TAMPA, Fla. - If you have considered buying a home recently, then you know it's a sellers' market.
Mortgage rates continue to be at all-time lows, with 30-year mortgage rates running at 2.875%. The pandemic has shown us the realization that we don't have to work in the big city office anymore.
We've seen a mass exodus from the overpopulated big city life to the rural or temperate climate areas. One of those benefactors is Florida. The Wall Street Journal reported earlier this year that many people are moving into Florida every single day. There have been some reports saying as many as 1,000 people move to Florida every single day.
With so many people moving in, that means that there is less inventory for home buyers. This has created the ultimate sellers' market. Florida Realtors released their latest housing data that showed single-family existing home sales rose 15.7% over the past year. The average home price has increased from $361,839 to $465,508, an increase of 28.7%.
But the inventory is the lowest it's been since January of 2008, a decrease of 56.3% compared to a year ago, so what is a person to do if they are interested in buying a home?
A piece in The Wall Street Journal talks about some of the things to consider if you are in this situation. Some of the key factors you need to consider are mortgage rates, how much you saved for a down payment, local housing prices, taxes, closing costs, and insurance.
Know your home value
If you are looking to sell your current home first, then conducting an online home appraisal to get a sense of what the value of your home is worth is a crucial first step.
Sites such as Zillow, Trulia, or a Redfin, are great online tools that can give you a good sense of what your current home is worth.
It's also recommended to contact a trusted real estate professional that has current information on the real estate market. It is an ever-evolving landscape, so you want someone who is up to speed on the latest housing trends.
How important is getting a pre-approval on a loan?
With demand so high, you have to be ready to pounce if you find the house of your dreams. One way to expedite this process is obtaining a pre-approval letter. This is not to be mistaken with a pre-qualification, which is a mere broad-stroke overview of your financial situation.
A pre-approval letter is a hard inquiry completed by a financial institution where they do a deep-dive physical exam of all of your finances. Going through the pre-approval process will slightly ding your credit score, but is a necessity if you want to lock in a house before another motivated buyer.
How do you know it's the right time to buy?
With average home prices skyrocketing, the truth is whatever you've budgeted for the purchase price of your new home, you'll most likely have to tack on an extra 10%, maybe even 20% for a realistic purchase price.
Using an online mortgage calculator, you can quickly identify how much your home payment is going to be. This is where you have to be real with yourself and answer the question: Is this more house than you can afford?
We all want to have the American dream and own our own home, but the last thing that we want to do is be stuck in a house we can't sell with a payment we can no longer afford.
For other tips on winning the house buying war, be sure to check out a recent interview with Stephen Gay, a local realtor who shared his insider advice on landing your dream home in the Tampa Bay housing market.
Jeff Rose is a combat veteran, certified financial planner and founder of GoodFinancialCents.com