Navigating The Changing Real Estate Market
In most locations across the country, it’s safe to assume that it’s a seller’s market. Although you may find neighborhoods that are desperate for buyers, you’re more likely to encounter bidding wars, cash buyers, and people who are willing to do almost anything to secure a contract. In this competitive environment, it’s hard to know what to do as a buyer or investor.
Here’s what you should know.
What’s Up With the Housing Market
In many markets across the country, homes are going under contract at a dizzying pace. The average home gets about five offers in a month, so sellers can usually count on the ability to choose the best one.
High demand and low supply have made markets highly preferential to sellers. As such, buyers must make their offers as compelling as possible. Many people looking for a home or investment property have started waiving common contingencies — such as home inspections or appraisals — to put their offers ahead of others.
What’s Driving the Hot Housing Market
The reasons for the changing real estate market can be tied directly to the pandemic. When large cities shut down businesses and services to combat the spread of COVID-19, many people decided to relocate. The Federal Reserve approved a decrease in interest rates multiple times in 2020, leading to historic low interest rates on mortgages. At its lowest point, rates on a 30-year fixed-rate mortgage were about 2.7%. Coupled with a shortage of building supplies such as lumber and steel, demand soared.
In 2022, people are still looking to grab a good deal, although the pickings have become increasingly slim.
How to Buy Property in a Changing Market
Buying in a hot real estate market isn’t impossible, but it does take care. You need to have an organized plan to find the right properties and make a good offer before they’re gone. Here are a few tips to ensure the best results.
Set Goals for the Purchase
Before you do anything else, make sure that buying a property is the best choice for you right now. Many people enter the market because they feel as though they must, instead of acting based on practical choices. Start by setting goals for the purchase. If you’re planning to own the property for a short time, confirm that you can get a good return on investment in that time.
Organize Your Financials
Once you start looking at homes, you won’t have much time to make a decision. Organizing your financial information and figuring out your limits on down payment, financing and closing costs is a necessity. You’re competing against a growing pool of cash buyers. If you’re planning to get a mortgage, you need pre-approval and a competitive earnest money deposit, at minimum.
Recognize Your Limits
Take a moment to set limits on your willingness to purchase a property, and don’t let the whirlwind bidding process run away with you. Many buyers are waiving the inspection contingency (or not getting one at all), but this can increase the risk of the property. If something just doesn’t feel right, you have no obligation to make an offer. Waiting to buy or going through a longer buying process is often better than buying a property that doesn’t turn out to be a good investment.
At Renovo Financial, we aim to help real estate investors make the right choices on investments. Our loan programs are designed for various investment types, including fix and flip or multi-family loans. For more information, contact us today.
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