Have you decided to put off purchasing a home? If you’re worried you’re paying too much for a house- think again. Here’s why:
Higher Home Prices
Let’s take a pause and rewind to 2012, the unemployment rate exceeded 8%, short sales and foreclosures were rampant, consumer confidence was low, the prospectus of job growth was bleak and the general consensus was the economy was still licking its wounds from the recession. People don’t buy homes when they’re feeling skittish about their job. Fast forward to current, job growth has begun to reemerge, the banks have cleared most of the foreclosures from their balance sheets and short sales are infrequent. The result? Because the pendulum swung so far in the opposite direction with drastically home prices, today’s prices are the normal correction of a settling housing market.
The likelihood for prices to continue to rise by leaps and bounds while credit is still tight is a shot in the dark as wage strength has still not peaked. Remember banks still have tight constraints on lending and are especially picky on approving big mortgage sizes. Home prices are in direct proportion to the health of the local economy. Take San Francisco, California for example, home prices without question are exorbitant, a result of a booming tech industry. The stronger the local economy, the more people working, the more support housing has to remain strong.
Sellers With Unrealistic Expectations
The upward drive in prices has brought sellers out of the woodwork in hopes of attaining a maximum price. Many have expectations far larger then what the market will bare. The best example of this is a home listed on the market for longer than 30 days within a strong local economy. In Sonoma County, California, for a house to be listed longer than 30 days without a contract is a good sign the property is listed too high assuming a single-family residential home. The only alternative is to drop the list price to induce an offer. It’s not uncommon at all to have a home close escrow at a price beneath the original listing price. An offer to buy a home within 10% of list price is considered reasonable.
Multiple Offers Far & Few
Multiple offers in a sellers market are indicative of 8 to 10 offers per property on each listed house. That is a strong indicator of the true seller’s market much like it was in the summer of 2014, but these days, a handful of offers is more realistic expectation assuming a desirable location. Less competition means a greater opportunity to get your foot in the door.
Consider this-mortgage rates are down, increasing affordability. More people can afford to pay a little bit more for a home and not feel financially squeezed because their housing payment is lower. Prices rise in relationship to what a ready, willing, and able buyer is willing to pay for a property. The basics come into play at this point including the location of the property, school district, bedrooms, bathrooms and lot size all play a critical factor in the listing price of a home. Agents know this, but not so much sellers, as sellers still believe they can get top dollar for their property.
If you’re looking to buy a home, and are putting the project off because you think prices are too high, prices will always be too high unless you change your criteria beginning with location. The cyclical nature of economic events move home prices. Put another away, a repeat of the economic events that began in 2007 through 2012 would have to reoccur to drive prices to levels they they were at and the reason that’s not likely to happen in the foreseeable future is because the mortgage industry (which governs the credit by which people can buy homes) is significantly regulated by the government.
Still Thinking About Buying A Home? Some Quick Tips To Getting Your Offer Accepted
1. Get a real pre-approval upfront- that means letting the lender review your credit report, along with all your supporting financial documentation. Doing so, will bullet proof your loan, solidifying your ability to perform on the contract.
2. Upon submission of your purchase contract, have your loan officer call the listing agent introduce themselves and let them know that you are very well qualified and that they have personally reviewed your credit, debt, income, and assets. A personal touch can go a long way with the listing agent for them to influence your offer with the seller.
3. 30 day contracts are still the norm. Spruce it up with a 12 day loan contingency removal down from the normal 17 days, while increasing your deposit on your earnest money, as a sign of good faith.
4. If selling with a contingent offer, that is selling one house to buy another,list your home on the market, then make an offer to purchase the new home and include a copy of the listing demonstrating you are a serious buyer as an offset to the contingency.
5. Include proof of funds in your offer. Putting down 15%? Great! Prove you are ready to play ball by providing a bank statement showing your assets.
Just getting started? Let us help you with a free mortgage rate quote.
RELATED MORTGAGE ADVICE FROM SCOTT SHELDON
View More from The Mortgage Files:
begin your mortgage journey with sonoma county mortgages
Let us make your mortgage experience easy. Trust our expertise to get you your best mortgage rate. Click below to start turning your home dreams into reality today!