Competitive housing market creates a difficult landscape for home buyers
The booming housing market across the US continues to gain steam and create a competitive environment for those looking for a new home. From the soaring costs of lumber to bidding wars among those shopping for a home, now is the time to sell. Although, a seller’s market creates a difficult landscape for those looking to buy.
As life slowly begins to return to a new level of normal, many individuals are able to return to work and start bringing in their regular income. Additionally, the passage of the American Rescue Plan Act of 2021 has a significant amount of money in the pockets of many Americans and puts them in a place where they’re able to put money down on a new home.
The American Rescue Plan Act put $1,400 stimulus checks in the pockets of many Americans as a method of providing a measure of economic stability during the COVID-19 pandemic. Families with children also received that amount per child in the household, up to four children. This made it possible for a household of six that made less than $150,000 last year to receive as much as $8,400.
In addition to a government stimulus, the Fed has kept interest rates at nearly zero for roughly a year now, which has made home-buying more affordable for those who have been on the fence regarding the issue. Although, it’s also created a window for those who could already afford to buy a home to buy more home. These factors have led to a boom for sellers in the housing market.
Americans who have rushed to the housing market are feeling the effects of supply and demand. Bidding wars on homes are driving the price of homes far beyond market value and making it difficult for many to afford the home that they once could. First-time homebuyers especially struggle in this instance as they’re often presenting a lower offer compared those who have recently sold a home or even competing with all-cash offers.
Rock Mortgage Houston says buying your first home “is a significant milestone and one of the biggest purchases you will ever make in your entire life.” However, first-time homebuyers are met with competitive offers that can’t be matched without the help of a professional.
In an overly saturated buying market, many who put an offer on a home are outbid within hours and never have a chance to make a competitive offer. This leads to buyers placing offers on as many as six to 10 homes before they get an offer accepted. In a stable market, buyers can typically land the first or second home on which they place an offer.
While buyers have been frustrated with the state of the housing market, sellers are getting out of their homes faster than in years past. According to Zillow, homes in 2010 were on the market for an average of 140 from the initial listing through the closing period. In 2020, that number had dropped significantly to 55 to 70 days.
Unfortunately for home buyers, there doesn’t appear to be any relief in the near future. At least not like what we’ve seen in the recent past. In 2006, the price of homes jumped 10.4% from the previous year. The price continued to rise until a major crash in 2008 when the housing bubble burst due to inconsistent mortgage dealings across the nation. A spike in foreclosures and short sales caused the price of homes to plummet by as much as 18%.
Of course, each housing market across the nation is unique and fluctuates according to availability. That being said, certain areas have felt the economic impact of Californians leaving their home state for cheaper markets. Boise, Idaho has felt the largest impact of this migration with a 26% increase over the previous year.
As the Fed slowly raises interest rates, the affordability of homes will go down. This will cause the market to slow from its current boom. As the demand goes down, the supply will come closer to meeting its regular market value once again. Does this mean that the housing market is headed for the same fate as 2008? Unfortunately for those waiting to buy during a crash, that is not likely. However, it does appear that things will level out once again.
Since the crash of 2008, underwriting laws have gotten to be more strict and investors linger in the market looking for rental properties. These provide safeguards to keep buyers from getting into more house than they can afford and keeping the market from dropping too low.
As those who are shopping for new homes feel the frustration of a hot market, it is expected to start to cool in the coming months. However, many will feel that they have missed out on a golden opportunity to buy their dream home now and settle down sooner than they had originally planned.
Story by Yunas Chaudhry. Chaudhry is a super-connector with AYC Web Solutions who helps businesses find their audience online through outreach, partnerships, Photography, branding and networking. He frequently writes about the latest advancements in digital marketing and focuses his efforts on developing customized blogger outreach plans depending on the industry stainless steel tongue scraper and competition.