This upcoming spring is projected to be a good time for homeowners to make a sale on their home. But for first time homebuyers, the spring and summer buying season may be tougher than they originally imagined.
A combination of economic factors have led many current renters to make the transition to homebuyers. These include higher job growth, an increase in wages and increasing rents, particularly in popular cities. In many instances, it makes more financial sense to purchase a home instead of continuing to rent.
But first time homebuyers are finding themselves at a disadvantage because they may not have the money to get into a bidding war. In an interview with Bloomberg Business, one Nashville, Tennessee, couple said they had completed all the necessary steps prior to buying a home, which included getting a good pay raise, consolidating student debt and saving for a down payment.
However, the couple got into a bidding war over two houses and the other buyers were willing to pay as much as 10 percent above the initial asking price.
Availability hampers expectations
Another factor that is making the purchasing process more difficult than imagined is the lack of housing. Bloomberg stated there is a lack of homes that are usually priced lower. Because demand is so high but supply lower than usual, younger buyers are being pushed aside because they cannot afford the climbing prices.
Interestingly enough, homes that are on the more expensive side are piling up in inventory. In an interview with Bloomberg, Fannie Mae chief economist, Doug Duncan, stated that he expects home prices to increase approximately 5 percent, along with sales to increase by about 3 percent, which is lower than 2015.
"Affordability is a challenge this spring," Duncan told Bloomberg.
In the span of a just over a year, housing inventory has steadily decreased. According to information from Redfin, inventory in February 2015 was plus 8 percent. It has declined since then and in February 2016, housing inventory is at a negative 4 percent.
But signs could be changing, if the latest numbers from the U.S. Census Bureau are any indication, as housing starts in February 2016 were higher than one year ago.
While buyers currently find difficulty, it can be said that current conditions favor sellers. If you're preparing to list your home this spring or summer, prepare to have numerous offers come your way, and potentially more than you can handle if you live in a desirable suburb or city neighborhood.
Take your time to carefully talk with potential homebuyers to find a reasonable asking price. While you can likely get more than what you originally envisioned, you don't want to overplay your cards and push buyers away.
You must also take into account how a home inspection will affect the asking price. For instance, buyers may ask that you commission the inspection before any agreement can be signed. In other instances, the buyers may actively ask for an inspection to ensure nothing is wrong with the house.
This spring is shaping up to be a good time for sellers to unload their property.