A friend confided in me that she’s at her wits’ end. “Yeah, I know, the pandemic is driving us all nuts,” I said. “No,” she said. “I mean, yeah, it’s driving me nuts, too, but that’s not it.” “So, it’s the crazy grocery bills?” I asked. “Nope.” “Not being able to travel?” “Not it.” “The cold?” “Nuh, uh.” Newly married and with a baby on the way, she told me she and her husband had put in offers on four homes in the past six months and were outbid or beaten to the punch every time.
She’s in good company. According to a 2021 Consumer Reports survey, since the beginning of the pandemic, 50 million Americans have either shopped for or attempted to purchase a house with just 30% of those looking able to close the deal.
To say the market is hot is a little like saying the ocean is damp. According to Antje Gehrken, president of the Chicago Association of REALTORS, the organization’s data shows that “inventory in Chicago was down 28% in November compared to last year.” Fewer homes on the market means bad news for buyers. But not all bad.
“It is absolutely still a seller's market in the traditional sense because there are more buyers than homes available for sale,” Gehrken sakd. “At the same time, it’s a great time to be a buyer because interest rates are still great, and the market is showing signs of stabilizing.”
In fact, last month, the average 30-year fixed-rate mortgage rate climbed higher than at any point last year while the Federal Reserve said to expect three additional interest-rate hikes in 2022. However, such rates are still on the low end of averages historically. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage from 2011 through the end of 2021 was 3.85%, while the average rate since Freddie Mac started collecting the data in 1971 is 7.80%.
“The fact that interest rates are expected to increase significantly has buyers thinking of purchasing soon before the rates go up,” said Gail Spreen, senior vice president of Sales at Jameson Sotheby’s International Realty. “Rental rates are also increasing so it is a great time to buy and take advantage of undervalued condos. There is good condo inventory downtown so there are options for all buyers to find a new home.”
Still, however you look at it, for buyers, landing a home feels a lot like a game of Whac-a-Mole. So, what can you do when finding that new dreamhouse always seems just out of reach? The consultants at @Properties offered some inside advice.
Tap into pre-market opportunities
Pre-market (or private market) listings are homes that are for sale but not yet publicly listed on the MLS, a database of houses currently on the market. It may be because a seller wants to do some presale prep work; they may be waiting for the spring market or simply desire more privacy. Buyers won’t find these listings on the major search portals but real estate agents can often access these private listings.
Get pre-approved early
An up-to-date mortgage pre-approval (or proof of funds if you’re a cash buyer) is essential for home buyers in today’s market. Pre-approval lets the seller know that you’re a qualified buyer, but also helps you understand what you can afford, which is especially important in today’s environment.
Know exactly what you want
Start surveying houses in your desired location several months before you’re ready to buy. You’ll get a good feel for the kinds of homes available in your area and be able to narrow down what’s right for you. Be realistic in your assessment. In today’s market, you need to be ready to make big decisions, fast
Make your offer stand out
When inventory is low, multiple offer scenarios are more common. There are other ways, beyond pre-approval, to make your offer more appealing, such as increasing your earnest money deposit, waiving certain contingencies, or being flexible on terms that may be important to the seller, such as the closing date.
The data backs up the advice. According to the Consumer Reports survey, to seal the deal, 28% of home buyers made offers over the asking price and 44% bid on multiple homes. Seven percent included “escalation” clauses allowing their offer to automatically rise when higher bids were received, while 26% agreed to purchase homes “as is,” without requiring sellers to make fixes.
Flexible buyers who keep their options open may be better positioned for success. Margaret Baczkowski, Senior Broker of @Properties and Founder of MB Luxury Group, agrees. To take advantage of today’s market, buyers need to be willing to take some reasonable risks, she said. That might mean looking at locations others aren’t or thinking in new ways about what you want your home to do for you, where you want to live and why.
“It’s important to get an understanding of your risk level and long-term versus short-term goals,” she said. I think it's okay to pay a bit more than you had planned to buy a place you love if you're going to be there awhile. However, a one- to five-year purchase plan is different.”
Even in today’s red-hot seller’s market, there is a silver lining for house hunters. “For buyers, success in finding the home of your dreams is completely doable,” Gehrken said. “It can get a little frustrating sometimes, so I recommend sprinkling in a little bit of patience and faith.”