Homebuyers are stuck with fewer homes, high prices and rising rates | News, Sports, Jobs
LOS ANGELES — Shortly after moving to South Florida for a new job in the U.S. military, Shannon Kaufman and his wife, Wendy, embarked on a whole different mission: buying a house.
For months they scoured the listings, strategizing late at night on which homes to target and calculating how much they could afford, even if it meant using up some of their retirement savings.
After viewing 200 listings and making offers on 15 homes that ultimately came to nothing, the Kaufmans finally found a home that at least met some of their needs. They will praise it though.
“We found a place that was smaller than we wanted, but it will work until we build something or until the market cools down,” said Shannon Kaufman, 47.
The US housing market has become increasingly frenetic and prices are out of reach for many buyers, especially first-time buyers. This spring, traditionally the busiest season for home sales, is more likely to bring frustration and disappointment to aspiring buyers than home ownership.
The number of homes for sale nationwide remains near record lows, fueling fierce competition among buyers vying for fewer homes. From Los Angeles to Raleigh, North Carolina, when a home hits the market, it usually sells out within days.
Bidding wars are common, often resulting in the selling price being well above what the owner was asking for. And potential buyers who consider financing their purchase with a home loan often lose out to investors and others who can buy a home with cash. A quarter of all homes sold in February were purchased with cash, up from 22% a year ago, according to the National Association of Realtors. Property investors accounted for 19% of deals in February, down from 17% a year ago.
Project manager Nichol Khan and her husband Ed moved to Mesa, Arizona from Phoenix two years ago to shorten their commute. Home prices in the Phoenix area jumped 20% from a year ago to $500,000, according to Realtor.com.
“The prices keep going up,” Khan said.
The couple lost more than a dozen homes they bid on. Some of the houses ended up selling for less in cash than the couple had offered.
“We don’t have $500,000 in cash,” said Khan, 42. “We just couldn’t compete with that.”
Fewer homes on the market and high prices have characterized the housing market for the past decade. Today, rising mortgage rates are further complicating the home buying equation. Higher rates could limit the pool of buyers and slow the rate of home price growth – good news for buyers. But higher rates also weaken their purchasing power.
The average rate for a 30-year mortgage has climbed to around 4.7%. A year ago, average rates hovered just above 3%, according to mortgage buyer Freddie Mac. The increase follows a sharp rise in 10-year Treasury yields, reflecting expectations of an overall rise in interest rates as the Federal Reserve moves to raise short-term rates to combat the surge. of inflation.
Potential buyers who applied for a home loan in February faced a median monthly mortgage payment of $1,653 including principal and interest, an increase of 8.3% from a year ago, according to the Mortgage Bankers Association.
“It’s hard to believe, but I think it’s going to be tougher this year, in some ways, than previous years,” said Danielle Hale, chief economist at Realtor.com. “So far, at least, we have seen the number of homes for sale continue to decline and prices continue to rise. These two factors combined suggest that the competitive market will keep buyers on their toes.
Experts say buyers should aim for homes that are a good fit with what they can afford.
“You should be looking at 15-20% below their limit; it gives them room for valuation spreads, it gives them room to trade,” said Tracy Hutton, broker at Century 21 in Indianapolis.
Being well prepared is sometimes not enough when an owner would rather accept a cash offer than sell to a buyer with financing.
South Florida’s Wendy Kaufman couldn’t even make it to an open house for a property on the market after revealing the couple had a mortgage backed by the Veterans Administration.
“When they saw I had a VA pre-approval, they said, ‘Sorry, we don’t want to work with you. ‘” she said.
Sometimes buyers don’t have the opportunity to make an offer before a home is purchased, unseen.
In the Miami area, so-called “blind bids” have become common as a way to circumvent other buyers, said Rafael Corrales, a Redfin agent.
One reason is the ultra-low level of homes for sale, which for the greater Miami metro area was down 55% in February from a year ago, according to Realtor.com.
Although every market is unique, there is a common obstacle in the United States: affordability. Median US home prices jumped 15% in February from a year earlier.