Monday, July 26, 2021 / by Ken Couture
If you have been randomly searching for real estate listings in recent months, you may know that the market is very hot right now. According to Zillow's data, not only has the median house value in Las Vegas increased by 12.6% in the past year, but the median selling price of existing houses in May was also more than 22% higher than a year ago.
There are good reasons for this. Low-interest rates and higher consumer savings rates during the pandemic have allowed thousands of new buyers to enter the real estate market, and the trend of remote work in the United States has caused many homeowners to flee the expensive urban real estate market. (like San Francisco). Instead, choose low-priced markets like Las Vegas.
Higher home prices are certainly a problem for prospective homebuyers, but it is a fairly easy problem to solve. On the other hand, high house prices combined with extremely low inventory levels have created huge hurdles for many people. The housing market in Southern Nevada now has only 0.6 months of inventory, and around 6 months is the housing market that is generally considered "balanced."
As a result, we have seen an unprecedented number of bidding wars. Houses have shrunk in just a few days or even hours. Cash buyers are doing their best to defeat home buyers who rely on mortgages to buy the best homes.
What you can do about it
Although cash quotes are usually more important than quotes with financial surprises, homebuyers can take some smart steps to help them get the home they need.
First, in the absence of a specific home to buy, complete the mortgage process as much as possible. Full mortgage pre-approval (not just pre-qualification) represents a firm loan commitment based on a thorough review of the buyer's credit, assets, and other factors. Having a pre-approval letter from a good mortgage lender and submitting it with the quote is not as powerful as a cash quote, but it is a second-best option.
Second, if you want to seriously compete with cash buyers, real estate investors, and countless home buyers like you, it’s important to stay ahead. Set up real-time alerts when new listings are available in your desired location and price range, or better yet, hire a good buyer's agent to do this for you. When you find something interesting, be prepared to call your real estate agent immediately. Once you decide to bid, please bid as soon as possible.
Speaking of transactions, if this is your first time buying a house in a long time, you may have become accustomed to some bargaining practices. Frankly speaking, these practices won't make you any profit in today's market. This is not the time to bid cheaply, ask sellers to pay transaction fees or ask for delicate cosmetic repairs. Provide a reliable quotation from the very beginning. You can also try to increase your offer by paying more deposits than other buyers or agreeing not to require minor repairs after the inspection. Another strategy is to use upgrade clauses, which allow you to automatically surpass other offers to a certain extent.
How long will the low inventory last?
The good news is that there may be some light at the end of the tunnel. Historically, summer is the time when we see the most houses on the list. There is reason to believe that this year's transaction volume may be particularly high because, in the past year, a large number of people who should have sold houses postponed the sale because of the COVID19 pandemic. Although the housing inventory remains very limited, since July 2020, May increased slightly for the first time.
Matt Frankel is a Certified Financial Planner and Mortgage Expert at The Ascent by The Motley Fool.
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