Should you buy a house or wait? Housing inventory is low, but demand for houses is high. And with mortgage rates at historic lows, many homebuyers are finding themselves in bidding wars and sometimes competing with all-cash offers.
That means homes are selling for well over asking price in the most competitive markets, according to housing experts we spoke to. They say 2020 has been a strong seller’s market — and 2021 is likely to be too.
If you’ve been thinking about buying a home, you might be wondering if it would be better to hold off a bit until the market is more favorable for buyers. Experts say there’s no perfect time to buy a house, and the best time is when it makes sense for you personally.
And price is not the only factor at play, either, especially when the U.S. economy is still in recession from the coronavirus pandemic. Mortgage rates are expected to remain low, and home prices are forecast to rise more slowly than in 2020.
More buyers than homes for sale
If you find a reasonably priced house in good condition, chances are you won’t be the only one making an offer — even if it just hit the market.
“It is a seller’s market in just about every part of the country,” says Christopher Arienti, broker and owner of Re/Max Executive Realty in Franklin, Massachusetts. “Seller’s market” is a real estate term used when there are more prospective buyers than homes for sale.
“It is a seller’s market in just about every part of the country.”
For buyers, this means flexibility is important, and you may have to make some concessions. For example, it’s tough to win over a seller in a hot market if you make the purchase offer contingent on the sale of your current home. That’s like a nail in the coffin.
On the other hand, understand the risks of any concessions you offer, and don’t make any that you can’t afford. Talk to your real estate agent to understand your local market and how to make a strong offer.
Home prices expected to increase
Real estate experts expect home prices to go up in 2021, but not as fast as they did in 2020.
Prices of existing homes are projected to increase 3.1% in 2021, compared with a 6.7% jump in 2020, according to an average of forecasts from Fannie Mae, Freddie Mac, the National Association of Realtors and the Mortgage Bankers Association.
Prices vary by season, so when you choose to buy can impact what you’ll pay. Homes are generally most expensive in June and July and cheapest in January and February, according to a NerdWallet examination of market trends across 50 of the most populous metros in the U.S. The analysis used Realtor.com data from 2015 through 2019.
Active home listings are also highest in the warm months, which means you’ll have more homes to choose from. But demand is high then, too, so homes sell more quickly. Homes spent an average of 76 days on the market in the lowest-priced months, compared with 51 days in the most expensive months, according to NerdWallet’s analysis.
What hasn’t changed- get your finances in order
Before you apply, check your credit reports and dispute any mistakes you see, and find out your credit score.
“Nothing is worse than finding your dream home and getting surprised that your credit score isn’t what you thought it was,” Lindner says.
Get your paperwork organized. Be prepared to provide details about your income, debt, employment and financial accounts to get preapproved. A mortgage preapproval is an offer by a lender to loan you a certain amount under specific terms. It’s not a guarantee for a final loan approval, but it will show real estate agents and sellers that you’re a serious buyer.
Combined with your household budget, knowing the amount you’re qualified to borrow is essential for knowing how much house you can afford.