by Maurie Backman | Published on July 25, 2021
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Home buyers have faced competition not just from regular buyers, but investors, too.
Ask the typical buyer who's been on a house hunt this year, and you'll probably hear that the real estate market has been downright impossible to break into. For months, housing inventory has been extremely low, and that, combined with low mortgage rates, has made it so there's a ton of competition. That, in turn, has caused home prices to soar, leaving buyers with no choice but to either sit tight, bail out, or take on much higher mortgages than they'd like to.
But it's not just that regular buyers are competing against each other for homes. They're also having to duke it out with real estate investors -- people who buy homes not to use themselves, but to rent out to tenants on a long-term or short-term basis.
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During 2021's second quarter, real estate investors purchased 67,943 homes, according to Redfin. That's an increase from 59,017 homes during the first quarter and 32,873 the year before.
Real estate investors often have the advantage of having access to more money than regular buyers (especially since they tend to have equity to tap from the homes they already own, or the option to refinance their existing mortgages and take cash out of their properties to put down on new homes). The result? They can come in with higher offers, and they have the flexibility to pay more when homes wind up in bidding wars.
Now the good news is that housing inventory did rise slightly in June. Realtor.com reports that new listings ticked upward by 5.5% compared to June of 2020 and increased 10.9% from May. But there's still a major shortage of available homes compared to the number of people who want to buy one. And that, combined with increased competition from investors, has made things very difficult for the average buyer.
The typical buyer who attempts to purchase a home in the near term is likely to grapple with few choices, stiff competition, and inflated prices. As such, it could work to buyers' advantage to hold off on house-hunting for at least another few months and see if more inventory gets added. In fact, some buyers may want to wait until 2022 to start looking again.
Once there are more homes to choose from for both regular buyers and investors alike, prices should naturally start to come down as supply catches up to demand. But that's unlikely to happen very soon, and it may not happen before the end of the year.
The good news is that mortgage rates are likely to stay low well into 2022, and quite possibly for the entire year. This means that buyers who sit tight today don't have to stress about missing out on the opportunity to lock in an affordable home loan. While today's mortgage interest rates may be low, home prices are anything but, and buyers who opt to wait might save themselves some serious money in the process.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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