June is American Housing Month. Whether you’re currently trying to buy or considering doing so, you may be feeling discouraged by the brutal competition of today’s housing market. Tri-State buyers like you face a few unique challenges: low inventory, bidding wars, and rising interest rates among them. By familiarizing yourself with these obstacles, you can strategize and avoid homebuying burnout.
Recognizing today’s barriers
Price and inventory
Though Ohio housing sales cooled off a bit in March 2022 compared to the same month in 2021, the price of houses increased over 10%.1 How did this happen? Inventory hasn’t had enough time to catch up with demand. The 2008 financial crises caused the number of new homes being built across the country to plummet. Building rates never completely rebounded, and the pandemic exacerbated the issue due in part to the price of building materials. In May 2021, the price of lumber alone was three times as expensive as it was pre-pandemic.2 Freddie Mack projects the U.S. is short 3.8 million homes and is especially lacking in starter homes under 1,400-square feet.3
Where is the demand coming from? Unfortunately, other Tri-State homebuyers aren’t your only competition. Real estate investment firms are looking to own a slice of the local housing market. Across the U.S., investors account for 18% of home sales – that’s up from just 8% in 2009.4 In Hamilton County, where Cincinnati is located, five companies have bought more than 4,000 houses since 2008.5 Generally, these properties are then rented out, reducing the number of single-family homes available for purchase in your neighborhood. This is important because homeownership is a great tool for families to build generational wealth.6
Rising interest rates make it more expensive to borrow. It’s important to take this into account if you’re planning to finance your home purchase, as the higher interest rates will make your monthly mortgage payment more expensive. The demand for Adjustable-Rate Mortgages (ARMs) increases during rising rate environments for this very reason. Typically, the rates you’re offered on an ARM are lower than those on fixed-rate mortgages. That’s because ARM rates are adjusted to keep pace with market changes. The lower rate helps offset the uncertainty of changing market conditions and may help you score a lower monthly payment.
Tip: Learn more about ARMs and how today’s rates may impact your home financing decision.
Kicking burnout to the curb
It’s discouraging to put in an offer on a home only to get outbid again. Though there are many factors out of your control in today’s housing market, there are steps you can take to increase your chances of success. The first is to get pre-approved for a mortgage loan. Sellers will see you’re pre-approved when you submit an offer. Having a committed lender will give them more faith that the offer will go through, helping you stand apart from any competition that didn’t secure pre-approval.
If you’ve had one rejected offer after another, don’t be afraid to take a break from the process. Some mental rest and relaxation will help you reacquaint yourself with the wants and needs you had going into the homebuying journey – things you may have compromised too much on if you were feeling desperate and made a hasty decision.
Once you reenter the homebuying market, be sure to broadcast that you’re looking to friends and family. You can even post about your desire for homeownership on social media to put out more feelers for local options hitting the market.
GECU is here to Improve the Quality of Your Financial Life, and that includes helping you achieve more financial freedom through homeownership. Our dedicated team members will educate you on how today’s housing market, coupled with your unique needs, may affect which financing option is right for you. Whether you decide on an ARM or a fixed-rate mortgage, financing through the Credit Union opens the door to competitive rates and local knowledge that’s crucial in the Tri-States’ competitive market. Ready to talk? Schedule an appointment online to meet with us at your closest branch location.