Frenzied spring coping tips by Lane Hornung.
Another frenzied market expected, because of record low supply, strong demand.
This spring may even be more frenzied that last year.
This isn’t our first frenzied spring home buying rodeo.
It was a wild ride for those in the home buying market a year ago in hot markets like Denver.
This season is shaping up to be equally frenetic. Maybe more so, as record low inventories from a year ago have fallen even lower. At the same time, demand remains robust and interest rates remain low.
John: What are some of the lessons learned that consumers should keep in mind when bidding on homes this spring?
Lane: I think buyers have come to accept that they have to put in their strongest offer right away. This isn’t a market where you can play coy. If you don’t put in your strongest offer, there’s a good chance someone else will.
John: Last spring, a lot of buyers who lost bidding wars were extremely frustrated. Do you think we will have more of the same this year?
Lane: I think buyers are understanding that it does them no good to be mad at the market. It is understandable that they think the market makes no sense. But it does make sense. It comes down to supply and demand. There is not much supply, but there is plenty of demand.
John: Much like a hot stock market, some people might think they should sit this one out and wait until there is a correction, so they can buy their slice of the American Dream at a lower price. What do you think of that strategy?
Lane: No one is forcing you to step into the market. If it is too crazy or too hot for you, then you would be happier on the sidelines.
You must realize, however, that if your ultimate goal is to buy a home, there are risks to staying on the sidelines. It is very hard to time the market, and very hard to predict interest rates. They may rise while you are waiting on the sidelines, and you will lose the opportunity to lock in interest rates very close to historical lows.
Plus there’s no guarantee that prices will be dropping any time soon. If anything, due to macro economic factors in the market of high demand and low supply, prices are more likely to increase.
John: What about the strategy of buying in a neighborhood that might not be your top choice, but where prices are lower and the competition might not be quite so fierce?
Lane: I think that is definitely a lesson learned from last year. The “brand-name” neighborhoods are great, but that is often where the prices are bid up the most. An agent who really knows the area should be able to find a less expensive alternative.
John: Speaking of price, what take-aways are there from last spring?
Lane: I think it is a good idea for a lot of people to look at listings that are below the top of their price range.
If you look at homes that are priced 10 percent below what you can afford, for example, that gives you more room to raise your offer, if a bidding war erupts.
John: Lane, what are you hearing from 8zers?
Lane: I’m hearing that homes that are not over-priced and show well are generating multiple offers. I’m hearing of homes being bid up 10 percent or 20 percent over the asking price.
In fact, I wouldn’t read too much into listing prices. Some agents list homes at a price they know will generate multiple offers and they let the market determine the sales price.
John: And what about the sellers?
Lane: I think one thing sellers have learned is that they don’t need to take the first offer. What they want is the best offer. Often, the seller can leave a lot of money on the table if the home is not presented to the entire market.
John: Thanks, Lane.
Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. DenverRealEstateWatch.com is sponsored by 8z Real Estate. A monthly Q&A with Lane is a feature of DREW. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.