You find you have the itch to buy a new home. It feels like the right time but you’re hesitant because you’re smack dab in the middle of a hot and competitive home market. This situation often scares buyers from taking the steps to invest in a home, but it shouldn’t. Let me ease your mind about buying in a hot market.
You must first know that there is never a bad time to buy a home. Every market has unique conditions and turn arounds, but there is value to be found in all of them. You don’t want your fears to prevent you from searching only to find that you’ve lost your buying power once rates begin to rise. Currently interest rates are at historic lows (as low as 3.5%) so waiting for ‘the bubble to pop’ can be a decision you may regret.
The National Association of Realtors (NAR) states that the average flat market for unsold inventory is 6 months. This means that in a “normal” market a home would remain available for 6 months. An inventory with less than 6 months is deemed a seller’s market and alternately more than 6 months is a buyer’s market. Portland is sitting with 1.1 months of inventory making it the hottest seller’s market in the nation (as of January 2016).
Articles and blog posts such as this can scare potential buyers into thinking they should postpone their home search. It states that home prices rose 11.4% in one year. Rather than being deterred by these statistics you should also understand that those who purchased a home in 2015 (also a hot market) are profiting to the tune of a nearly 12% equity increase in just one year. 2016 has begun much like 2015 and while there are never guarantees, it’s still a great time to buy.
Here is a list of things to consider in a hot market. *These tips can be used in any home market; hot or not.
1. Which two are most important? Location, Size or Condition?
Real estate can typically be broken into these three categories. Pick two of these three and decide where you are willing to compromise. Finding a realistic compromise on 1/3 of your wants can open your search in even the hottest of markets and you’ll still be investing in a terrific home.
2. Have you cast a wide enough net?
If you’re digging deep enough and searching wide enough there are always gems to be found. If you’re not casting a wide net, consider opening your search. Expand your horizons, you might be surprised at what you find.
3. Have you been pre-approved?
Knowing your pre-approval amount before you start looking will save you from sticker shock, buyers envy and wasted energy on home searches outside of your budget.
4. Are you stuck on a specific dollar amount?
Offer your best price right up front. Skip the song and dance of bartering on the home price and instead see what your agent can negotiate around conditions and back end costs (inspections, appraisals, closing costs, rent backs, quick closes, etc.)
5. Do you have a great buyer specialist?
A great buyer specialist will not only help you locate the best deals but will help you offer an attractive and prompt bid when you do find a home you love. They will work with you to vet homes before you walk through a single door, saving you time and energy in your search.
6. Are you prepared to offer a little bit more for a home you love?
Currently in Portland, the average purchase price is around 101%, meaning buyers are offering 1% above the asking price. Will you be prepared to offer more than the asking price in order to secure the home you love? This may sound unappealing but if you calculate the average appreciation of a home over 30 years, it’s a significantly small price to pay for a long term investment. For example, if you offer $2,500 ( 1% above asking) on a home selling for $250k, you are really offering less than $7 a month on a 30 year loan (not including interest).
With this knowledge, you can rest assured that your dream home is still within your reach and you’re well on your way to beating the heat in a hot home buying market.