Here’s the deal: Realtor.com says median home prices are up to $225,000, with the hottest markets right now in Dallas/Fort Worth, Texas; Santa Rosa and Vallejo-Fairfield, Calif.; and Denver. One measure of a hot market is how long a house is available before it sells, and for-sale homes in these areas are going off the market much more quickly than in the rest of the nation.
“Sellers in the hotter markets are seeing listings move between 29 and 49 days more quickly than in the rest of the country, and at an accelerating pace from just last month — an average of five days faster,” says Jonathan Smoke, chief economist at Realtor.com. “These markets are especially attractive to buyers … listings are viewed two to three times more often than the national average.”
If you’re looking to jump into the market, be prepared, and don’t focus on cutting the perfect deal as much as on a realistic deal that gets you a home you love.
“Buying at a lower price might be the wrong thought process in this market,” says Edward Kaminsky, president of Kaminsky Real Estate Group in Manhattan Beach, Calif. “Information moves so rapidly through Internet sites that the chances of getting a bargain have long gone away. The bigger concern is where will prices be and where will interest rates be in six months, one year or two years.”
Kaminsky offers a blueprint for buyers before they start looking for a new house:
• Know your budget.
• Shop within your budget.
• Adjust your expectations if the market has passed you.
• Make educated offers, and find out as much as you can before writing the offer. See if there are offers on the home you want, and if they are over the asking price.
• Consider increasing your down payment to get your loan.
Another big part of the preparation process is getting pre-approved, says Casey Fleming, a mortgage advisor at San Jose, Calif.-based C2 Financial and author of the blog LoanGuide.com. “To get the best deal in a competitive market, make sure you get pre-approved,” he says.
But what many real estate agents won’t say is that your pre-approval must be credible, Fleming says. “Buyers should remember the highest bid is not necessarily the best bid,” he says. “The bid most likely to close is the best bid. If the mortgage advisor is experienced and knowledgeable, and works for a lender that is credible, the buyer has a good chance of having their offer accepted even if the offer is lower than others.”
One good reason to buy now, even if prices are up and the inventory situation is sketchy, is that interest rates remain reasonable (at 3.79% for a 30-year fixed mortgage loan, according to BankingMyWay.com.) “Buyers should be taking advantage of the low rates and locking in a fixed low rate for 30 years,” says Craig McCullough, a Washington, D.C., realtor. “Even if prices were going to stay the same, rates are predicted to increase over the next year or so.”
“Half a point of interest in not an unlikely rise, and depending on sales price, it can mean several hundreds of dollars a month to a buyer,” he adds. “Add in the likely rise in sales prices, and tardy buyers could face a double-whammy on both sales price and interest rate.”