, thereby placing them at risk of a future default. That’s because your lender knows less about your obligations and spending habits than you do.
Before committing to any home purchase, it’s always smart to review your budget and assess your level of employment security. Is your current job at risk? Do you have easily marketable skills that would allow you to quickly get another job if you had to?
-- Investigate the area where you’d like to buy.
As good as they are, national forecasts are of less value to you as a would-be buyer than is information that helps you assess the relative strength of the area where you’re contemplating a purchase.
To locate the parts of your metropolitan area that have the best prospects for future appreciation, Tyson suggests you start with a regional map. On this, pinpoint major employers -- such as corporate headquarters and military bases -- where jobs are expanding. Locate communities with top public schools. Also, identify neighborhoods served by public transit lines.
-- Scope out neighborhood property values before you bid.
Researching relative property values before you put in an offer on a home is critically important in the current market environment, says Fred Meyer, a veteran real estate appraiser and broker.
“As always -- but especially now, with home prices changing dynamically -- it’s imperative you develop a knowledge of price trends in your area, including the most recent sales,” Meyer says.
But data on comparable sales won’t give you the whole story. These days, you also need numbers to track the direction of the market -- whether prices are heading up, down or sideways. Ask your agent to give you data on the median price of a home sold this past month versus the month prior. Also ask for median price comparisons on an annual and yearly basis. These statistics should give you a good feel for the trend. Use these data when crafting a bid for a property you like.
“No matter how competitive the market, it’s always worth the effort to do your research,” Meyer says.
(To contact Ellen James Martin, email her at email@example.com.)