Just when we thought the housing market inventory shortage couldn’t get any worse, it did. A recent report showed that the supply of homes has declined over the past few months, making things particularly challenging for first-time home buyers.
According to Realtor.com August 2023 report:
“The U.S. housing inventory crunch accelerated in July as active listings growth slowed for the fourth month in a row and fell below year-ago levels (-6.4%) for the first time since April 2022.”
Tips for Buying a Home During an Inventory Shortage
Tight inventory conditions can be challenging for all home buyers. First-time buyers can face even bigger hurdles since they don’t have the profits from a previous sale toward their purchase. They also have less experience when compared to someone who has purchased and sold homes in the past.
To overcome these challenges, exploring strategies on how to save money to buy a house becomes crucial for first-time buyers.
However, there are steps you can take to increase your chance for success when buying your first home during the shortage of inventory. Here are some of those strategies:
Enter the Market with the Right Mindset
The situation of the real estate market might differ significantly from one city or metro region to another. However, most markets continue to experience low supply levels in 2023. These conditions typically give sellers an advantage when it comes to negotiations.
As a first-time homebuyer, you can’t do much to change the current supply and demand situation. But you can enter the real estate market with the proper mindset. By understanding current real estate dynamics in your area, you’ll have an easier time navigating the market and negotiating with sellers.
Conduct Extensive Research into Local Market Conditions
What are home prices doing in your area? What’s the supply and demand situation like? And on average, how long are homes staying on the market before going under contract?
These are just a few of the questions first-time home buyers should answer before entering the house-hunting stage. Market research can benefit all buyers. But this kind of research becomes invaluable for those buying their first home amid inventory deficit conditions.
When the time comes to make an offer on a house, you want to make an informed decision backed by data and research. This can help you put an offer more quickly to get ahead of other buyers. Market awareness can also help you submit a firm offer that the seller is more likely to accept.
The good news is you can find all this information online for free. Start by doing a Google News search for your city, followed by the phrase “real estate market.” Next, visit websites like Realtor.com and Zillow to review recent sales in the area you plan to buy.
While acquiring knowledge through these online resources is valuable, if you’re interested in delving deeper into real estate investing, you can also explore some of the best books on real estate investing for more comprehensive insights.
Don’t Get Discouraged If Another Buyer Outbids You
During a housing market with low inventory levels, first-time buyers often have to make offers on more than one property before securing a deal. So don’t get discouraged if a house you want slips through your fingers.
Tight inventory conditions can increase buyer competition, which means you could find yourself in a multiple-offer situation, and you never know how much those other buyers offer to pay. All you can do is present your best offer based on market research and hope for the best.
If you miss out on one home, chalk it up as a lesson learned and move on to the next one. When buying your first home amid low supply levels, patience and persistence will eventually win the day.
Expand Your Search Zone Beyond First-choice Neighborhoods
Chances are, you already have a desired location in mind where you would like to buy a home. Most first-time homebuyers have a first-choice neighborhood — and possibly a second and third as well. You can increase your chance of success by expanding your search box as much as possible.
If you’re going to be commuting to work each day, you’ll need to consider the distance factor. However, even then, you might find that you can get more houses for the money (and with less competition) just by widening your search area.
Get Pre-approved Before Attempting to Make an Offer
Are you considering taking out a mortgage loan to purchase your first house? If so, you could benefit from getting pre-approved by a lender. This is a kind of financial pre-screening process where the lender reviews your financial situation to determine how much they are able to lend you.
When buying your first home during an inventory scarcity, mortgage pre-approval becomes even more important. It can help you narrow your search to a specific price range, making the house-hunting process more efficient — and possibly more successful.
Also, including a pre-approval letter with your purchase offer might make the seller more inclined to accept it. Sellers typically want to see this kind of letter when dealing with buyers who are using mortgage loans. It shows that you’ve already been screened by a lender and have your financing lined up.
Have a Spending Limit in Mind in Case of Bidding Wars
Bidding wars become more common when there’s a housing market inventory shortage going on. A bidding war is similar to the multiple-offer scenario mentioned earlier but tends to be a bit more heated. This is a common occurrence in a competitive real estate market fueled by low supply levels.
Understanding how to invest in real estate without buying property can offer valuable opportunities for those seeking alternative real estate investment methods.
As a first-time homebuyer, you want to avoid offering an amount that could create financial hardship down the road. The best way to avoid this is by having a clear budget and spending limit on paper before you even start house hunting.
During an inventory shortage, buyers sometimes offer more than the asking price in order to outmaneuver competing buyers. But there may also come a time when you simply have to walk away from an overheated bidding war, especially if it’s going to stretch your budget.
Buying a first home during a lack of inventory can be challenging. However, despite the lack of available inventory, thousands of first-time buyers just like you have succeeded.
If you do your market research ahead of time, work with an experienced agent, and make a strong offer backed by market data, you can greatly increase your chance of home buying success!