As pent-up demand from the spring compounded to produce one of the busiest summers for residential real estate on record, the demand is promising to spill over into the fall months. Bidding Wars may still be around for awhile.
“Normally, my brokerage’s sales start to dip after September, and we generally have a slowdown all the way through the end of February,” says Christy Walker, Designated Broker/Owner of RE/MAX Signature in Phoenix, Arizona. “But in this case, it doesn’t seem to be slowing down. We are expecting to see this pressure of demand continue through the fall.”
Bidding Wars Could Continue This Fall
Several agents claim buyers, many wanting to relocate as a result of flexibility provided by remote work, would like to move to the suburbs for more space and reduced housing costs, while current owners seem happy to stay put. It’s all contributing to competition for limited inventory taking place across generational lines, according to real estate agent Melvin Vieira.
Vieira, an agent with RE/MAX Destiny in the Greater Boston area, says before COVID-19, there used to be a cycle of younger generations trading condos in the city for single family homes, while older generations would downsize and move into those smaller homes closer to the city. That’s no longer the case.
“Boomers are saying, ‘I don’t need to move, I have my house and I’m good for now.’ Or their aging parents are moving in with them, so those multiple generational households aren’t really leaving either,” Vieira says.
The end result was a heavy need for single-family homes prior to the pandemic began, which has now heightened as a result of real estate market restarting post-quarantine. Vieira says he often sees lines of people (six feet apart and in masks, of course) waiting to see an open house.
In Phoenix, Walker is seeing a different competition between generations play out. Boomers are retiring and downsizing, but they’re eyeing the same properties millennials view as the perfect starter home.
“I’ve got several millennial first-time buyers who deferred buying a home until now,” Walker says. “They’re realizing they just need to move forward with their dreams and not put things off.”
Low interest rates are creating opportunity – and competition
Low mortgage interest rates have played a huge role in making those dreams achievable, encouraging more buyers to enter the market. The average interest rate for a 30-year fixed mortgage in early September was just over 3%, in accordance with Bankrate.
“We’re finding now that even though homes may have escalated $50,000 in price due to demand, lower interest rates could mean the monthly payment is still low. It’s creating affordability most people didn’t have before,” Walker says.
Walker just closed on her own house and offers herself as an example. She says she and her husband had the ability to extend their budget for a new house by more than $200,000 while only adding $150 to their monthly payment. Many buyers are discovering they’re able to have the same flexibility in their budget.
With an increased ability for buyers to bid above a listing price, sellers in some areas may get top dollar for their home this fall. But buyers have more flexibility in negotiations than they may realize. Vieira and Walker both say buyers, with a little strategy – and an agent by their side – may still be able to be in their new home in time for trick or treaters (or whatever Halloween looks like this year).
How buyers can win in a seller’s market
It begins with a competitive offer, which contrary to popular belief, isn’t always bidding to pay more for the home, according to Walker.
“If you’ve seen several houses and you’re confident that a home is worth $15,000 more than what it’s listed for, then go ahead and bid higher,” Walker says. “But buying over value to compete in a bidding war is not going to help you in the long run. You need to consider your exit strategy.”
She often reminds clients that life can change on a dime, and in some cases owners need to sell sooner than planned. If they overpaid for a home in a bidding war and aren’t in a position to recoup those costs in a sale, they may end up losing when all is said and done.
Instead, Walker says buyers should work with their agent to see if their inspection period can be shortened in the contract to five to seven days as opposed to the standard 10 days (at least for the Phoenix market). Buyers may also consider doing a pre-inspection. If a seller says they will be reviewing offers on a certain day, buyers can use the time before then to have an inspection (with the seller’s permission). That way buyers can waive the inspection in the offer without actually taking on the risk of having no inspection at all.
“Sellers often don’t mind because it shows your level of commitment to the process and offers them a free inspection record if they don’t choose your offer,” Walker says, though she adds there is the risk of spending money on an inspection upfront and then not having your offer accepted.
In a competitive market, Vieira says an agent’s role is also more critical than ever.
“You need an agent by your side that knows the business and the proper questions to ask. Your agent will always be thinking of what can go wrong and help make sure you’re well-informed about the real estate process,” Vieira says. “A RE/MAX agent is probably one of the most knowledgeable agents – our experience is great value to buyers.”
As low housing inventory is likely to continue into the future, it’s important for buyers to keep an open mind. A home might need a few upgrades to become the home of their dreams.
“Look at the house and understand what it has to offer. Not every house is going to be 100% of what you want,” Vieira says. “As long as it’s 75% of what you’re looking for, you can typically make that house a home.”
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