Housing market shows signs of cooling, which is good news for home buyers
With stagnant home prices and lackluster sales, will the housing market cool off? Home supply may still limit buyers, but low interest rates make it a good time to buy. (iStock)
The housing market typically heats up when warm weather rolls around in spring and summer, but the past year has taught us that nothing is "typical" in real estate.
Spring 2021 is already defying seasonal trends with a slight drop in home sales and a big drop in inventory, according to a report from the real estate company RE/MAX. Between 2015 and 2019, home sales were up from April to May by 53.4% on average. In 2021, home sales actually declined by 0.2% during this time period.
Just like home sales tend to ramp up around springtime, median sale prices typically increase by 3.2%, as well. This year, though, home prices stayed the same for both months at around $320,000. The number of listed homes also decreased by 7.1% at a time when new construction usually floods the market, although the demand for housing hasn't fallen.
"The market still tilts mainly toward sellers, but we could be seeing the first signs of a return to more balance after the hottest stretch of sales in years," Nick Bailey, president of RE/MAX, said in the report. "Ultimately, that would be good for both buyers and sellers."
Homebuyers can take advantage of the more merciful real estate market while also getting a good deal on a mortgage, thanks to mortgage rates hovering around record lows. If you're ready to begin your home search, start by shopping for a mortgage. Compare mortgage rates on Credible so you can find the lowest rate for your situation.
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How to be a competitive buyer in a housing boom
Although home prices and sales are finally leveling out after months of a bullish real estate market, prospective buyers aren't out of the woods just yet. With limited housing inventory, there will still be a fair amount of competition, so it pays to be prepared before you start shopping for a home.
Here are a few tips for setting yourself apart from other home buyers, so you can submit an offer on the house you really want.
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Come prepared with a preapproval letter
The very first thing that seller's agents expect from potential homebuyers is a preapproval letter, which proves that you have the funding necessary to purchase a home. Thankfully, getting preapproved for a mortgage is simple, and you can take care of virtually the entire process online. You just need to provide proof of identity, income, and assets to see what kind of mortgage terms and rates you may be eligible for.
You can get preapproved for a mortgage on Credible's online loan marketplace.
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Be flexible with your schedule (and your closing date)
The market's showing signs of cooling off, but buyers will still face a time crunch during the home shopping process. On average, houses went under contract just 28 days after listing during the month of May, with certain metro areas seeing even shorter timelines.
This means you'll need to free up your schedule during the home purchase process since homes will be off the market quickly after being listed. When a home that meets your criteria is put on the market, you may need to cancel your plans and schedule a tour that same day.
It also helps to be flexible with your closing date, because this may give the seller a more favorable moving timeline. Something as simple as a flexible closing date may be able to set your offers apart from the rest — without costing you anything extra.
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Look at homes below your spending limit in case you need to offer above asking price
Although home prices were flat between April and May 2021, they have increased 17% since May 2020. The price jumps were even higher in some metro areas with hot housing markets, the report found:
- Boise, Idaho: 40.7%
- Augusta, Maine: 37.8%
- Phoenix, Ariz.: 32.9%
- Los Angeles, Calif: 32.0%
- Detroit, Mich: 30.2%
Many homes are still selling far above the list price, so it's worthwhile to look at homes that are below your absolute maximum. You can use a mortgage payment calculator to see how slight fluctuations in loan amount can affect your monthly payments.
Thanks to low mortgage rates and a much-needed break from rising home prices, now is a good time to buy a home. Visit Credible to get in touch with a loan officer who can guide you through the mortgage application process so you can begin home shopping.
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