Record housing stock, high prices and low mortgage rates have provided an interesting backdrop for the 2021 housing market. Millions have fought tooth and nail to close on homes throughout the year, but millions more have failed in their attempts.
The housing market in 2021 was booming, but that doesn’t mean buying a home was a breeze. In fact, 66% of Americans who started last year with purchase intentions failed, according to NerdWallet’s 2022 Homebuyer Report. With 26 million people planning to buy homes this year, according to the survey, lessons learned from failed attempts in 2021 could hold some pointers for buyers this year.
More than a third (35%) of Americans who planned to buy a home in 2021 but didn’t said they postponed or canceled those plans due to the pandemic or related effects. Of course, individual shoppers can’t do much about the economic and public health impacts we’re all experiencing, but that doesn’t mean all hope is lost.
Studying the most common barriers to buying in 2021 can give future homeowners the edge they need to close a deal this year.
1. Competitive Bids Make Deals
Low inventory amid high demand creates a competitive market, and in that regard, 2022 will be similar to 2021. A quarter (25%) of Americans who had planned, but were unsuccessful, to buy a home in 2021 say they made an offer on at least one home, but were ultimately not contracted.
A competitive bid is not just the highest bid. Of course, money talks, and you’re more likely to succeed if you can outbid the competition. But there are other ways to make your offer stand out.
Make the transaction as easy as possible by keeping it simple and convenient for the seller. Demonstrate your ability to pay with a mortgage pre-approval, suggest a quick closing and let the seller choose the date, and offer to buy the home as-is after having it professionally inspected. Your real estate agent can help you write an offer that will move to the top of the pile, without putting you at undue risk.
2. The houses available may not be perfect
The greater the housing shortage, the more flexible potential buyers will have to be.
A quarter (25%) of unsuccessful buyers in 2021 say they delayed their plans because they couldn’t find a home that suited their needs. Chances are the line between wants and needs, for many in this group, is not clearly defined.
Before you start shopping, make a list of all the features you would like to have in a home. Then mark the ones that aren’t really needed. The more features you can compromise on, the more likely you are to end up with your own home. That doesn’t mean you have to be prepared to fit a family of five into two bedrooms, but maybe you can live without a two-car garage or a finished basement.
3. Buying in 2022 will still be difficult
Nearly a quarter (24%) of buyers who were unsuccessful last year say they have delayed their buying plans because they think it will be easier to buy in 2022. But the forces that made buying a home a challenge in 2021 will largely continue into 2022.
The rate of price growth may stabilize somewhat over the coming year, but prices are unlikely to reverse and fall dramatically. And the shortage of homes on the market is unlikely to see a drastic change either. According to the same survey, of potential home sellers who want to put their homes on the market this year, 89% say something is holding them back, including worries about finding or affording a new home. themselves.
If you’re hoping to buy this year, be prepared for a challenge. Realistic expectations can protect you from disappointment and help you make contingency plans when you find yourself fighting with other potential buyers.
4. Current house prices could blow budgets
It’s tempting to borrow more money or push yourself harder to get a contract. No. Nearly a quarter (24%) of successful buyers last year say they walked away from the market because they couldn’t afford the homes that were available.
Be thorough when setting your home buying budget, with the resolve to stick to it when the going gets tough. Stretching too far to buy a house only to find yourself housing poor can be a recipe for sleepless nights under your new roof. A home affordability calculator can help get you started in the right direction, taking into account all of your existing expenses as well as those that come with home ownership.
5. Borrowing for a house is not a safe thing
Qualifying for a mortgage usually requires adequate and consistent income, a manageable amount of existing debt, and a credit history that makes you a good risk to lenders. While 16% of unsuccessful homebuyers in 2021 said they were unable to qualify for a mortgage, it’s possible some of them didn’t actually apply and just assumed they would. refused.
Buying a home is most often a long-term goal, and it can take years for your income and credit to be in good enough shape to qualify for a mortgage. Aim for a credit history that showcases on-time payments, keeping debt low, and saving a down payment to make your mortgage application more attractive. Keep in mind that a healthy down payment will reduce the total cost of your home loan by saving you interest and private mortgage insurance (required for mortgages with less than 20% down payment).
There are also programs available for first-time buyers that can make it easier to get a home loan.
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Elizabeth Renter writes for NerdWallet. Email: [email protected] Twitter: @elizabethrenter.
The article 5 Home Buying Lessons Learned From Last Year’s Unsuccessful Buyers originally appeared on NerdWallet.