In the ever-changing landscape of the real estate market, the current conditions have presented unique challenges and trends that are unlike anything we have seen before. As a home inspection company with over 22 years of experience, we have witnessed various market fluctuations, but the current situation stands out as particularly unusual.
In this blog post, we will dive into the factors contributing to the strangeness of the market and provide insights to help buyers and sellers navigate this unprecedented landscape.
Factors Influencing the Market
Currently, most offers are made above the asking price with only a financial contingency to make the offer more attractive. In some cases, buyers are making cash offers with no contingencies. This situation may be difficult to comprehend, but it is not hard to understand when you look at the real estate industry’s current state.
Lack of Strong Housing Inventory
The first factor to consider is the inventory of houses. The market has been without a strong inventory of houses for some time now. This is why we see multiple offers on one property. The lack of a strong housing inventory has significant implications for the housing market.
Buyers often find themselves in bidding wars, leading to inflated prices and making it challenging for first-time buyers to enter the market. Affordability becomes a critical issue as prices surge beyond the reach of many potential homeowners. Moreover, the shortage puts pressure on rental markets, leading to increased rental costs.
For instance, during a four-family showing a few weeks ago, there were 75 people that went through the property on that day, and offers had to be in by 8 pm that day. We can imagine how many offers they received and the bidding war that ensued.
Additionally, homeowners are staying in their properties for longer periods, reducing the number of available homes for sale. Various reasons contribute to this trend, including economic uncertainty, stringent lending requirements, and a desire to capitalize on rising home values. Homeowners who would typically sell and move to a different property are opting to renovate or expand their existing homes instead, further exacerbating the inventory shortage.
Excess Buyers & Overbidding
The second factor is the excess buyers on the market, which then can lead to a multitude of overbidding. Overbidding occurs when multiple buyers compete for a limited number of properties, resulting in offers that exceed the asking price. This pushes people to bid over the asking price just to get the seller to look at their offer.
The limited supply of available homes for sale, coupled with high demand, creates a highly competitive environment. As a result, buyers often feel compelled to offer more than the listed price in order to secure a property amidst stiff competition. This bidding war dynamic can drive up home prices significantly, making it difficult for many buyers, especially first-time buyers, to afford a home.
Low Mortgage Interest Rates
Thirdly, and some may not believe it, interest rates are still relatively low. Compared to the interest rates in the past, current interest rates are low. For instance, in 1983, when some people purchased their first house, the interest rate was 12 ¾ percent, which was low compared to others who purchased a few years before at 18%.
Low mortgage interest rates have also played a role in increasing the number of buyers in the market. Favorable borrowing conditions have made homeownership more attractive and affordable for many individuals. Consequently, the increased demand from buyers, combined with limited housing inventory, intensifies competition and leads to overbidding situations.
Although the current market may be discouraging, it is essential to note that it will stabilize eventually. It may not be this year or the next, but it will happen. Therefore, it is important to keep your chin up and stay encouraged. Here at Wall to Wall Home Inspections, we can help you make informed decisions when buying or selling a home. We also provide top-rated home inspections to ensure your house is in great shape. Contact us today and schedule an appointment online!
