Throughout the last two years, the real estate market has been a seller’s best dream and a buyer’s worst nightmare. Buyers have an obvious disadvantage in a seller’s market, where the supply of available properties cannot keep up with the demand. However, the severe discrepancy between supply and demand in the current market has given sellers the overwhelming upper hand.
As we enter the second half of 2022, interest rates are steadily rising, inflation is slowing, and demand is cooling off. However, the difficulties buyers have been facing are not gone. In an already inflated market, the majority of homes are still selling at or above asking price. Buyers still have a limited selection of real estate to choose from, and they are competing against corporate investors with plenty of cash. In this post, we will go over the three biggest concerns for buyers in today’s market, and how to overcome them.
3 Biggest Buyer Concerns in Today’s Market
1. Low inventory
The US has been faced with record-low inventory ever since the Covid-19 pandemic began in 2020, according to Forbes.com. In response, buyer demand has reached new heights, and there are simply not enough homes for everyone wanting to purchase one. Hunting for the perfect house in the perfect neighborhood is quickly becoming a pipe dream for many buyers, who are now facing the reality that they may not get all the features and benefits they wanted in a home.
In addition, low inventory creates competition and bidding wars among buyers in the same price range. Many buyers have faced the heartbreak of finding their dream home and making a great offer, only to lose the bid and walk away empty-handed. Unfortunately, low inventory will be a concern for buyers until the market reaches around six months of supply (how long the current inventory would last if no other homes are put on the market). Right now, Bibb County is seeing around five months supply of inventory.
How can buyers overcome the lack of inventory? As demand wanes, supply will begin to catch up. That means, in the current market, patience is the greatest virtue. During your house search, you should leave emotion aside so that you do not get too attached to any single property. You should also try to prioritize your wishlist, separating wants and needs so that you can expand your search and maintain an open mind.
2. Inflation & Interest
Today, as interest rates quickly rise and prices continue to climb, buyers’ purchasing power has taken a huge hit. According to Macon’s The Telegraph, the median sale price in Middle Georgia during 2021 was $170,00; that price has risen to $221,990 in 2022. This means that buyers who waited to purchase could end up paying 30% more than they would have a year ago.
On top of inflation, the cost of borrowing money is also increasing. According to Freddie Mac data, average mortgage rates for 30-year fixed loans have risen from 3.85 to 5.51% in the past four months. Mortgage300.com reports that every 1% increase in interest rates causes your buying power to decrease by about 10%. In summary, these shifts in the economy are drastically changing the amount homebuyers can afford, and in some cases, pricing them out of the housing market.
How can buyers overcome inflation and interest rates? Before you begin searching for homes, work with a lender to determine a budget you can comfortably afford. Many lenders will offer to lock in your interest rate while you shop in case rates continue to rise before you find a home. It is important to keep in mind that mortgage rates still fluctuate from day to day, and they may dip before rising again. Ask your lender about a float-down option, which allows you to take advantage of a dip in rates, even if you are already locked in at a higher percentage.
In the midst of this crazy seller’s market, buyers have felt tremendous pressure to act quickly, make compromises, and take unnecessary risks. For example, since competition and bidding wars have been fierce, many buyers are trying to make their offer more appealing by skipping inspection and appraisal contingencies. Plus, the fast-paced nature of the market forces buyers to make decisions immediately after touring a house. According to Rocket Homes, 69.4% of homes in Bibb County, GA sold in less than 30 days last month (June 2022). Homebuyers face enormous financial risk by rushing to make these large purchases.
The good news is rising interest rates have caused price growth to slow down, and buyers may find that there is less competition bidding against them. Although, the only true way to overcome pressure in the real estate market is to have patience. Quick decision-making is often not well thought out and may even lead to legal trouble. Also, it is never a good idea to skip a home inspection, since there may be costly underlying issues that do not make themselves known until the new owner takes possession. Even though sellers have the upperhand in the current market, you should always prioritize your own financial needs, no matter how much you want a house.
Making Smart Real Estate Decisions
The remaining truth is that buyers can still make smart real estate decisions in a competitive seller’s market. The current market conditions may put buyers at a disadvantage, but it is important for them to understand the risks and prepare for them. Plan ahead, be patient, and work closely with industry professionals to make smart, guided decisions.
Find a lender, an attorney, and a real estate agent you can trust as you navigate the home buying process. Our agents here at Sheridan Solomon and Associates are well-equipped to help you every step of the way. We work with other local real estate professionals on a daily basis to make each transaction smooth and successful. Just give us a call or reach out on our website.