What to Do If You Are a Buyer in a Seller’s Market
Oftentimes a seller’s market comes about when mortgage interest rates are low. Low interest rates make home buying possible for more people; thus, increasing the number of buyers. More buyers cause more houses to go under contract, which depletes the housing inventory. Lots of buyers and low inventory drive housing prices up. High home prices end up cancelling out the low interest rates that enticed buyers into the market in the first place.
Delay your home purchase. If you can delay your home purchase, you may find it easier to be a homebuyer in the future. There are of course, no guarantees, but as home prices rise to a ridiculous level, more and more buyers will be priced out of the market. Many buyers are unable to handle not only the high sticker price, but the extra money that comes to play in the bidding wars where buyers are forced to offer well above asking price. Once buyers exit the market because they cannot afford to stay, the demand for homes will wane, and prices will go down to a more reasonable level.
Even buyers who are not driven from the market due to the high expense may leave due to exhaustion and discouragement. In a seller’s market, buyers are constantly forced to make decisions at lightning speed, and even when they do, they find themselves time and time again still losing the opportunity to bid on a house. The constant cat and mouse game can be discouraging. A seller’s market also causes buyers to put their lives on hold in order to be able to run out to see a home the minute it goes on the market. Buyers often lose their social and recreational life as all their free time is sucked up in the home search. Buyers’ professional lives can suffer as well. The elusive chase for a home in the seller’s market can be exhausting.
Focus on your budget. Whether or not you decide that the seller’s market is the right time for you to buy a home, dedicate some time to focus your energy instead on your finances. Take a closer look and determine how much house you can realistically handle. Often what the bank qualifies you for and what you can comfortably afford while maintaining your lifestyle are two very different things. Evaluate what is important to you and ask the difficult questions such as: How important is having a big house to you versus taking yearly trips? Or how important is having discretionary income?
Once you figure out how much house you can afford, stick to your budget. Do not succumb to panic buying and go over budget just because the market has driven up home prices. “It is not worth putting your financial future at risk by getting a property at the upper limit of what you can afford, especially if it impacts your savings and retirement or requires you to take on new high-interest debt with credit cards or personal loans” (time.com).
Also, do not settle for a house you do not love just because you are afraid that housing prices will continue to go up forever. The right house at the right price will come along. And if it does not, then maybe a seller’s market is not the right time for you to buy. The market will eventually correct itself. It is worth it to wait it out.
On the flip side, experts say that as long as you have got the funds set aside for a down payment, have built up an emergency fund, and can still afford to save and invest for retirement, it is best not to stress about timing the market (time.com).
On the bright side, if you decide to delay buying a home, you can still work toward becoming a homeowner in the future without actively shopping for a house (time.com). Saving up for a bigger down payment and having a higher credit score will help you qualify for the lowest interest rate possible no matter the market conditions (time.com). Putting together a larger down payment for a home and taking steps to improve your credit score can put you in an even better financial position for when the time comes to purchase your home (time.com).