8 housing hacks for a low inventory market
If there's one commonality in the housing market these days, it's almost certainly a lack of inventory. There are just not enough houses available for sale to meet buyer demand. The resulting seller's market often leads to fierce bidding wars, quick turnarounds, and having to offer tens of thousands more on a bid just to be taken seriously by the seller.
The current state of the market has certainly calmed down in this regard from where it was a year ago, but the issue of low inventory has been a near-constant one for years now, making it difficult for home seekers to find and secure the home they want.
For first-time homebuyers, this can make the dream of homeownership seem impossibly far away. Even seasoned house hunters may also find current market conditions frustrating. It's not all doom and gloom, however. As always, we're here to help, so the following is our list of eight things you can do to cope with the lack of housing inventory as you search for a home.
Understanding what you want
This first entry on our list might seem like a no-brainer, but it's important for you and your family — and really anyone who will be involved in the purchase — to sit down and discuss exactly what you want in the new home. Write it all down. Be sure to separate out your 'must-haves' from 'wouldn't-it-be nices' on this list. The more you can really hone in on what you need versus what you want, the better you can qualify potential home listings as they come your way.
By being able to filter home purchases in advance, you can avoid putting time, effort and money into a home that ultimately wouldn't be right for you even if you did get it. Despite appearances, finding a home is a marathon, not a sprint. So, plan ahead to save yourself the undue mental stress that comes with chasing the wrong properties. Besides, who wants to settle for what you can get if it doesn't make sense for you, your family and your situation?
Build a new home
One way to deal with low inventory is to side-step it entirely. If there's not a home on the market that fits your needs, build one that does. This kind of tailored approach to home ownership has become increasingly popular since the onset of the pandemic, and the massive demand for housing that followed.
Just bear in mind that the process for new home construction does take longer than it used to a few years ago. Labor and supply shortages mean that you're looking at anywhere from 6 months to a full calendar year to complete a new home. So, be sure you're in a good place to wait that long.
Also be aware that the rising costs of building materials, lumber in particular, mean that you might pay more per square foot than buying an existing home. The lack of contention over a newly built home, however, makes new construction attractive to potential homebuyers seeking another option in the face of low inventory.
Lock in your rate early
It's always a good idea to lock in your mortgage rate as soon as you can. Strange as it may sound, you can secure your rate before you have even started looking at homes! This will help you attain — and keep — your preferred rate, even if mortgage rates go up in the meantime, potentially saving you a ton over the life of your loan. This can be particularly useful to house hunters who may find themselves bidding on multiple properties over a period of time.
Our Lock 'n' Roll program is an ideal way to help you. With it, you can lock your rates for 60, 75 or even 90 days with no upfront fee. If rates go up during that time, your locked in-rate remains in place. If rates should go down, you'll have the option of negotiating down to the better rate. Lock 'n' Roll works with a wide range of loan types, including FHA, VA, USDA and more, so don't miss out on this potentially useful tool in your buyer's toolbox.
Don't vacate, renovate
Perhaps the home you're already in is the one you need — it might just need a bit of a glow-up to get where you want to go. Need more room? Add on a new space or convert your garage. Low curb-side appeal? Go for siding, a new paint job or an outside refresh. A little imagination and creative rearranging of your existing space can go a long way towards achieving the home that you and your family need.
Best of all, it's likely less expensive to upgrade your existing home than it would be to by another one. Depending on how long you've been in your current home, you may be able to leverage your existing equity to fund the repairs with a HELOC or home equity loan. The ability to modify and improve a property is one of the greatest powers a homeowner has, so be sure you don't overlook the house that might be literally under your nose.
Maximize your offer's buying power
The best way to make your offer stand out from the crowd is to be pre-approved for your loan. This should not be confused with pre-qualified, which doesn't have quite the buying impact. A letter of pre-approval with your offer tells the buyer that you're serious and ready to move forward without delay. That can put some serious buying power in your corner.
Additionally, here are a few more ways you can set your offer apart from the rest:
- Put up additional earnest money
- Offer above the asking price (within reason, of course)
- Make a cash offer, if possible
- Reduce, or eliminate, contingencies
- Write the seller a personal letter
There are many more ways to give your offer the edge, so be sure you closely collaborate with your Loan Officer to make your offer as impactful as possible.
Buying in the off-season
Timing can be everything. Historically speaking, the housing market ramps up during the warmer months, starting with Spring Selling Season. So, you might follow the 'Thermometer Rule' of homebuying, which we'll define as: The warmer the temperature, the hotter (and more competitive) the market is likely to be.
So, if you have the ability to wait for the autumn and winter months, you may find that there are fewer potential homebuyers all vying for the same homes when the temperature cools off — the inverse of the Thermometer Rule. The only downside is that many home sellers may not think to list their properties when it gets cold, instead waiting until the weather warms up again. Don't be surprised if there are fewer listings during this time. That's the trade-off of looking during the off-season.
Be aware of your limits
This point goes hand-in-hand with the first one on this list. If you have been pre-approved (and you really should before you start your search), you should know how much you can afford. Knowing your limits, however, goes beyond the knowledge of the absolute amount you are willing or able to spend on a house.
This understanding also involves knowing how much you are willing to accommodate sellers' demands for concessions or special treatment. It involves setting personal and financial boundaries, of knowing where to draw the line. Do you waive all contingencies? Do you accept the house as-is, or press for repairs? It’s also useful to cultivate an awareness of if a home will ultimately satisfy the needs of everyone involved. Remember, you should never be expected to give more than you are able. That leads us to the last point on this list.
Knowing when to walk away
Sometimes it's just not meant to be. Any number of things can throw a monkey wrench into the works, many of which are beyond your control. Recognizing when to walk away from a bad deal is a critical part of this process, regardless of market conditions. If the current crop of housing listings just isn't for you, there's no shame in waiting for something better to come along.
When housing is scarce, it can be tempting to leap on the first offer that gains traction. Buying a house is one of the largest investments you'll ever make. Plus, you'll be living there potentially for years to come, so when you find yourself on the verge of that commitment, it's worth a long, hard look to make sure what you're getting is really what you want.
Bottom line, we know it's tough out there, regardless of whether you're looking for your first home, or your next home. We hope that these housing hacks can help you navigate the field out there and give you some tools to help you land the home of your dreams.
We are, of course, here to help you on this journey in any way we can. If you have questions on any of these points, or you're just looking for a place to begin, talk to one of our expert Loan Officers to get started.