Remember studying the 1850s-era Gold Rush in your 7th grade American history class? Everybody went wild, ditching their day jobs, heading west and wading into mountain streams with a pan and a dream.
That’s what this real estate market feels like. The new Gold Nugget is housing and there’s a crazy rush to snap up homes no matter what the cost—many times leaving logic at the curb.
Compared to last year, the average home price in the Central Texas real estate market has risen 25% and the number of listings has decreased by a whopping 75%, according to the 2021 Texas Real Estate Research Center and Texas Association of REALTORS®.
For potential buyers AND sellers, this seems like a market that’s gotten completely out of control.
Renters wonder, “Will it ever be a buyer’s market again?”
Should I join the frenzy and do whatever it takes to buy a new home?
What if I stay put, prices rise even higher, and I miss out on today’s low mortgage interest rates?
Homeowners wonder, “How much longer will this be a seller’s market?”
Should I sell in 2021 to capture a crazy high price while I can?
What if I wait too long and miss the chance to cash in my equity?
Use our tips to devise a realistic plan.
#1 Find a guide.
Predicting what will happen next in this market is tough for everybody.
Receiving expert guidance about buying or selling decisions is critical now. Sojourn Real Estate professionals have years of experience—through multiple cycles of buyer’s and seller’s markets. (Though this current cycle is one for the record books.) Our job is to assess the Texas real estate forecast and point you in the right direction.
Don’t go it alone—that’s like panning for gold without . . . well, the pan.
#2 Understand the cycle.
There are reasons all this is happening. The more you understand, the better decision you can make about buying or selling.
Over the last few years, the housing market was due to explode—for a number of reasons:
- Millennials flooded the market with demand for a first home.
- Construction of starter homes tumbled.
- Zoning laws deep-sixed much-needed dense housing developments.
Then the pandemic lit the fuse:
- The Federal Reserve threw a lid on home loan interest rates.
- Stimulus payments hit buyers’ bank accounts.
- Personal savings levels increased.
- Isolating remote workers sought upgrades in their living situations.
And bam! Demand for homes, no matter the asking price, blew up.
But are we in a cycle like in 2008 and 2009 when the housing market suddenly crashed?
Most experts agree that’s not the case. For one thing, lenders learned their lesson from the last boom/crash housing cycle and are largely avoiding risky loans for unqualified buyers, one of the root causes of the 2008 financial crater. Texas real estate forecasts indicate that this important factor will likely stave off economic disaster now.
Even with a slight uptick in mortgage interest rates recently, the demand for homes in the Central Texas real estate market has not dampened. Most market trends indicate that the seller’s market won’t cool down very soon—although the rise in home prices will probably slow a bit as 2022 approaches.
#3 Don’t act on impulse. Be prepared.
Find out what your bargaining power is. Don’t even peek at a “For Sale” sign until you know what your numbers are. In case you missed it, read our blog about the basics of Buying Empowerment and enlist the help of a REALTOR® and mortgage broker to determine exactly what you can afford and when. An impulsive home purchase can turn into a financial ball and chain.
Know that sellers aren’t motivated to bargain. Because this is the Mother of All Seller’s Markets, you’ll probably need to cover expenses like closing costs, unlike in the past. Ask an expert to show you how much cash you’ll need to have on hand to get a deal done.
If your offer is accepted, don’t skip a home inspection prior to signing on the dotted line. In this market, if a problem is identified during the inspection, the seller won’t be motivated to make a repair, but YOU will know what you’re getting into. Check out our home buying checklist here.
Price advice. Ask a REALTOR® to “pull comps” for you—identifying homes like yours that have sold recently in your neighborhood. This helps determine your current home’s market value, a number that can change from week to week. Make sure you stay in touch with local market trends so you get the most out of your home if you decide to list.
Be ready for anything. Wild as it sounds, buyers will do just about anything to close a deal these days. Talk to your REALTOR® about what you’ll do in unexpected situations. For instance, buyers are waiving their right to back out if a property doesn’t appraise for the agreed-upon sales price. You’ll want to have a plan to take advantage of every contingency that comes up during the offer/counter-offer process. And check out our tips for handling multiple offers.
#4 Plan your end game.
Don’t beat yourself up about paying “over ask” on a property. Yes, you could’ve snagged that property for less a year ago, but real estate investments historically do well over time. According to Kirbi Barbosa, a REALTOR® with Sojourn Real Estate in Temple, Texas, “Most homes appreciate in value eventually, adding to your equity if you hold onto the house long term.” Think back on what your parents paid for their first home and what it’s worth now, no matter who owns it. ’Nuf said?
Pay and stay.
If you can reasonably afford to get into a mortgage, a good plan is to stay in that home through this market’s inevitable rollercoaster ride over the next few years. After all—properties that sold during 2008’s housing market tumble likely have equity today. As with romance, time tends to heal all wounds.
Beware of flipping out.
Buyers planning to “flip,” or quickly turn around and sell the property, risk losing money if this volatile market levels out and the house hasn’t had a chance to appreciate in value yet.
Don’t have the funds to purchase now? Use the time to investigate government programs to help first-time buyers, address the dings on your credit score, and talk to a REALTOR® about planning strategies. A buyer’s market will happen again. But patience will be required as you wait.
Just because you have a dozen offers within the first few hours of listing your home doesn’t mean you’re safe to gamble with the family fortune.
Know before you go.
Make sure you have a place to live once you sell.*
*Read that sentence again and commit it to memory.
If you don’t have a solid plan for where to live after you sell your home, you could find yourself joining the hordes of buyers out there competing for real estate.
Homes aren’t the only scarce commodity in this market, rising construction costs and supply shortages are hampering builders, land prices are on the rise, rentals are scarce, and even tiny homes and RVs are in high demand.
#5 Settle in for the ride.
“Current demographics are very favorable to a sustained housing boom, especially in the wake of the pandemic and as more Millennial households enter into prime homebuying age and start families,” says real estate economist Taylor Marr. “Households are demanding space as they work from home more frequently and invest more in home offices and gyms. Finally, homebuilding is still playing catch up as housing supply remains tight from homeowners refinancing and staying put in their homes longer. All of these factors aren’t going anywhere in my opinion any time soon.”
In conclusion—this hot housing demand cycle is here to stay (for now). Your best bet is to have a conversation about your particular needs with a qualified REALTOR® and make a plan.
If you’re considering purchasing a home in the next 6 to 12 months, our Sojourn Real Estate team will guide you to make the right investment so you don’t lose money or squander an opportunity. Likewise, if you’re considering selling, a quick meeting with our team to evaluate your property and your future plans will help you decide if now is the ideal time to sell.
Schedule a meeting with a Sojourn Real Estate agent to learn what you can do to strike real estate gold.