The housing market is tough for homebuyers right now, especially in California (as well as some areas of WA, IN, GA, and OH). There are simply more prospective buyers than homes available to purchase. To understand how to deal with the housing shortage, your buyers may first want to know why it’s happening.
The housing shortage in various cities is a result of a great many factors. In California, the population has been growing exponentially, particularly over the past 30 years. But, housing growth has not risen enough to accommodate this increased population. As a result, this scarce housing supply has driven property prices up.
Property prices in California are now higher than almost all other states in the USA, with the median price for a Californian home at about 2.5 times the national home median. As a result, only 50% of Californians currently own a home, which is the lowest rate of homeownership in the state since the 1940s.
However, it’s not all doom and gloom, and buyers can get the edge on the property market by being proactive, prepared and willing to compromise. So what can buyers do to increase their chance of success in this cutthroat seller’s market?
Buyers: Get Clear About Your Expectations
In these current market conditions, buyers need to be crystal clear about expectations. Communicate those expectations to your agent to see what’s realistically possible. A mismatch in buyer and agent expectations can lead to conflict or disappointment.
In a market experiencing a housing shortage, buyers need to be prepared to adjust expectations. A skilled real estate agent will be able to negotiate the best possible deal for you, but market conditions are a major factor in determining what can be achieved. Either way, it’s important that both buyer and agent are on the same page, with common goals in mind.
Be Prepared To Compromise
When there are slim pickings available, and a large volume of prospective buyers, buyers may need to resort to compromising on your property wish list. It’s not about discounting your housing needs – it’s about prioritizing your needs and wants and balancing the costs and benefits. In a seller’s market, you may not be able to find that three bedroom, two bathroom home in your desired area, within your price range. You may need to compromise on the location, or consider buying a home which requires renovations to get into the property market.
Get Your Finances Ready Now
In a high-demand market, those that need time to sort out their finances are left behind. Not many people have enough cash to buy a home outright, so if you’re in the majority, you’ll need to speak to a lender. Do this early and obtain pre-approval for your mortgage, before you even start shopping for a home. This will help your agent focus the search for the right home for you. And it will increase the speed at which you’ll be able to obtain mortgage approval, when you actually find a property you wish to buy.
In a seller’s market where multiple offers are highly likely, showing you’re already pre-approved for a loan can help get your offer accepted over others.
In turn, this will increase your chances of actually getting the home you want.
Be Proactive In Your Search For A Home
In a tough property market, proactivity is key. If you’re not clear on what features you’re looking for in a home, write up a list now. Then, approach your real estate agent to discuss your needs. Don’t rely on homes being advertised in the newspaper or online – houses in a tight market don’t last long. Importantly, an agent will be able to tell you what hasn’t been advertised yet, or what will be coming on the market soon. This will help you get the home you want sooner.
There is an element of risk when transactions move quickly – so, as a buyer, it’s important to keep yourself safe. Working with a qualified real estate agent with a solid reputation can reduce your risks. He or she will be able to advise you about any suspicious signs of potentially fraudulent sales. Unfortunately, there are unscrupulous scammers out there who prey on average Americans trying to get into the housing market.
Here are some potential red flags that may signify something less than above board is going on:
- There’s no seller’s agent involved in the process
- A seller requesting an online deposit directly to them, and not via a lawyer or agent
- The seller has a copy of the transfer deed, but no other home information (e.g., surveys and purchase documents)
- The seller needs to close on the sale urgently
Rely on a qualified real estate agent with a strong reputation who knows what to look for, and can help steer you away from trouble.
Talk with your agent about how you’ll authorize any offers, transfer of funds or document exchanges. Be sure to double- and triple-verify with your agent any wire transfer instructions before acting upon them.
You can be ready to take advantage of buying opportunities in a tight market while managing your risk.