A hot housing market is a dream for sellers trying to get the most money they can for their home. Hot housing market means that there are more homebuyers trying to purchase homes then there are homes for sale. This produces bidding wars on homes for sale and sellers can get thousands over their original asking price. Homes that normally sit on the market for a month or two are sold within days.
More Demand Than Supply
There are a few factors that go into creating a hot housing market. First and foremost it depends on the amount of inventory of homes available on the market to be sold. The fewer homes on the market mean that there is less to choose from. This situation can arise due to numerous reasons. People are happy with where they are.
Residents in Texas and Florida are especially content with their living situations. Housing is more affordable in both states and there is no state tax. Gas prices are also more reasonable then most other states in the country. Government restrictions are not as prevalent in these states either. Also, sellers have to think about the price they will pay if they sell their home and have to purchase a new one. With housing prices being so high it is a deterrent.
All of this leaves buyers in a panic on whether or not they will be able to purchase home in the desired location they want.
Interest Rates
A second factor that creates a shortage of homes in a hot housing market is rising interest rates on home mortgages. Therefore, there are less people willing to sell their homes, continuing the decrease in the amount of homes for sell. The difference between paying interest rates that are at 2% as opposed to 6% is thousands upon thousands of dollars over the life span of your mortgage.
Slow New Home Construction
Thirdly, new home construction cannot keep up with the demand. There is no way to know for sure when there will be a rise in the demand for housing. Real estate developments are more reactive then proactive in this regard. It isn’t until the company realizes that there is a housing demand before they begin plans for a new community. By then there are already buyers ready to purchase new homes, but the new homes are not built yet.
Tips In A Hot Housing Market
Luckily there are some tips homebuyers can abide by while house shopping in a hot housing market.
- Start by narrowing down the area you want to purchase a home in. Ideally, having a couple of neighborhoods in mind is a great place to begin. If able, make sure to take a physical look at the area you want to buy in. Go to any open houses that are available.
- Check if the location fits your lifestyle and needs. Determine if the local restaurants, shopping, and entertainment options are what you envision having access to. Once this is determined start doing your research on the homes most recently sold in that area. This will give you an idea of what the homes are actually selling for compared to what they were listed at.
- Find a local realtor to help find you your dream home. A local relator will know the neighborhoods, usually gets access to a home that isn’t listed on the market yet, knows how to make an offer that a seller will be interested in. They will also walk you through the whole process and help you get the best deal even in a hot market.
- Make sure you have your finances in order and a mortgage preapproval letter ready to go. In a hot housing market there is no time to race around getting this done when it can be completed before you ever start looking. This shows buyers you are serious. If you can make an all cash offer or put down a large down payment that also goes a long way with sellers feeling comfortable accepting your offer over another’s.
- Be ready to compromise! You may not find your exact dream home but you can find one that will be close. If you get too demanding in your must haves list you most likely will not find a home suitable enough for you. Clarify what really is a must have over what is a want. You may think you must be in a certain neighborhood, but a better home is in a neighborhood nearby. Don’t miss out on that opportunity because you have your set demands in place.
- Ensure you get the home inspection done. Do not skip it just because you are scared the sell may not go through. It is worth it to know if the home has any major problems before being stuck with a money pit. You can however keep the inspection simple and let the little things go.
- Be patient. If the home is not for you, do not rush into it just because you think you may not find another one. There will always be another home for sale, and it may just be the one you’ve been looking for.
The Silver Lining In A Hot Housing Market
There are upsides and downsides to a hot housing market as well. The upside is certainly geared more towards sellers. In a hot housing market sellers can receive well over the amount they initially paid for their home. This can help with the expenses of them purchasing a new home in a hot housing market.
As a seller you know your home will be purchased quickly. So sellers best be prepared with their next move, whether they plan to purchase a new home or move into an apartment. There are some upsides for buyers as well.
One upside is that rent prices are only going up. If you decide to purchase a home then at least your money is going into an investment rather then nowhere at all. Also, for buyers who are looking into purchasing in locations that are not highly sought after, they can get an even better deal. If people are leaving a certain city or state rapidly this creates a great opportunity for buyers. With the upsides come the downsides of a hot housing market.
Don’t Overspend
Some buyers make bad decisions when it comes to purchasing a home. They are getting so wrapped up into winning the bidding war that they are spending much more money on a home that may have some serious issues. Contracts are being written up and signed without ever having an inspector go through and ensure the home is up to date and has no underlying issues. This leaves homebuyers with some serious buyers remorse in a lot of cases. Another downside is the interest rates. They have been on the rise and there does not seem to be a slow down quite yet. High interest rates means you will be paying more for the home you purchased today or a year from now then you would have if you had purchased the same home a year or two ago.
