Like everything else since the start of the pandemic, the housing market in the United States has gone through an extreme swing in the last couple of years. Available homes are in short supply, home prices are high, and competition is stiff. As a homebuyer—especially if it’s your first time around the block—it’s critical to understand what you’re up against.
Keep reading to learn more about the current real estate market and how to position yourself for success during peak home buying season (aka right now).
Why is spring peak home buying season?
Peak home buying season—the time when most people search for and make offers on homes—usually occurs from March through June. Peak season coincides with spring primarily because of school schedules. Many homebuyers with families want to start looking for homes during the spring so they have time to move and get settled in a new space before the school year starts up again at the end of summer.
Spring also brings longer daylight hours, warmer, milder weather, and more affordable moving prices. Spring is peak home buying season, but summer is peak moving season, so you may score lower rates for movers and packing supplies before the summer rush.
What does peak home buying season look like this year?
Peak home buying season is right now—and the housing market is as tight as ever, thanks in large part to increasing inflation. Here’s what’s going on:
- Home prices are record high: According to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, the cost of homes rose 19.2% from January 2021 to January 2022, a bigger increase than the record-breaking 2021 annual levels.
- There are fewer available homes for buyers: Total housing inventory at the end of January 2022 was down 16.5% from January 2021, according to the National Association of Realtors.
- It’s a seller’s market: Sellers have the upper hand right now, which means buyers need to be flexible and fast with their offers.
4 tips for buyers during peak home buying season
Despite the current housing market challenges, it’s not all doom and gloom as a homebuyer. There are still steps you can take to get ahead. Here are four tips to keep in mind if you’re searching for a home right now:
1. Understand your financial situation going in
Whenever you make an offer on a home, you need to be prepared to pay a 10-20% down payment, a monthly mortgage, closing costs, moving costs, and costs for unexpected repairs. This year, though, it may be wise to over-prepare your finances. You may need to make an offer above the asking price to beat out your competition, for example, or put down a larger down payment in order to keep your mortgage more affordable.
To get a clearer picture of your spending power and budget, it’s a good idea to:
- Get expert advice: Talk with an accountant about your current finances and long-term goals to see what’s feasible. Then meet with a loan officer to get preapproved for a mortgage.
- Pick a realistic home price range: Know what you’re able to spend on a home based on the loan amount you pre-qualify for and what you’re actually comfortable spending. Keep in mind that just because you qualify for a certain loan amount doesn’t mean you should necessarily borrow that amount. You may need to stretch your budget to get an offer accepted this season, but not so much that you get caught in a debt spiral.
- Set aside money for “all in” scenarios: Make sure you have a cash cushion for situations when you need to raise your opening bid or go all-in on a promising opportunity.
2. Widen your search and adjust your expectations
With fewer available homes and high demand this spring season, you may have to expand your search to find a place that works for you. That means looking in multiple areas and potentially adjusting your must-haves.
Start by considering the areas other homebuyers in your price range and demographic find appealing, whether it’s a city or a planned community near great schools; these are likely to be the most expensive and competitive spots. Searching outside these spots in less popular neighborhoods could help you score a better deal on a home.
As you hunt for a place, take note of which features and layouts the most affordable homes have—or don’t have. If you find that none of the places in your price range come with a two-car garage, for instance, you may have to knock that item off your must-have list—or else bump up your budget.
3. Make a clean offer
A clean offer eliminates hurdles for the seller. If you really love and want a specific home, making the cleanest offer possible can increase your odds of getting it accepted. Of course, every home and situation comes with unique considerations, so it’s crucial to consult your realtor and review your finances before making any big decisions.
In general, though, here are some ways to make a clean offer:
- Offer at or above the asking price
- Make sure your loan is pre-approved and already through the desktop underwriting stage, so you can close faster if accepted
- Be willing to remove the appraisal contingency or contingencies for non-essential repairs—if you can afford to take the financial risk
- Be willing to shorten the timeframe for escrow if your seller wants that
- Be open to negotiating a rent-back situation if your seller wants that
4. Know when to wait or walk away
Just because the competition for houses is steep right now doesn’t mean you should rush into making an offer. No matter the state of the market, it’s important not to act out of fear, desperation, or panic. Knowing your deal-breakers and boundaries ahead of time will help you stay calm and logical when making decisions.
If you can’t find any homes you can actually see yourself living in for at least a few years, consider waiting until the fall to resume looking. If you don’t need to move during peak season, purchasing during an off time can yield you a better deal, partly because sellers are usually willing to negotiate more if their homes have been listed all summer with no success.
If, however, you’ve already made an offer on a home, stay aware of red flags as you go through escrow. Consider walking away from a deal if:
- The home inspection reveals major problems with the house, and the seller won’t agree to pay for repairs.
- The home appraisal comes in lower than your offer, and you don’t have the cash to bridge the gap.
- Your title company won’t pay title insurance on the property.
- During escrow, you learn something about the neighbors, community, or original construction that makes you feel uneasy about living there or listing it in the future.
Home insurance for the new homebuyer
No matter where you’re at in your home buying journey, it’s not too early to start looking into home insurance plans. The best home insurance is the kind that protects your home—and supports your lifestyle.
At Hippo, we offer modern home insurance with features designed to help you thrive as a homeowner. Think: free home care guidance and a complimentary smart home monitoring system. Learn more about us or get a quote in just 60 seconds.