How to Buy a Home in an Inventory Shortage Crisis
- May 21, 2013
- Ashley Bailey
- Real Estate Tips
Over the past few years the housing market has taken a beating, and is now pressed with a new issue: a shortage of homes. This crisis is creating tough competition among consumers looking to buy a home. With mortgage rates low and prices competitive, now would the ideal time to buy, if you could actually find a house that is up for sale. Buyers must keep in mind that as competition over a property increases, so may the price tag. "Nationally, there were just 1.93 million homes on the market in March, down 16.8 percent from the prior year, according to the National Association of Realtors. In a healthy market, there's roughly a six month supply. This March, that number had fallen to 4.7 months—a situation stacked against buyers," according to the Associated Press.
Why the Shortage?
Construction on new homes is currently slowing down from previous years and the number of available previously-owned homes is very limited. Many thought the addition of foreclosed homes would add to the inventory, but many banks and borrowers have averted foreclosing altogether. One of the most prominent reasons for the shortage is that many homeowners don't want to risk losing the equity they've built up in their homes should they decide to sell today. Also, many homeowners are still considered "upside down" on their mortgage. Furthermore, because of the low prices and low rates, home are being snatched up quickly and taken off the market.
What This Means for You
This can be frustrating to the eager buyer ready to purchase their first home, a family looking to upsize or someone who is relocating! In 2006 home prices peaked and this past year they were at an all-time low, an ideal time to want to buy. Unfortunately, due to the shortage of inventory, many sellers are using it to their advantage by inflating prices. Comps or comparable home prices are what the real estate industry uses to set values, however many sellers are deciding to price the home to their liking.
So What Are Real Estate Agents Doing?
Many real estate agents are calling homeowners directly or sending letters to see who is open to the idea of selling their home. Buyers who have an ideal location, home or community in mind seek out a real estate agent and provide them this criteria. The real estate agent in turn contacts the homeowner directly. Real estate agents are discovering that sellers are receiving numerous offers on a home, because of the slim inventory. Desirable deals have become more poignant: buyers who pay cash as opposed to applying for a loan usually get the upper hand.
Home Buying Tips: How to Beat the Competition
- Have a vision of your dream home in mind. Determine the size that is right for you and make sure the location is ideal! This will cut down on wasting time on a home that isn't perfect for you and your loved ones.
- Seek out a real estate agent to find your dream home, even if it isn't on the market yet!
- If you have found the perfect home and it isn't for sale, consider reaching out to the owner. However, caution should be taken. By law you cannot just leave a note in someone's mailbox! Mailing the letter will suffice.
- Put your bid in early, many buyers are submitting bids even before the homes hit the market.
- Zillow.com and Trulia.com are awesome websites that allow you to receive alerts when a house hits the market. Zillow has a "make me move" section which helps encourage owners consider the decision to sell.
- A few other resources to find available homes include: Spokeo.com, Realtor.com, online county records, and social media sites.
- Our guide on shopping for a home can also give you some helpful tips!