Here are some tips for navigating this seller’s market as a buyer.
Buying a home in a seller’s market is always a tricky process. With low inventory and high demand, sellers have the upper hand and they know it. Right now in Madison, there are just 315 listed properties, of which only 132 are available for purchase; the others have already accepted offers. That equates to less than a half-month of inventory. Thankfully, there are a few aspects of this crazy 2021 market that will do homebuyers a world of good to know.
For starters, interest rates remain at all-time lows. The average rate for a 30-year fixed mortgage dropped to 2.79% during the week of January 11. As of the morning of this recording, we had a pre-approval come through at a mind-blowing 2.6% for a 30-year fixed mortgage with 3% down. What’s even better news is that all the major industry players predict these rates will stay around the low 3s throughout 2021.
Now, given that these low rates are fueling such prolific demand, home prices will likely continue to rise, albeit at a slower pace. Our research shows that prices should increase by a rate somewhere between 4% to 5%. The Mortgage Bankers Association projected a modest 2.4% jump in home prices, and Freddie Mac didn’t get much bolder with its projection of 2.6%.
All the major industry players predict that interest rates will stay around the low 3s throughout 2021.
With the market moving as fast as it is today, it’s so important to have all your financial ducks in a row. That means getting pre-approved and being ready to throw out an offer when the right home hits the market. You’ll likely find yourself in a bidding war, so here’s some advice:
Don’t just focus on price alone. The other terms of your offer can be just as important. For example, you may want to waive certain contingencies or add an escalation clause that will automatically increase your offer price if other higher offers come in. This shows the seller you’re serious about buying their house without forcing your hand financially.
You could also consider doing an inspection but set a limit to the number of repairs that you’ll be able to request. In certain circumstances, we’ve also found that writing a personalized cover letter to the seller can help a buyer’s chances. If price and terms are all equal, it just might be the thing that sets yours apart from other offers.
So, if a home purchase or sale is a major part of your 2021 plans, it’s time to start the process. You can get a jump on the spring market by taking a look at all the homes and condos that are available for sale in Madison and Dane County right now; just head to madisonneighborhoods.com and danecountymarket.com. As always, if you have questions about this or any other real estate topic, don’t hesitate to reach out to us via phone or email. We’d love the opportunity to have a chat with you soon.