Fast Rising Home Prices Catching Buyers by Surprise

I recently did an open house for a HUD home in Fresno, Ca. It wasn’t the best home I’ve seen from HUD, but it was very spacious and only had some cosmetic repairs that it needed. The oven was missing and there was no refrigerator, but it was one of those places that I secretly wish I could buy for myself and could visualize my family and I living in very comfortably. I am not in a situation where moving makes a lot sense right now, but stepping into the shoes of a home buyer, I could definitely see the potential in it. It was a 3 bedroom 2 bath with 2005 sq ft in a nice area with a massive back yard and oversized garage. Don’t get me wrong, it was still a little rough around the edges, but with a new carpet, paint, and baseboards, it could be a real gem. It was appraised at $185,000 and was listed on the market at that price.

But the real story here is the reaction of many of the visitors to the open house. While most of them agreed that the house had nice “bones” and was fairly large , especially compared to many newer homes – it was nearly unanimous that they were all surprised at the asking price and questioned whether or not the missing oven and fridge was taken into account. I assured them that the property had already been appraised in its current condition and was selling as is. While many of them seemed surprised – they also acknowledged that they have lost many bids, even though they were overbidding from the asking price – in some cases as much as $10,000. It seems that though they are starting to feel the pressure of rising home prices. I keep hearing the same thing from buyers – the house they found on the internet or in magazines is no longer available by the time they call about it. Or, if it is available to bid on, they are getting outbid, no matter how much they overbid.

That being the state of the market, and with homes selling on an average on 44 days ( and much less in many cases)in the Fresno area, I suspected that this house would be gone the following day, as it was the last day to bid on the property before the bids were reviewed. I advised people that while they believed it may be priced a little high, that it was highly likely that an offer would be accepted the following day. Sure enough, the next day an offer was accepted and it was off the market. The moral of the story? Home prices are undoubtedly on the rise and if you’re in the market for a home, be prepared for battle cause you’re not alone in your quest to find the perfect home at the perfect price.

While a new Fannie Mae survey indicates that consumers expect Home prices to rise, despite rising interest rates, they are nonetheless rising quicker than people were actually expecting. Now homebuyers are finding themselves scrambling to put together a bid good enough to get accepted, and are padding those bids above and beyond the asking price and still finding no joy. It’s a tough market right now, but what makes it tougher is when home prices start moving out of buyer’s pre-approved range. I have this happen many times now – a buyer is qualified for up to $130k and has been looking for a home and trying to get an offer accepted for several months – now the same size homes that were in their price range are now selling for $140k and the pattern keeps repeating until there are longer any move-in-ready homes available in the 130k range.

So what are buyers supposed to do about this?

* Don’t give up, for one. The right house is out there and you have to keep your eyes open so that you don’t miss anything when it hits the market. Stay on the lookout and have your agent follow up on any home that catches your interest – please do a drive by first if possible.

*Be sure to work with a reputable agent and have that agent set you up a web portal that sends relevant MLS listings directly to your email so you can view them the first day they hit the market.

*Don’t underbid or ask for concessions. The difference between the winning bid and losing bid can be as little as asking the seller to pay for an inspection or closing costs. If you really want this house, make your first bid your best and final bid, and make it a good one. Be sure you’re not bidding more than you’re pre-approved for.

* Keep your pre-approvals up to date – many pre-approvals have expired during the time it takes to find the right property. If it’s not up to date, you may lose time trying to get another one - make sure yours is not expired so that you can strike when the iron is hot.

* Continue saving money – this will come in very handy in a rapidly rising home price environment, where you may need more money for the down payment and closing costs.

*Don’t make any major purchases during this time, even if you get frustrated and think you might change your mind about buying a house. Emotional ups and down are commonplace during the home buying process and you may get motivated to buy again just as quickly – you don’t want an impulsive major purchase to stand in the way of your new home.

Stay positive. Don’t give up on your dream of owning a home – interest rates are still relatively low and so are home prices. If you are serious about buying, stay the track and keep making offers till you get one accepted. The satisfaction of being a homeowner is worth the heartache of chasing the dream. Good luck and happy house hunting!