Being a Buyer in a Seller's Market

Sometime in late February or early March, as the snow was melting away, something funny happened.  A "buyers market" became a "sellers market".  In September 2011 Chicago had over 12 months of market inventory (definitely a buyer's market) and as of the end of May 2013 we barely had 2 months of inventory (a crazy low number, a sellers market.)

Property prices are beginning to rise and almost every deal I've been involved with (or even heard of) this year is a multiple bid situation.  Many buyers are becoming frustrated with the fierce competition currently overwhelming the market.  According to a recent Redfin Real-Time Home-Buyer report, buyers believe prices are going to keep rising alongside a low inventory.  The most major concern for buyers looking for a new home falls not under cost, but low inventory, with 65% of buyers stating that there are "not enough good homes for sale."

This being said, does this mean buyers are trickling off?  Actually, no.  According to this report, buyers would rather pay more and accumulate some debt rather than stay in their current living conditions (should the appropriate financing plan be in place, of course).  Personally, I've worked with a handful of buyers in the last month who have decided to really "stretch" to make their way into a home that suits their needs.

Some rudimentary tips for navigating this new "seller's market":

1. Come prepared.  Talk to your lender and find out what you can really afford, and what that translates into in terms of monthly out of pocket cost.  Make sure to factor in not only the mortgage payment (principal plus interest) but also condo/homeowners fees, insurance, and property taxes.  On the flip side, know that your mortgage interest is (still) tax deductible, and your property taxes have some income tax benefits as well. 
2. Research your desired neighborhoods.  Open Houses are back, and internet data is more prevalent than ever.  
3. Understand what your money buys and where your trade-offs will be.  It is always a compromise when buying a home.  There's a home in the location you want, and one that is the size you want, and one that has all the amenities, but that one is 25% above your budget - irrespective of your price.  Why?  Because the things you desire are the same as what other buyers desire - each house that possessed one or two of the "correct" elements was priced as it was because it was missing the others.  Make sense?
4. Don't dawdle.  Homes are selling in the first days, even first hours on the market.  If you find the home that meets your needs, consult your real estate professional on the best strategy for winning that inevitable multi-offer situation.  This is not the time to get cute.  And there's never a time to go unrepresented, but this might be the worst time to do so.

If you are looking to buy a home in this "sellers market," don't be too dismayed.  With the appropriate game plan (and having someone representing you who is well-versed in the market), negotiations are able to be made in your favor.  If you want to discuss your options and get a better real-world perspective on the current market, drop me a line or give me a call.