The current housing market is one of the most lopsided seller’s markets we have ever seen which means that it is harder than ever to buy a house right now. Bidding wars are the norm, and a non-cash offer will not be good enough in a lot of markets. In a recent discussion on NPR, Bill Wheaton, a housing economist at MIT, stated that the past one year gain in housing prices is about 10% nationwide. That means that buyers are entering a market where house prices are at an all-time high and inventory is close to an all-time low. It is not a good time to buy.
A Housing Shortage
The inventory shortage in America is a combination of reluctancy to build after the most recent housing crash and the moratorium put on evictions and foreclosures because of the pandemic. People are ready to buy, but there is just nothing out there.
As mentioned above, the one year gain, taking inflation into account, on housing prices nationwide is about 10%. That is one of the largest year over year increases ever. That means a $300,000 home in March of 2020 would now sell for $330,000 or more. That is a huge difference for most people.
These skyrocketing prices have made it difficult for people to find a house that they both love and can afford. On top of the skyrocketing prices, many houses are going for over the asking price, and sometimes considerably so. People who can offer cash then make the purchase easier on the seller because they do not have to worry about an appraisal and they know they will get the full negotiated price.
Expect a Bidding War
Bidding wars are now the norm in home buying. In fact, when you look at the market analysis for many cities in America, the average home price may be going for more than 100% of what was asked. When you find a home that you like, you have to decide almost immediately if you want to put an offer on the home. When you make the offer, you have to be willing to go over asking and oftentimes to what realtors refer to as “highest and best.” That simply means that the seller is giving you a chance to make another, better offer against the people you are now competing against to win that home. This is not longer an uncommon occurrence, it is the norm.