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Sunday, March 3, 2013

For Many, 2013 Will Be the Year to Finally Buy a Home


Bidding wars. Buyers paying cash. Homes selling for more than asking price.

Are we entering another housing bubble? No. But prospective buyers in many markets may be shocked at the competitive nature of the home-buying process these days.

The number of homes for sale fell to a 13-year low in January, leaving would-be buyers chasing a shrinking supply of homes just before the spring selling season.

"On a national scale, the market is clearly rebounding," says Greg McBride, senior financial analyst at "It's not that the prices are crazy, but the buyers outnumber the available homes for sale."

There was an average of 4.8 months of supply of existing homes for sale in the fourth quarter, according to the National Association of Realtors (that is, it would take 4.8 months to sell off the inventory at the current pace).

Six months' supply is closer to normal, says Celia Chen, a housing economist with Moody's Analytics, an economic research firm. In 2010, it went as high as 10 months. "Prices are starting to rise as a result of the strong demand relative to low supplies," says Ms. Chen.

That said, prices still are about 30% below their peak, she says. And the reasons for the slim pickings aren't good news. Lenders are taking their time putting bank-owned properties on the market, in part to keep prices up.

Plus, prospective sellers are waiting until prices rise before listing their homes for sale. About 11.9 million homeowners are still underwater—that is, they owe more on their mortgage than the home is worth—according to estimates from Moody's Analytics.

"When you're underwater, you're much less likely to list your home," Ms. Chen says.

Dongyun Lee

And that means a potentially tough time for buyers. "You might have to look and shop around a lot," says Keith Gumbinger, vice president of, a housing-market data provider. "Competition for the most attractive properties is going to be stronger than you think."

Real estate is local, of course. Inventories aren't as tight in Michigan and Ohio, for example, where many distressed homes are on the market, or in Oklahoma, where the market is more stable. But buyers may find their choices limited in parts of Arizona, Florida, Colorado, Texas, California and the Washington, D.C. area, among other places.

If you're in a tight market, consider these strategies to smooth the process:

1. Stay calm

Don't spend more than you can really afford.

"There's a renewed frenzy" in the market these days, says Christy Dean, a real-estate agent with Walt Danley Realty, focused on the luxury market in Paradise Valley, Ariz.

Buyers can get caught up in the hype, and that can mean spending too much, she says.

"I've seen it happen so many times. The wife is about to have their first or second baby. They have to have a house on this street," she says. "Don't get house poor. Be conservative."

2. Make your best offer

Remain calm, yes, but be realistic. When bidding on a home with multiple offers, you need your offer to stand out.

"Be bold," says Hal Lehrman, owner of Brooklyn Properties in New York. "Usually, the best buyer we have on a bidding war is the guy who lost the last bidding war. He's ready. He doesn't want that to happen again."

The danger is overpaying, but if it's the right house for you, that risk is tempered by other considerations. "In a rising market, you look back five years from now, you're not going to care about that extra $5,000," Mr. Lehrman says.

3. Check credit

Before setting foot in an open house or lender's office, check your credit reports at (you can get one free report annually from each of three credit-reporting companies at this website). "If you see anything that doesn't appear correct or needs updating, a good time to make those changes is before you're in the process," says Mr. Gumbinger.

Consider buying your credit score as well. (One option is With your score in hand, you're in a position to negotiate, he says. You can say to the lender: "I'm looking for a 30-year-fixed [mortgage], I have a Fico [score] of 760, I can put 20% down. What sort of interest rates and closing costs can you offer me?"

4. Account for assets

In competitive markets, buyers need a lender's preapproval in hand before looking at homes.

"Preapproval is absolutely a must," says Vince Malta, a Realtor in San Francisco and a regional vice president for the National Association of Realtors.

Be prepared for a stringent underwriting process. Lenders want to see a consistent income stream. And a gift or funds transfer must be well documented, Mr. Malta says, in part to ensure you're receiving a true gift, rather than a phantom loan. "If it's not properly documented, it won't be counted toward your down payment," he says.

One benefit to a preapproval is that it sets a price limit on your home shopping, Mr. McBride says. "There's no sense falling in love with a place you can't afford to buy because you can't get approved for the loan."

5. Bring a big down payment

If possible, bringing more than 20% to the table will help your offer remain competitive.

"Anything that helps the down-payment side of it is a persuasive thing for a seller," Mr. Lehrman says. "It reduces the possibility that there will be a bank problem."

6. Be nice

If you're competing for a house with other buyers, stand out by making life a little easier for the seller. For example, be flexible about the closing date.

"If all things are equal—the seller is getting the same dollar amount from me or the next person—but I give the seller the flexibility of the settlement date that he prefers, maybe the seller is going to say, 'Money's not everything,' " says Dominic Cardone, a partner at Keller Williams Real Estate in Media, Pa., and a regional vice president with the National Association of Realtors.

7. Find a good agent

An experienced real-estate agent may alert you to homes before they come on the market. Plus, if your agent is respected, that can help you stand out with the seller's agent.

For Many, 2013 Will Be the Year to Finally Buy a Home

Posted on: Beverly Hills Real Estate-Beverly Hills Homes For Sale

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