Every year, a new wave of people are ready to buy a house. It's a decision that is long considered over years of saving and financial planning. When the time is close, each buyer looks out to really investigate the housing market. At first, you favorite a few homes online and plan to check on them in the next week. Perhaps you got an agent and started tentatively putting down bids on tempting properties. If you're house-hunting right now, you may find the market surprisingly competitive. Homes that were on the market days ago are gone and quickly sold. Bids are often over-bid and sellers can take their pick from dozens of interested buyers.
Why is the housing market so competitive right now? The answer pertains to a number of causes: pressures involving the low interest rates, investment patterns, and national inventory shortage have combined to create widespread housing intensity for the summer of 2021.
When the Interest Rate Drops, Buyers Increase
The pandemic financial crash hit the nation pretty hard, and the market responded. Since early 2020, interest rates have been opportunistically low for new and refinanced mortgages. The interest rate became the opportunity of a lifetime for anyone planning to buy a home, even if they were still a few years off in original plans. Mortgage interest costs were and still are worth the savings. So first-time buyers, investment buyers, and vacation home buyers came out of the woodwork to take advantage of the historic dip in the interest rate.
An increased number of buyers in the market directly increases the competition for the homes available to buy. With more buyers comes more bids, and it shifts toward a seller's market.
Investment Real Estate and Uneven Distribution
The next reason for the intense housing competition is the investment real estate trend. Right now, both companies and the privately wealthy can buy homes by the portfolio and rent them out as investment properties. It's a steady income and a pretty good retirement plan. The idea has been too appealing to resist, and as a result there are now so many established investment buyers that starter homes and 'rentable' homes are quickly being snatched up into property portfolios.
It can be tough to find an available starter home with so many investors financially lined up for their next purchase. Both the warehoused properties being rented and the quick investor purchases has led to too few local homes being available for normal buyer families.
Housing Inventory Shortage
To top it all off, there's a national housing shortage due to population growth outpacing new home construction. Right now, we're a little short on houses, especially those in high-demand areas near city centers and transportation arteries. Any imbalance or pressure on the housing market is felt keenly because the demand for homes is steadily greater than the homes available within in-demand areas.
Post-Covid Financial Recovery Enthusiasm
Another factor increasing buyer competition this summer is the post-COVID recovery rush. Many families worried about a bleak future during the worst of the lockdown months last year. For those families with stabilizing finances and a few years of savings, the elation can translate into eagerly planning to buy a house. As the business world recovers, home purchases are taking a jump.
The Summer Rush
Finally, there's the real estate annual cycle. Summer is always the hottest time of year for home buying. It's a nice season for travel and home touring, plus the kids are out of school and able to move between school years. Hot real estate summers are how the industry has always worked. Competition always increases during the warm months and re-groups during the winter. So if you're noticing a fever-pitch from a few months ago, some is simply the natural momentum of the summer real estate season.
How to Prepare to Buy in a Competitive Housing Market
So the 2021 housing market is more intense than expected; what do you do? If you're a determined buyer, then all you need is a strategy to weather the storm and secure your ideal new house.
1. Get Your Mortgage Pre-Approved
- Have your financing submitted, approved, and pending when you're out making bids.
- Shows the seller you can financially commit immediately.
2. Know Your Priorities List by Heart
- Be prepared to assess a house and talk straight with seller-agents on what you need.
- Must-haves, deal-breakers, and preferences.
3. Work With a Real Estate Agent
- Real estate agents have greater access to unlisted homes.
- Your agent can find you many homes to tour and bid on.
- Your agent can help schedule and hold homes before a bid.
4. Be Prepared to Act Fast with Inspections and Bids
- Inspections must be scheduled at lightning speed for you to bid competitively.
Getting Ahead of the Home Buyer Competition this Summer
If you're ready to buy a house and need to get ahead of the competition, the best place to start is a pre-approved loan. In a competitive market, sellers deal with fall-through buyers confusing the mix. Pre-approval means a bank has already reviewed and accepted your request for a loan - meaning sellers can confidently accept your bid knowing you are financially ready to commit.
Reach out to one of our expert local Loan Officers to get pre-qualified to allow you to rapidly bid on the best homes in your local market.
Please note, by refinancing your existing loan, your total finance charges may be higher over the life of the loan.