If, like us, you aren’t in the market for a house right now, consider yourself lucky. The real estate market is crazy right now — so crazy that bidding wars for homes are commonplace. It’s not just a seller’s market, or even a seller’s market on steroids. It’s more like a seller’s fantasyland where any imaginable price or egregiously unreasonable condition can be put on a house and some desperate soul will accept it just to get their foot in the door. If you know anyone trying to buy a house right now, you’ve heard ridiculous stories of some listings getting more than 30 offers and selling for prices more than a third above the asking price.
This CNBC article sketches out some of the macroeconomic indicators at play. The number of houses listed for sale has fallen to a record low. More than half of all prospective home buyers are facing bidding wars for the house of their choice, and the primary reason people who are in the market for a new house haven’t bought a home already is that they’ve been repeatedly outbid. More than half of new homes offered for sale are in contract in less than two weeks.
And here’s another sign of a superheated real estate market: a Google search for bidding wars will call up multiple website pieces advising on tips and strategies on how to win the inevitable bidding wars, like “11 Tips To Win A Bidding War On A House” or “Best Strategies To Win A Bidding War.” What are some of the strategies? Stay on top of the market in your target area and go see new listings the minute they appear. Pay cash if you can, or be pre-approved for financing, so you aren’t requesting financing contingencies. Offer more — sometimes far more — than the asking price. Agree to quick closings. And if it’s a house you really, really like, be prepared to waive the home inspection contingency, take the place as is, and hope that such a decision made in a crazy market doesn’t come back to bite you when you discover a new roof is needed immediately. Anybody who has bought a house knows just how risky that last strategy can be.
Those of us who are in the Switzerland position in the bidding wars — that is, neither buying nor selling right now — can view all of this with academic interest, but if you are a first-time home buyer this craziness has to be incredibly frustrating. Those of us who have homes can hope that the superheated market continues until we sell, but unless you’re moving into an apartment or an old age home, you’ll be a happy seller on one hand and a frustrated potential buyer on the other. I’d rather see things get back to normal.