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This years Spring buying season started early. Unlike previous years this 2017 Spring is a mix of Low inventory combined with higher prices, and rising interest rates. This has made this Spring buying season challenging, but not impossible.
Here are some things you need to know going in to navigate this 2017 spring real estate season.
1. Inventory is low
Home inventory has dropped for eight consecutive quarters, making it harder to find a home. According to the Greater Antelope Valley Association of REALTORS we are seeing unprecedented low inventory. The current supply of homes is barely enough to cover a month.
Hit hardest? First-time homebuyers. There’s a larger inventory of trade-up homes and luxury homes than starter homes. As prices rise, people who might have been looking for a luxury home may now be in the trade-up market. Those who would have been in the trade-up market are buying starter homes or hanging on to the homes they already have, and to complicate things further downsize movers are competing for the same inventory. This means first-time buyers have to put in extra effort to land a home.
2. Homes are selling fast
Understanding the current real estate market can keep you from being blindsided. Short supply is the dominant issue this spring. Homes that are priced at market and are in attractive condition sell in days. Act quickly when you find something you like, and be flexible with seller requests to nab that home.
It’s best that you speak to a lender before you start your search and get pre-approved vs.pre-qualified for a loan. This will give you the ability to move fast on that cute little 4 bedroom that you love so much. As sellers will likely have multiple offers a Pre-Approved buyer is a stronger buyer.
3. Interest rates are rising
Rising interest rates could price some buyers out of the market. The Federal Reserve announced in March that interest rates would be increased by a quarter point based on the growing confidence on the economy, and based on some comments they are likely to raise rates again when they meet again in June.
Even with that interest rates are still historically low and affordable. Higher rates will likely decrease one’s home-buying power, but it’s unlikely to deter serious buyers who are actively looking for a new home.
4. Timing is everything
Should you wait to save 20% for a down payment (to avoid private mortgage insurance, or PMI), or should you buy now with only, say, 5% to put down before interest rates rise? In most cases, it becomes more expensive to wait. If it’s going to take you two years to save 20% and prices and rates rise, it’ll usually be better to go ahead at 5% and pay PMI. Do your research. There are even programs available where Lenders will pay PMI for you.
5. Consumer confidence is high
Rising interest rates signal a strong economy, and consumers, with renewed confidence in this strongest job market in 15 years, are buying homes. Wages for the most part are on the rise as is the stock market. This is what most people call a comeback.
People who found themselves underwater on their homes are now starting to see those homes gain value, But as home values increase, we’re not seeing a glut of homes listed for sale. In fact, Trulia research has determined that in markets with the biggest home value gains, supply is tightest.
The reason for this isn’t clear. One theory is that while homes are easy to sell in this environment, they are still difficult to buy. So even if people can sell for a good price, they would then be thrown into the same buyer pool as everyone else. A tactic that can improve your chances of success as a buyer this spring? Cast a wide net in your search, increasing your opportunities to land a home.
6. Being able to overlook the little things can help
If your ultimate goal is to become a homeowner this spring, you may wish to circle back to that older home with no upgrades that didn’t initially excite you. Many available properties lack modern layouts and amenities, but for a good deal you might want to ignore cosmetic issues like bad paint colors or poorly placed furniture in favor of “Good Bones” and a layout that will last many years. In a competitive real estate market with low inventory, being able to overlook simpler flaws could be the difference between getting a good deal on a home and not getting a home at all.
7. Preapproval is more important than ever
You may need to offer more money to buy a home in this busy real estate season. First, figure out what you can comfortably afford. Don’t stretch yourself financially.
Once your budget is set, focus on preparing your finances for a home purchase. The more prepared in preapproval you are, the more value you add to yourself and your buying appearance. This means having all documentation in line so you can move fast.
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