Lower mortgage rates are bringing out more potential home buyers. In certain parts of the country, this has translated into a lot more competition. In markets that have seen prices become more moderate, supply is lower than it was a year ago and bidding wars are becoming more prevalent. For example, a recent Redfin housing index notes that cities like Oklahoma City; Richmond, Va.; Memphis, Tenn.; Buffalo, N.Y.; and Atlanta are seeing buyer demand outpace the number of available homes for sale.
“With low mortgage interest rates luring more home buyers off the sidelines as supply dwindles, we’re likely to see competition pick up, especially for the most affordable homes and neighborhoods, where inventory is limited and buyers are most rate-sensitive,” says Daryl Fairweather, Redfin’s chief economist. He says his brokerage is starting to see an increase in the number of home buyers starting their searches and taking home tours following the latest mortgage rate drops.
Realtor.com® predicted that a shift in the market is coming and urged potential home shoppers to be prepared for it well into 2020. The supply of homes for sale has actually been trending up—more than 6% annually in January—but now it is up just 2.8%. “If the trend we’re seeing continues, overall inventory could near record lows by early next year,” says Danielle Hale, realtor.com®’s chief economist.
Harrison Beacher, a real estate professional with Keller Williams Capital Properties in Washington, D.C., is preparing his clients to face bidding wars on their house hunt. He urges them to work with a lender to know exactly how much they can borrow and afford.
“They have to understand their comfortable max,” Beacher told CNBC. “We say, ‘What is your max capacity?’ Be prepared mentally to go up to that max capacity. If it’s under, that’s gravy.”
Beacher also has his clients consider how much they are willing to risk to make their offer more attractive, such as whether they’d consider waiving any inspections or contingencies on a house. “That can be scary to a lot of folks,” Beacher told CNBC.
Source: “Bidding Wars Are Heating Up. Here’s How to Win Your Dream Home,” CNBC (July 12, 2019)