This February, properties spent an average of 20 days on the market, compared to 36 days in February 2020, but what does that signify? Simply put, we are operating in a seller’s market so demand for homes is exceeding the amount of homes listed, creating a disadvantage for prospective buyers. Now more than ever, buyers need to be adaptable, compromising and patient when buying a home in 2021.
In a seller’s market, the housing market is fiercely competitive so it is imperative that buyers have their finances in order so that they can place an offer as soon as they find their dream home. Thanks to the economic fallout from COVID-19, lenders have raised their credit requirements and credit availability has dropped, which has made qualifying for a loan and mortgage more laborious for buyers. To get the best rate, buyers should shop online for a lender prior to home-shopping and compare their interest rates. Lower interest rates increase buying power and can be the difference between affording their dream home or losing a bidding war. The probability of a loan approval strengthens substantially with increased savings, decreased debt, a stable or increasing income and improved credit score. Buyers can convey their seriousness and sincerity about a home by submitting a pre-approval letter from their lender along with a down payment and purchase offer as this will assure sellers the buyer is financially able, and willing, to close the deal. Once the loan comes through, a firm budget needs to be established to one, prevent buyers from looking at homes beyond their price point (and falling in love with them) and two, to confine their search to a specific area. Buyers: think about not just what you can pay today, but also in the future, and consider potential expenses, home or personal, such as a new roof, a job change or family expansion.
Since the pandemic, online home tours and closings have become the crux of the homebuying process. Traditional open houses have become limited to serious buyers by appointment only, ceasing the days of touring homes for fun or curiosity. However, virtual home tours are advantageous in that buyers are able to assess the condition and layout of a home before considering an in-person visit through high-resolution images, drone shots and 3D virtual tours. By viewing as many homes online as they please, buyers can narrow down (or add to) the list of homes they’re seriously considering and then schedule an in-person viewing. An online option allows buyers to see quadruple the amount of properties they could tour on any given day. In a competitive seller’s market like ours, the only way to buy a home may be to make an offer without touring the home in person. Utilizing video walkthroughs and tours allow this prospect to be less risky. Just as you may have applied for a loan and viewed your home online, be prepared to close online. Closings have utilized the online method by sending documents electronically and requiring they be signed online as well as holding the closing over zoom. Some states allow paperwork to be notarized remotely via webcam. To buy a home in 2021, a webcam and fast and reliable internet is a must.
Housing experts recommend searching for a home in the latter half of 2021 because they expect more sellers will list their homes as more people become vaccinated and will thus feel more comfortable letting people in their home and interacting with them. Furthermore, home listings are less expensive in the colder months when demand is lower. While the homebuying process looks different than years prior, a positive is that home prices are expected to increase by only 5.9% this year compared to 10% in 2020. Economists project 30-year fixed-rate mortgages to remain low, with only a steady (0.125%) increase from 2020. It may be a seller’s market, but a dream home is still within reach.