For the first time in years, prospective homebuyers are coming up against a hurdle that all but disappeared during the housing bust: fierce competition from multiple buyers.
Agents and brokers across the country, particularly in popular areas such as California, are reporting that buyers are now resorting to bidding wars to obtain a home in a market where few are for sale.
Rick Sharga, executive vice president of Carrington Mortgage Holdings in Santa Ana, Calif., estimates that 70 percent of the homes sold in California have multiple bids. "In parts of California, there's less than a month's supply of homes on the market," he adds.
Lack of inventory across the country is the driving force behind bidding wars, Sharga says. Both new and existing homes remain at lower-than-normal levels, and foreclosure activity has slowed significantly. "All three categories are weak, though they're starting to loosen up," he adds. And there's added pressure in some popular areas of the country where investors have scooped up the supply, making it even more difficult for individual buyers to move quickly on a home purchase.
But buyers shouldn't give up, Sharga says. Low mortgage rates and home prices mean that "affordability is really attractive now," he adds. "Basically buyers should exercise patience and prudence." He advises house hunters to take these three steps to prepare for their search:
- Know what you can afford: If you're not preapproved for a mortgage, at least be pre-qualified.
- Research the type of property you want to buy before you begin your search.
- Be diligent about looking at all opportunities.
He adds that working with an aggressive real estate professional will increase your odds. "It's amazing what low (housing) inventory levels will do," he says. "We know of agents who are knocking on doors of homes that aren't for sale and asking the owners if they are interested in selling."
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