May sales indicate the US housing market is blazing a trail to the best start in the past six years according to the National Association of REALTORS® (NAR). With their monthly existing home sales reports analyzed we can see that “existing” homes sold climbed to 5.18 million for May of this year.
With more homes being sold the competition has also grown spiking home prices. This is the fastest start we have seen for home sales since the government introduced the first time home buyer tax credit in November of 2009.
Inventory of Homes for Sale Hits Long Time Low
The extra demand for homes fueled by the low rates and bargain prices fading away has created a shortage of inventory of homes for sale. For stick built homes, not counting new-construction, existing homes for sale dropped to just 2.22 million which is down 10% year over year. Using simple math we can see that the total home inventory would be bought up in just 5.1 months if no new homes were added for sale.
As a general rule of thumb, anything under a 6 month inventory of homes for sale represents a seller’s market.
What is a seller’s market when it comes to homes for sale?
A seller’s market is a home sales market favorable to home sellers rather than home buyers. For the preceding several years, analysts have been calling the housing market a Buyers’ market which allow low-ball offers and nearly unreasonable demands for the sellers to get their homes sold.
With the current seller’s market, sellers are able to list their home for higher price points and offer very few concessions to buyers to allow their home to be sold. Required repairs and seller paid closing costs are becoming few are far between in the current housing market.
How do I Buy a home in a Seller’s Market?
With the current pace of home sales being a buyer in a seller’s market can be tough. Plan on being outbid on homes you may love and leave yourself plenty of time to find your next place. Additionally the best advice for buying a home in a seller’s market is to be prepared with a home loan pre-approval.
Speak with a mortgage loan officer and find out your budget for purchasing a home and stay within your budget. There is nothing a seller will hate more than to accept your offer only to be held up by the loan process because you were not approved. If the purchase contract expires they will unlikely extend.