What You Should Know Before Buying a House in a Competitive Market

Over the last decade, the real estate market has seen massive growth rates all across the IND. Homes in some markets have become so expensive and many people are becoming cautious of buying. You hear it all over the news that millennials are struggling to buy homes, and it’s no surprise that this is going on, considering that homes in hot markets are constantly being overbid. There are many steps one should take before buying a home. However, a lot of the rules tend to change when the real estate market is hot. We all know it’s difficult to try and predict when a market correction is about to happen, so instead of trying to predict it we catered a list to try and mitigate any mistakes one might fall into in competitive markets.

Be sure you’re in it for the long-term

Like the stock market. If you’re in it for the long-term, you really have nothing to worry about. If you’re planning on buying anytime soon, you need to make sure that you see yourself living there at least for the next 4-7 years. Otherwise, it may be best to hold off until there’s a cool down in the market. Overall home values generally increase over time so even if there’s a correction, you were never in it for short-term gains in the first place. Just make sure it fits your needs and is in the location of your choice. Buying a home a place where you will likely be spending the majority of your time. So don’t rush and make sure to have a plan for multiple years. If you see yourself transferring jobs within the next 1-3 years, then you may want to hold off on buying. Ask yourself if you like the city, even if it’s expensive, and see if you can picture yourself living there for many years.

Don’t get FOMO

Many home buyers get too attached to a home when they’re looking around. It’s not a good idea to get too emotionally attached to a certain property, all this could cause you to make irrational decisions that you may end up regretting later. Many agents will say “we have multiple offers on the property”, but you probably shouldn’t bite. A lot of the times you may feel pressured to buy a home and this can get even worse when you are already too attached to the property. Don’t be afraid to lose out on a home, especially if you feel that you’re overbidding in a competitive market.

Can I actually afford it?

You should be buying a home if you can afford it, seems obvious,  yet many try to go over their budget and stretch their mortgage to the most they can get. Yet this will likely backfire in a downturn. There’s a reason why certain markets are competitive. For example, if you live in San Francisco, you know that the majority of high paying jobs are related to technology. So if you and your spouse as well, work in these related fields, then you may be able to afford a home in that area. There are other factors that may play a role in your affordability such as current debts and if you have kids. In the end, you probably don’t want to get too eager when it comes to buying a home, yes it’s an exciting moment, but be very cautious when it comes to making sure you can afford a home in a hot market.

Do I really need to buy?

You may have second thoughts about buying a home and that is completely normal. There are obviously many benefits to renting that don’t come with owning a home. You just need to be self-aware enough and ask yourself if at this moment it’s the right decision. Odds are, if you’re a young person who has no kids, then buying a home might be better put off for later, even if you have the financial capabilities. In this situation, you would deeply need to take into consideration your opportunity costs. Make sure that buying over renting in your market is worth it. Buy a home because you want to and it’s the best decision to make right now. Don’t do it to impress others or just because all your friends are buying one. Everyone makes these decisions at different points in their life. Be confident and make sure it’s the right choice. If you think it’s not, see where you could elsewhere place your money, if you believe it is, then absolutely go for it.

Don’t focus too much on the media

What you hear around the news and especially now with social media, can definitely alter your decision to buy a home. In the end, nobody knows when a recession is coming. There have been people predicting it since 2016 and every year after they claim it’s coming “next year”. Imagine you decided not to buy a home in 2016 because you thought the market was going to crash. You would have lost out on crazy gains for your home and taken advantage of low-interest rates. A lot of fluff can be made into a huge story, just make sure to use rational thinking and actual data for when it comes to buying a home. It seems that many try and predict this trend yet it seems like a gamble. Try not to overthink it, it will only make the process more stressful.

In the end, a lot of us saw what happened during the 2008 crisis and some of us personally knew people who were foreclosed on. Don’t get me wrong, there is never really a bad time to buy or sell a house. There will always be both buyers and sellers. A lot of the times though during hot markets, the competition heats up and the news gets out of how crazy the real estate market is and we tend to not make the best decisions. Every real estate market is changes some for good and some for bad. What matters is that you see yourself living in that home for several years. Don’t worry about how the overall market is doing. If anything just focus locally on your market or the market where you’d like to buy in.