Home prices reached a high in February, which was good for sellers but bad for buyers.
It's no secret that it's been a pure seller's market since 2021 kicked off. But home values may have actually risen more than most people realized.
On a national level, home prices in February climbed 12% year over year, according to the S&P CoreLogic Case-Shiller home price index. That's the largest gain on record in 15 years.
Of course, rising home prices are a great thing for sellers. But on the flipside, many buyers have been priced out of the market.
Not only have home values soared, but the competition is fierce. Low inventory and competitive mortgage rates continued to fuel buyer demand this year. In fact, over half of the homes that went under contract in February wound up being subject to bidding wars. Furthermore, homes are selling in about half the time now than they did a year ago.
If you're a prospective buyer who has been struggling to find a home in today's market, you're not alone. Here are some tips for navigating your home search.
1. Get pre-approved for a mortgage
If you go into your home search having been pre-approved for a mortgage, it'll help you in two ways. First, based on the loan amount you qualify for, you'll understand how much house you can afford. It will also tell sellers that you're a qualified buyer who's less of a risk than someone without mortgage pre-approval.
Remember, when a potential buyer makes an offer on a home, there's no guarantee that person will get the financing needed to complete the sale -- and that's a risk sellers take. While a pre-approval letter doesn't guarantee you a mortgage, it makes it more likely that you'll snag one. Because to get that letter, a mortgage lender will need to review your finances beforehand.
2. Prepare to be very flexible with your seller
Getting an offer accepted on a home doesn't just mean coming in with the most attractive price. It may also require you to be flexible. If your seller wants to delay your closing, you may have to agree to that to get a deal signed. Similarly, your seller may need to rent back the home you buy for a period of time. So that's an arrangement to consider if it means getting an offer accepted.
That said, be careful with a rent-back agreement. Due to the current eviction bans that are in place, you don't want to get stuck in a situation where you agree to rent a home back to your seller and then can't get that seller to vacate on schedule. Be sure to consult an attorney and experienced real estate agent before agreeing to such an arrangement.
3. Consider sitting tight until inventory opens up
Normally, a large number of homes hit the market during the spring season. So far, that spring demand hasn't happened. A lot of sellers may be waiting for things to improve with regard to both the pandemic and the economy before putting their homes up for sale. So as a buyer, your best bet may be to wait things out and see if more inventory comes into play later in the year.
February's soaring home values could stay very high for quite some time. If you get pre-approved for a mortgage and gear up to be flexible, you just might get an offer of acceptance on a home you like. Or, you might decide that waiting things out is better for both your sanity and your wallet.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2023 The Ascent. All rights reserved.