Back again with our special “Where we Stand…”
drilling deep into what’s happening in today’s real estate markets, and what it all means to you. Now we ended up the last hour of today’s show with a discussion about inventory….
And how the shortage of homes for sale in many markets, is causing property values to rise, which of course, is helping homeowners grow more equity. They’re accumulating wealth at a rapid pace, thanks to the appreciating home values.
We also looked at what that means for sellers, who are often coming away with bigger profits at the settlement table.
But now let’s take a look at how low inventory, and rising prices affect home buyers across America. Because for buyers? It’s a bear!
The fact is there are more buyers than there are homes for sale in most markets Across America. Now, that’s not true of every price point. For instance in some areas there are plenty of multimillion-dollar properties to choose from. But at the more affordable price points, where many first-time buyers begin their home owning experience, inventory is extremely tight.
The result is, with lots of buyers and just a few houses, those buyers have to compete. Bidding wars have broken out in many markets around the country, in which one buyer tries to outbid the rest, to get the home of their dreams.
And in some markets it’s gotten so intense — that many buyers are skipping some of the basic protections available to them. Waiving the home inspection. The appraisal. The financing contingency. These things exist to protect buyers. But in an ultra-competitive market some people are just saying let’s do the deal without all that.
Now, economists point out yet another challenge caused by the rising home prices in America. They say real estate prices are rising faster than wages. And so the buying power of a home buyer today, will possibly be less as the years pass. That’s quite a reversal from the way it used to be. Because in a balanced economy, wages would at least keep pace or in some cases surpass the rising real estate prices.
So the rising prices are certainly causing challenges among buyers. But those buyers do have a huge factor in their favor. And that is, mortgage interest rates remain low. It’s really been quite a surprise. Because we’ve been in the 4% range year after year. And that helps many buyers get into homes they otherwise couldn’t comfortably afford.
Another bright spot is that mortgages are easier to obtain now than they were a few years ago. Sure, underwriting is still strict, meaning you’re going to have to be truly qualified for a home loan in order to get one. But lenders are allowing lower credit scores, and higher debt to income ratios. Plus, home buyers can get a quality mortgage in today’s market for as little as 3% down. So again those are all positives for home buyers in today’s market.
Oh – and just one more thing. Demand among potential home buyers remains extremely high all across the country. People really want to buy a home of their own. And even though the shortage of homes for sale, and the rising prices are creating challenges for today’s buyers there is one thing that they can count on. If they are able to actually find that house, and buy it, then as soon as they get the keys, all the things that were negatives, become positives. Rising real estate values will immediately become a plus, as their equity, slowly starts to notch up, year after year. And their household wealth begins to grow.
Just one way that so many things change for the better – when you finally own a home of your own.