How to Navigate the Hot Housing Market

Jul 6, 2021 | All Posts, Blog | 0 comments

The housing market is still red-hot, and experts predict that it probably won’t cool down significantly anytime soon.  In 2020, 50% of homes sold for more than their list price, and more than half of home buyers made an offer without actually seeing the home in person. While some professionals are predicting a slight slow-down toward the end of 2021, the market will most likely remain fairly high for quite awhile.

Much of the housing shortage issue has arisen because of a shortage of building supplies. Covid-19 has been a major contributor to this deficiency. Freddie Mac estimated that at the end of 2020, there was a housing shortage of nearly 4 million homes.

Should you sell, buy, or stay put?

If you’re selling your home, this is great news for you. In a hot housing market, sellers have the freedom to ask for more for their home. Just make sure that if you are planning to sell your home, you also have a plan for where you are going to live next. With homes selling in just days or less, you don’t want to wind up homeless! Also, keep in mind that while mid-range homes are flying on and off the market, higher price point homes aren’t going quite as fast. If your $500,000 or higher home doesn’t sell right away, don’t be discouraged. This is normal, even in the current market.

However, for buyers in a hot housing market, the process may be a little trickier. Still, buying a house is generally a good financial move, as long as you plan to live there long enough for home values to rise while you build equity. Here are 5 more tips to help you decide whether purchasing a home right now is a wise financial choice for you, and to help you know what to expect in the current market.

1. Be prepared to make an offer on the spot.

With many homes selling within hours of being listed, you’ll need to be prepared to make an offer right away. Likely, that offer will need to be higher than the asking price. If you’re serious about snagging a home, be ready to clear your schedule when a house you’re interested in pops up, so that you can take a tour right away.

2. Get preapproved.

If you’re planning to purchase a home with a mortgage, make sure you’re preapproved BEFORE starting your search or making an offer. You’ll need to have every competitive edge you can get in order to win a bidding war. Being preapproved is a vital step.

3. Stay within your budget.

With most homes selling above their listing price, it’s easy to get carried away when you find a home you love. Avoid the temptation to overspend, even if it means waiting a little longer for your home. Look at homes that are slightly below your budget, with the expectation that you will have to offer higher than the asking price. A good rule of thumb is to keep your monthly mortgage payment at or below 25% of your take-home pay.

4. Find a seasoned real estate agent.

In a fast-moving market, it’s important to work with a real estate agent who knows their stuff. Find someone who is qualified and experienced. He or she will be able to help you avoid pitfalls in the purchasing process.

5. Be patient.

If it all possible, be patient with your search. Go into the home-buying process with the expectation that it will probably take awhile to find your perfect home. With more buyers than available homes, it’s expected that you may have to wait. Don’t let emotions get in the way and cause you to make a financial decision that you’ll regret.

We’re here to help with your financial planning needs.

At Milestone Wealth Management, we want you to be confident in your home-buying experience and in every aspect of your financial life. We’re here to help set you up for long-term financial success. We’d love to meet with you and assist you in your financial planning journey. Contact us today—we can help.

This material is not intended to replace the advice of a qualified tax advisor, attorney, or accountant. Consultation with the appropriate professional should be done before any financial commitments regarding the issues related to the situations above are made.

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