Tuesday, April 24, 2012
Manhattan Beach-Beach Cities: Buying a home in 2012...the rules are changing.
song says.. the times they are a changin ...Adjusting to the change is proving difficult for many buyers.
The biggest problem is inventory or rather the lack of inventory. With fewer distressed properties coming on the market and sellers reluctant to sell at lower prices, inventory has plummeted. In Manhattan Beach and most of the Beach Cities inventory levels are half of what they were last year at this time. Agents are networking like mad searching for properties for their clients. Broker's Open Houses are as much about chatting with other agents to see what they have coming up as they are to view the home being showcased.
Homes that buyers rejected last year are not only selling this year but often at the prices that were considered on the high side not so long ago.While this doesn't mean huge increases in home prices it does mean that in some areas the price move is up not down for the first time in years.
Lots of buyers and small inventory levels add up to multiple offers. Often multiple offers mean higher prices. A few months ago buyers not only had a wide choice of properties but they could also afford to wait if a seller wouldn't take their price. There was no sense of urgency as there would be another property popping up soon and often at a lower price. Buyers not only have fewer properties available to choose from but are finding themselves outbid on choice and sometimes not so choice properties.
Adding another twist to the market is the number of buyers with a lot of cash in all segments of the market from entry to luxury. Buyers with good credit and 20% -30% down are finding themselves outbid by the competition with all cash offers. Buyers with smaller down payments are hoping to get FHA loans but are finding that much of the property in our area doesn't qualify. Townhomes can be FHA approved but it takes time and money. Sellers who are seeing multiple offers will pick the cleanest offer which usually means that FHA buyers are not finding as warm a reception as they did last year.
If this is the year you have decided to move there are a few things to keep in mind. First you need to have the money for your down payment readily available. Contingency sales are going to be difficult if not impossible in today's market. If Mom and Dad are helping with the down payment get the money in the bank now so you can have the paper trail ready for bank approval.
Second you must be pre-approved by a lender not pre-qualified. That means your lender of choice should not only have all your information but have completed the necessary paperwork to process your loan subject to the appraisal.
Finally do your homework. You need to know recent sale values. You can't base an offer price on comps that are 4-6 months old. You want to find out about pending sales of similar properties. Were there multiple offers and if so was the accepted offer near or over the listed price. This knowledge tells you what your competition is willing to pay.
Typically inventory begins to increase as the spring selling season wanes but this year could be the exception . Before everyone becomes overly excited about the current trend I should probably point out that our local housing market is very typical of a recovering real estate market.