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What You Need to Know About Buying a Home This Spring

Spring is also peak season for real estate sales. If you’re thinking of buying a home this year, you’re probably wondering what the current market is like and how to navigate it. The 2017 spring real estate season differs from past spring markets in some big ways. Most notably, low inventory in many markets combined with higher prices and rising interest rates. Here, Trulia tells you seven things you need to know as you begin your search.

  1. Inventory is low

According to Trulia’s research, home inventory has dropped for eight consecutive quarters, making it more difficult to find a home. “In 2017, homebuyers are up against a very competitive market, where there are fewer homes for sale that cost more than they did last year,” says Trulia Senior Economist Cheryl Young. “The Trulia Inventory and Price Watch found that housing inventory hit its lowest level on record, having fallen by 5.1 percent from a year ago.” Hit hardest? First-time homebuyers. There’s a larger inventory of trade-up homes and luxury homes than starter homes. As prices rise, people who might have been looking for a luxury home may now be in the trade-up market. Those who would have been in the trade-up market are buying starter homes or hanging on to the homes they already have. This means first-time buyers have to put in extra effort to land a home. 

  1. Homes are selling fast

Understanding the current real estate market can keep you from being blindsided. Short supply is the dominant issue this spring, with homes that are priced at market and in attractive condition selling in days. Act quickly when you find something you like, and be flexible with seller requests— two tactics that can help you buy a home in a competitive market.

  1. Interest rates are rising

Rising interest rates could price some buyers out of the market. “The Federal Reserve announced in March that interest rates would be increased by a quarter point based on the growing confidence on the economy,” says Young.

But interest rates remain historically low and affordable. “Higher rates will likely decrease one’s home-buying power, but it’s unlikely to deter serious buyers who are actively looking for a new home,” she adds. What’s likelier to happen, at least in the short term, is that more people will enter the market before rates get even higher.

  1. Timing is everything

The most difficult part of buying a starter home is saving the down payment. Once you have that in place, there are great options. But should you wait to save 20 percent for a down payment (to avoid private mortgage insurance), or should you buy now with only about 5 percent to put down before interest rates rise? In most cases, it’s more expensive to wait. If it’s going to take you two years to save 20 percent and prices and rates rise, it’ll usually be better to go ahead at 5 percent and pay PMI.

  1. Consumer confidence is high

Rising interest rates signal a strong economy, and consumers, with renewed confidence in this strongest job market in 15 years, are buying homes. This is what most people call a comeback. People who found themselves underwater on their homes now are beginning to see those homes gain value. They now can make, rather than lose, money on a home sale. But as home values increase, there doesn’t seem to be a glut of homes being listed for sale. A tactic that can improve your chances of success as a buyer this spring? Cast a wide net in your search, increasing your opportunities to land a home.

  1. Being able to overlook the little things can help

If your ultimate goal is to become a homeowner this spring, you may wish to circle back to that older home with no upgrades that didn’t initially excite you. In a competitive real estate market with low inventory, being able to overlook simpler flaws could be the difference between getting a good deal on a home and not getting a home at all.

  1. Pre-approval is more important than ever

You may need to offer more money to buy a home in this busy real estate season. First, determine what you can comfortably afford. Don’t stretch yourself financially. Once your budget is set, focus on prepping your finances for a home purchase. The more prepared in preapproval you are, the more value you add to yourself and your buying appearance. That means having all documentation in line so you can move fast.

 

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