The housing recovery is well under way, although the peak summer sales season seems to be fading. A report from Realtor.com last week showed an overall drop in inventory at the national level, which has contributed to rising prices in several markets across the country.
Housing inventory fell 19% in July to 1.87 million homes from 1.89 million the previous month, Realtor.com reported. The decline in inventory comes from a sharp drop in bank-owned foreclosures and other distressed properties, as well as many sellers who are likely holding back because they’d have to sell at a loss or owe more on their mortgages than their homes are worth.
While the recovery appears to be going full steam, the impact is actually creating a housing boom-like feel for those buyers at the lower end of the market. This is because the low inventory can’t keep up with demand, and therefore is creating multiple-bid situations, which are driving up prices.
Inventories were down in all but two of the markets Realtor.com tracks: Shreveport, La., and Philadelphia. Oakland, Calif., led the nation with the largest decline in inventory, which was down 59.3% from last year. Other cities that had at least a 40% decline in listings from a year ago were Riverside-San Bernardino, Stockton, San Francisco, San Jose, Bakersfield and Fresno – all in California – and Seattle.
What do you do as a buyer who’s up against multiple bids for every home you’re interested in buying? There are four rules of the road here:
Make your offer as solid as possible. Be sure to research recent nearby sales of homes similar to the one you’re making an offer on. Work with an agent who’s helped buyers buy homes in the area in recent months. They’ll have insight into current buying competition.
Get pre-qualified for a loan. Sellers will be more interested in talking to buyers they know will pull through with a loan. Show them by visiting a lender or mortgage professional before you start house hunting. Get prequalified for a loan and your offer will be much stronger.
Have as much down payment and closing cash as you can. This is common sense, but worth noting. A higher downpayment these days will get you a much better loan and also will likely put you at the front of the bidding line above buyers with less cash on hand.
Be patient. You may not get the first house you fight for. It’s OK. Inventory may be tight, but there is a whole population of sellers out there who’ve been waiting to sell. They’re watching the market and will come around, creating more homes to choose from.
It seems counter-intuitive to discuss the beginnings of what is expected to be a long housing recovery and multiple bids in the same article, but it’s reality in some markets across the nation.