Aggressiveness, patience and a willingness to enter fierce bidding wars are the hallmarks of a harsh housing market for buyers in the United States right now, according to experts.
Home prices are up more than 20%, according to year-over-year data released by the S&P for February and the median home price in the United States has climbed to $375,000 as consumers continue to see skyrocketing prices of everything from gas to groceries and homes.
Inflation has grown at its fastest level in 40 years and when mixed with rising interest rates, a perfect storm for home buyers in the market has been created.
Bidding wars are breaking out between buyers in the housing market, as an increasing number of buyers are exceeding their budgets to get the home they want.
Tenisha Williams, the CEO of Elite Realty Partners in Miami, said home buyers need to practice aggressiveness right now in this super-heated housing market, where bidding wars have taken over.
“People need to be ready to bid on these homes,” Williams said. “Even now, we put an offer in for one of our buyers, there were 76 offers. Patience is a virtue, and I believe buyers need to pack their patience and be willing to submit aggressive offers.”
Miami, Tampa, Orlando and Phoenix were the hardest hit U.S. cities by rising home prices. Spokane, Washington, Sacramento, Seattle and Dallas have seen the highest percentage of bidding wars for homes.
An increase in millennials, who now number 72 million, the largest generation in U.S. history, buying homes has sparked much of the demand. For some, it is becoming too much.
“I am about to give up because it’s exhausting,” would-be homebuyer Vanessa Fernandez said. “I have been driving every day after work and to be honest, it’s exhausting.”
A steep rise in interest rates, coupled with the surge of potential home buyers, has led to the wild housing market buyers are experiencing. Williams said this is the highest spike in interest rates she has seen in “at least 12 years.”
“Interest rates on average are about 5.11%. That’s a big deal, that’s a difference of about $500 from this time last year as far as home buyers monthly mortgage.”
The Federal Reserve raised its main borrowing rate by a quarter point last month, the main mechanism for combating inflation. Multiple rate hikes, with the possibility of half-point increases, are expected this year.
Williams believes as interest rates continue to increase, the market will cool off. When that happens, however, remains to be seen.
“With the median sales price being nearly $400,000, I think what the government is going to have to look into is affordable housing,” Williams said. “At the end of fourth quarter last year, only about 54% of those homes were affordable. I think that this market may definitely cool down. It’s too early to tell right now but they can definitely remain hopeful because somebody has to buy a house.”