Many buyers who sat out the spring market are now regretting it. That’s because prices have risen since the COVID-19 outbreak began in earnest last March. And there’s still a great deal of pent-up demand for homeownership among young adults.
Of course, those who’ve lost their jobs due to the pandemic are in no position to make a purchase anytime soon. But many who are qualified to buy remain upbeat about the future and eager to move forward before they’re priced out of the market. Yet, at the same time, they see clouds on the horizon as they observe family members already falling behind on their mortgage payments.
The job-related fears of many Americans are grounded in reality, according to Frank Nothaft, the chief economist at CoreLogic (corelogic.com), an economic think tank that tracks housing markets throughout the country.
“The national unemployment rate soared from a 50-year low in February 2020 to an 80-year high in April. With the sudden loss of income, many homeowners are struggling to stay on top of their mortgage loans, resulting in a jump in non-payment,” Nothaft says.
He’s predicting “meaningful spikes” in mortgage delinquencies unless federal and state governments step in to provide further relief to financially troubled households.
Despite these economic warning signs, would-be homeowners who retain solid jobs and are therefore qualified to take out a mortgage resist the suggestion they put their buying plans on hold.
“People with young children are especially unhappy about waiting to get into a place of their own. They’re sick and tired of living in rental quarters where their landlord has so much control over their lives,” says Mark Nash, a real estate analyst and author of “1001 Tips for Buying and Selling a Home.”
Nash considers it ironic that in the midst of a recession, available homes are in short supply, thereby pushing up prices and sometimes even leading to multiple bidding situations.
“This isn’t like the period right after the Great Recession in 2008 when home prices dropped dramatically and bargains were everywhere. Current buyers have little hope of snagging a tremendous deal on a distressed property,” says Nash, a longtime real estate broker.
Indeed, a recent report from Zillow, the national real estate company, says home price gains are now accelerating. As of mid-August, the median list price in the United States was up 7.3% year over year.
In such a competitive environment, there’s relatively little that income-constrained buyers can do to maximize their odds of acquiring an affordable property. But real estate specialists offer these few suggestions for those who’ve identified a home they’d like to own:
-- Inform yourself on local property values before you bid.
Eve Alexander, a veteran real estate broker who works solely with buyers, says buyers need context on prevailing values to make certain they don’t offer too much.
“For comparisons, try to identify five to 10 comparable homes that have sold recently in the area where you’re looking,” Alexander says.
If you’re seeking to buy in a neighborhood with widely varied properties, it’s helpful to compare the homes on your list on a price-per-square-foot basis. Then adjust for differences in home features.
After estimating the current market value of the place you wish to buy, it’s time to decide how aggressive an offer you want to make. Alexander says that will depend on how enamored you are with the home.
“You won’t want to push the limits if you’ve fallen in love with the property and feel it’s a ‘do or die’ situation,” she says.
On the other hand, you might choose to make a lower offer if there are other available homes in the area that would meet your needs equally well.
-- Ask your agent to query the listing agent.
When owners have an urgent need to sell, it’s normally against their interest for that information to be broadcast to the world. Even so, Alexander says many listing agents will readily divulge such client information in response to questions.
“You’d be amazed how many listing agents will tell all to a buyer’s agent,” she says.
Another way that buyers can gauge the sellers’ level of motivation is to ask nearby neighbors. Alexander recommends buyers pick a weekend time to walk through the community, chatting with a few residents about the pros and cons of living there. In the course of the conversation, they’ll likely tell you what they know about why nearby homes are for sale.
-- Try to determine the seller’s equity position.
Prior to making a bid, it’s wise to inform yourself on the sellers’ ownership stake. Those with more equity have more potential room for compromise.
“What you’re looking for are insights into the mindset of the sellers,” Alexander says.
One source of clues on the owners’ equity position can be found by searching local government land records. At the minimum, these records -- typically available online or through your agent’s database -- should tell you when the current owners purchased the property and the original price they paid.
“If the sellers bought the house a couple of decades ago and haven’t refinanced, they should have a lot more equity, which means there could be more give on price,” Alexander says.
(To contact Ellen James Martin, email her at email@example.com.)