There is a rise in prices in real estate, all mainly due to the pandemic.
There is a high demand but very low inventory and this creates a frenzy. Kim Baldonado spoke to a real estate agent and asked her for some tips.
Analea Perez is a first time home buyer.
“The listings I saw would go live, the ones I liked, I would check them a couple of days later, and they were pending,” she said.
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In many parts of the country, including southern California, the real estate market is downright wild.
Leah Guerra is a Los Angeles real estate agent. We asked her how to navigate the current frenzy.
First, why is demand so high?
A lot of the buyer demand is driven by historically low interest rates, so it’s basically cheaper to purchase than it was before. Although prices are increasing, your monthly payments are more affordable.
Why is the supply of available homes so low?
There just aren’t enough sellers selling, and part of that is because there’s a fear that they don’t have anywhere to go.
The last time we saw the housing market surge like this, it plummeted, causing massive foreclosures, but Guerra says that’s not likely to happen this time.
“Leading up to the great recession, there was way more supply than there was demand and lending qualifications were not nearly as strict as they are now. Anecdotally almost every client I have, no matter how long they’ve been working and how many assets they have, the loan approval process district, it’s really strict, and you didn’t have that before.”
For buyers, Guerra advises being prepared to make an offer quickly by researching neighborhoods and getting pre-underwritten for a loan, since a pre-approval is no longer enough.
“By the time you go see the house, if you’re not sure, somebody else is already making an offer, and it will be gone within days,” Guerra added.
When making an offer, consider waiving or tightening up contingencies.
“I never advise waving your inspection contingency, you need to know what you’re getting into, but by all means you need to shorten it because the seller wants to know this deal is happening. They have eight offers to choose from,” she said.
What about waiting for prices to drop?
That’s probably not going to happen. What probably will happen is that price appreciation will slow down.
While prices may not rise as quickly, interest rates are expected to go up, so being prepared to act quickly and being flexible will help.
“I started out thinking I wanted something very specific and as I saw how the market was going, I had to adjust and be flexible,” Perez said.