We’ve all heard the reports about the lumber shortage, skyrocketing home prices, buyers coming in with cash offers and bidding wars that force a house thousands above the listing price. According to WYTV, it’s a tumultuous time for home buyers and sellers alike, but is it prudent to stand back and put your dream home on hold?
Well, the answer is not an easy one. Youngstown State Economics Professor Albert Sumell said a lot depends on whether you are looking at your house solely as an investment or its usage. If you overpay for a house, and it’s the home you want and your plans are to stay there for some time, securing the deal with an aggressive offer could be the way to go.
Many are scared away from the market right now, fearing another housing bubble, and others are just being priced out, but the pace of annual price growth has been slowing since its high of 19% in early April. If the downward trend continues, prices could return to a somewhat normal pattern in the next six months.
While overall inventory is down 42% compared to last year, new listings rose 4% compared to the same week last year, which opened up some inventory and reduced some prices, giving buyers more options.
Another plus is that lumber prices are now beginning to stabilize. After skyrocketing to record highs in May, futures for July delivery dropped more than 40%. At its peak, the cost of lumber added $36,000 to the price of a new home. Many new home buyers at that time said. “No, thank you.”
Experts believe that a true slowdown in the market will begin when interest rates go up. Right now, they are at the lowest in decades at about 3% for a 30-year mortgage. The lowest was 2% last year.
“In the end, the change in the housing market is good. It’s been a depressed housing market for decades. A lot of good things can come from an increase. Overall, it’s a positive for the economy,” Sumell said.
What pitfalls await buyers who forgo inspections?
According to CBS Minnesota, the red-hot housing market has buyers getting creative in order to land their dream home. They’re even using tactics not often advised in order to sweeten their offer. What risks are home buyers making in this market? And can buyers avoid them while staying competitive?
“The numbers I have from Realtors, as well as appraisers that are doing all these purchase agreements, say between 50-70% of the purchasers are sometimes forgoing home inspections,” said James Peterson, owner of Peace of Mind Home Inspections, acknowledging he’s noticed a drop in business. The fact that so many are skipping a normally routine and important part of the home buying process concerns him.
“First thing I think of is safety. There are so many decks I’ve seen that have safety issues, electrical safety issues, potential mold growth in these houses that can affect families. I’m a businessman, but I’m a father first,” he said. Old or amateur electrical wiring is a big problem he notices, especially in older homes. Water that pools in basements is another issue, specifically in Minnesota.
“Which will, in turn, cause that foundation to rise and fall and have some issue,” he said.
Does the age of the house make a difference whether it’s safer to forgo an inspection?
“It sure does,” Peterson said.
Skipping an inspection for a home that’s only a few years old is nowhere near as risky as a home pushing 20 to 30 years. An exception to this situation is new home builds. Peterson said inspections for those properties are increasing and rightfully so.
“Because buyers are feeling that they’re at a dead end with things that should be fixed that aren’t being fixed, or being done improperly because of a lack of materials or labor,” he said.
Why are people forgoing an inspection right now? “They think that it makes it a bit stronger (offer), more predictable for the sellers,” said Steve Albers, Principal at Avenues and Acres Home Team.
Instead of forgoing inspections, Albers suggests buyers negotiate to have one that focuses only on certain parts of the house. “The roof, maybe HVAC, maybe foundation. So you don’t necessarily need to have it contingent upon the entire inspection but maybe these important points to buying a home,” he said.
Secret “whisper listings” are on the rise in the booming U.S. housing market.
Houses that are never even listed are selling fast, experts say according to KXAN. They’re called “whisper listings.” Whisper listings are residential properties released directly to a broker who only allows specific clients to view the home. It’s not advertised publicly or listed on the area’s multiple listing service (MLS).
It’s an attractive option for sellers who don’t want to go public, don’t want their privacy disturbed or are hoping for a quick sale. But it leaves out other buyers who aren’t in that small circle of clientele and makes the housing supply even more limited for those searching the public market.
The controversial practice has been around for several years, but it’s been growing in popularity during this hot housing market, especially in places like Florida. According to Redfin, the number of whisper listings has increased from 2.4% to 4.0% since November 2019, and there are no signs of it slowing down.
“Nothing like this has ever happened in the 18 years that I’ve been doing this job. It is absolutely incredible what is going on here,” Palm Beach, Florida, real estate agent Liz Hogan said.
The National Association of Realtors has discouraged the practice, according to the Wall Street Journal, adopting a new policy that requires its agents to list a property publicly within one business day. But there are exceptions, of course.
Meanwhile, existing home sale prices in the U.S. hit a new record last month with the biggest jump year over year in the National Association of Realtors’ history. A shortage of properties and low interest rates, among other things, have fueled the housing boom.
Weekly Mortgage Rate Update
Economic growth remains steady and is bolstering more segments of the economy. Although low and stable mortgage rates have kept the housing market booming over recent months, a deterioration in affordability and for-sale inventory has led to a market slowdown.
The Freddie Mac weekly survey shows the average rate for a 30-year fixed mortgage is 2.98%, which is 0.04 points lower than last week, and down 0.09 points from this time last year.