The real estate industry is super seasonal. Traditionally, agents talk about "spring markets" as the most popular time to both list and buy homes.
While that trend has been true for decades, in 2018, market research data--including our own findings--shows that buyers are getting a jump start on their house hunt, meaning the spring market may already be here.
We’ve taken a close look at some of the reasons behind the shift and what it could mean going forward. In addition, we've also included a few tips if you're looking to stay competitive in an early market.
The main factors to this early spring market:
A rise in mortgage application volume
Each quarter, the Mortgage Bankers Association releases a report containing data on relevant industry trends. A report released last week revealed that if the numbers are to be believed, buyers are about to start entering the market in droves.
By the numbers, it found:
- Mortgage applications rose 4.5 percent in the last week alone
- That number is a full 6.1% higher than it was in the same week last year
- Mortgage refinancing applications are also up by 1%
These numbers are some of the highest that have been seen since April 2010.
While the volume of applications does not necessarily equate identically to a number of qualified and motivated buyers, it’s more than enough to show signs of a strong desire for homebuying this year that's worth paying attention to.
What’s behind the surge?
Increases as large as these don’t happen without sufficient cause. Experts say that it can be traced back to:
Interest rates creeping up
This is the big one: according to reporting by CNBC, over the last week, the interest rates on 30-year, fixed-rate mortgages of $453,100 or less climbed to 4.36% from 4.33%.
These are the highest interest rates we’ve seen since last March.
Similarly, according to CNBC, the rates for 15-year, fixed-rate mortgages have spiked to levels unseen since September 2013.
With uncertainty as to how far the rates will climb or when they will plateau, many would-be buyers seem incentivized to lock in low rates while they’re still available.
Housing inventory remaining low
The Mortgage Bankers Association’s President, Lynne Fisher, cites low inventory as another major cause behind the mortgage rush.
Those of you who dipped your toe in the real estate pool last spring may remember that there were fewer available properties to choose from, particularly in starter and mid-range market price ranges.
Fisher predicts that a repeat of these circumstances, coupled with home builders who are unable to meet growing demand, are also contributing to buyers’ anxieties to get into the market.
How to stay in the homebuying game this year
Just because you might have more competition this year than in the past, that doesn’t mean you should shy away from trying to find your next home.
It’s absolutely possible to be competitive in this type of market -- it just takes some prep work.
Here’s what you can do to help set yourself apart from the crowd:
Get your financials in order
No matter what current market conditions are, you can always count on those with the strongest financials to be given the best interest rates.
To be considered for a loan, you should aim to have the following:
- Two years of W-2’s or high-net tax returns
- A credit score of at least 580 for an FHA loan or 620 for a conventional loan
- Debt that amounts for less than 35% of your total take-home pay
- Sizable savings to cover your down payment and closing costs
Even if you're not one to follow trends, if you want to buy a home this year, getting in means going with the crowd. Interest rates are still relatively low, so if you’re fairly well set-up financially, it may make sense to apply for a pre-approval sooner rather than later. That way, ideally, you’ll be able to find a lender who will lock you in at a reasonable rate.
If you’re on the fence financially, it’s still a good idea to connect with a lender sooner rather than later. He or she will be able to look at the specifics of your financial situation and give you advice on what your best next steps may be. Also, there are many first-time homebuyer programs and credits you should look into that can help make it easier for you to buy in this market.
Once you have a pre-approval in hand, it’s time to get moving. When there’s less inventory to choose from, it’s almost guaranteed that houses won’t stay around long.
Be sure to get property alerts through a site like Open Listings, so that you’ll be notified the second any property that fits your needs hits the market.
At that point, be sure to clear your schedule in time for any open houses or showings. You won’t want to miss your chance to see it.
Write a strong offer
Hot markets where inventory is hard to come by are not the place to play hardball.
You’re much more likely to find yourself in a multiple offer situation, which means if you’re serious about making the home yours, you'll need to put your best foot forward.
Some tactics for a winning offer in a seller's market include:
- Offering a high sale price
- Considering waiving inspections
- Meeting the seller’s desired timeframes
- Including an offer letter