I came across this article about how all cash buyers are cornering a market that has historically been driven by first time home buyers. To read the entire article, click here.
In my experience over the last 12 months, I’ve seen this first hand. Last Spring & Summer, first time buyers were being outbid by investors or individuals with the ability to pay cash and also offered far over the listed sales price. It was heart breaking to see time and time again when a buyer would be first in the door for a showing, make a full price offer (in some cases even go over asking price) and still be pushed out by cash deals. “All-cash purchases accounted for 42.1 percent of all U.S. residential sales in December, up from 38.1 percent in November, and up from 18.0 percent in December 2012, according to a new report from RealtyTrac. First-time homebuyers, historically about 40 percent of the market, accounted for just 27 percent of sales nationally in December, the lowest since 2008.”
Also mentioned, is a good point about how the increased appreciation of property drives prices higher and higher, making a home purchase even more difficult. Lastly, first time home buyers are also weighed down with heavy student loan repayment and credit card debt, so the new mortgage rules that have gone into effect this month push off the dream of buying a home for many. If you’re in the market to buy a home this year, my experience is to avoid waiting to buy a home prices for many reasons:
- before prices continue to rise
- before interest rates rise, as predicted a full point increase by end of 2014
- the increased activity of buyers flood the market during the “heavy buying season”
- as lending rules and regulations make it difficult to qualify for a loan.
Got cash, good credit? Experts say owning rental housing can pay off even as market recovers. Read more here!
In the Denver market and in many parts of the country, the inventory of homes for sale have sank to historic lows. In Denver alone, our inventory was roughly 35% lower in November 2012 than at the same time last year. My clients that are ready to buy and take advantage of the low interest rates are continually frustrated when we get to a property within hours of going on the market, only to find out that there are already several bids – which ensues a bidding war pushing the offer far over the asking price.
It’s a new reality where sellers have more control then they have had in the past few years.
In order to be strategic, I’ve been scouring the Metrolist for properties that are already under contract and short sales awaiting acceptance on a buyer’s offer. I’ve found that writing back up offers is the best way to make sure my client can still get a shot at a good home. Also, back up offers make sense when our original offer wasn’t accepted due to a higher bidder; but at least we are in a position to have the home should the first deal fall through.
With all the ups and downs of lending standards, many deals do seem to fall apart. Also, many buyers in first position walk while awaiting short sale acceptance. It’s all because the banks are backed up and in one case, the first position buyer had been waiting since July for approval. They decided to walk, leaving my buyer the option to come in and pick up the home!
When a back-up offer is made and accepted, it is important that both parties know exactly what has been agreed to. Of course the agreement needs to be in writing. Sometimes buyers are reluctant to be in back-up position, because they don’t want to be out of the market while they are waiting to see if the deal ahead of them goes through. But in every case, I encourage them to keep looking – the back up offer is just that – a back up plan.
It’s a new reality in the Denver market today. If a home is well cared for and priced right, there will be people knocking on the door wanting a chance. Could the economy be showing us that it’s still alive and kicking? Will this trend continue through 2013?