When you’re ready to find your dream home, there’s nothing more frustrating than finding a home in a low-inventory market. This is the struggle many homebuyers are experiencing right now, as tight inventory is both limiting their choices and driving up home prices, all while mortgage rates have trended up. So how did we get here, and what can homebuyers do?
While housing supply has always fluctuated from one year to the next, the current market is especially tight due to a few key factors. The first is due to the unexpected — and unprecedented — pandemic housing boom. As many individuals shifted to a work-from-home model and parents were thrust into the role of teachers, many families came to see their existing homes as inadequate.
This demand, coupled with historically low-interest rates, created a housing purchase (and refinancing) boom unlike any in decades. Fast forward a few years and roughly 80% of homeowners have mortgage rates below 5%, and nearly 25% have rates below 3%.[1] This is creating a “lock-in effect,” with homeowners unwilling to sell because rates on a new home would be much higher.
New construction is ramping up to provide additional housing. Still, labor and supply chain issues are hampering that process, and as a result, the overall U.S. housing supply is constricted, and a true shift is likely a ways off.
But if you’re serious about buying a home, there’s no reason to sit on the sidelines until the tides change. Take charge of your housing journey in any market with these proven strategies.
Pre-qualification sets you apart as a serious buyer who already has financing in place, and that’s an attractive quality for a seller who wants to close quickly. More importantly, this gives you a firm budget, so you won’t waste time pursuing properties that are ultimately out of your price range.
Finding a home in Nebraska starts with working with the right real estate agent. The MLS isn’t the be-all, end-all of housing availability, and experienced agents with extensive contacts may have information on “coming soon” listings or off-market listings, which gives you a significant edge. At the same time, you need an agent you trust and can work with because finding a home is a time-intensive task. To find an agent who meets all your needs, start by asking your lender or friends and family for referrals, and check out customer reviews. Set up interviews with at least three agents, and ask about their experience, training, and licensing. Finally, trust your instinct if someone looks good on paper but doesn’t seem like the right fit for you. As with any service professional, you need to feel good about the person you’ll be working with.
If you’re only looking at move-in-ready homes, your options will be limited. A fixer-upper will be priced lower, which could potentially get you into a neighborhood with higher property values. Better yet, you’ll have the freedom to customize the home to your preferences.
You may have your heart set on a specific neighborhood, but no amount of desire will make homes come on the market there. If you’re unprepared for a long wait, your best bet is to widen your search. Start by identifying what you like about specific areas (mature trees, large yards, walkability), then talk to your agent about other locations that may offer those amenities. Start your real estate search now.
If your seller hasn’t finalized the purchase or construction of their next home, they may be incentivized to accept your offer if you give them some wiggle room on when they must vacate. In some cases, you may be able to rent the home back to them for a fixed period after your purchase closes, which decreases your cost and gives you more time to make your arrangements.
Tight housing markets aren’t favorable for haggling. The strategy of lowballing the price and leaving room to negotiate upward, or asking for a lot of concessions for cosmetic flaws like paint and flooring, is a risky move in a seller’s market. This is why an experienced agent is such an ally. They can help you tailor an offer that will get the seller’s interest and bring them to the table, while other potential buyers waste time lobbying offers that are nonstarters.
This option may take a little longer, but it will give you the advantage of being able to customize a home to your needs. For example, maybe you want a loft instead of a built-out second floor, or an office with French doors instead of an extra bedroom. Add in the ability to customize cabinets, flooring, and paint colors, and you may end up with a home well worth the wait.
Source:
[1] Redfin, “Nearly Everyone With a Mortgage Has an Interest Rate Below 6%, Prompting Many to Stay Put,” June 14, 2023.
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