If you’ve been shopping for a home, you know it’s a seller’s market. Home prices are rising, the number of houses for sale is declining and properties are selling very quickly.
In Weber County, the median sales price increased substantially in February — up 19 percent from last year to $200,000. In Davis County, prices rose 11 percent — an increase of nearly $25,000 from the median in 2016. The same conditions prevailed in Morgan County where prices were up and buyers had fewer housing choices.
The current environment is the result of a housing shortage. In fact, the Kem Gardner Policy Institute at the University of Utah finds the number of new Utah households is now growing faster than the number of new housing starts. This is a first in more than 40 years.
Several reasons explain why house construction can’t keep up with demand, including a labor shortage in construction, constraints in land availability, and local ordinances and regulations.
This shortage doesn’t appear to be easing anytime soon. In fact, the high-demand and low-supply conditions may continue at least until 2019. That’s when the Policy Institute projects a slight slowing in Utah’s population growth.
In the meantime, house-hunters need to be prepared in order to secure their dream home. Follow these tips below as you navigate the hot housing market.
Know how much you can afford
Before getting serious about house-hunting, visit with a mortgage lender to see how much you can afford.
Take the additional step of getting pre-approved for the loan to demonstrate to sellers that you can get financing and can afford the house. This will likely make your offer more competitive.
Determine where you can compromise
No house is perfect so know what features are most important before you start shopping. Decide whether items like walk-in-closets or granite countertops are must-haves or nice-to-haves so you can make quick decisions as new houses come on the market.
You may also want to expand your search area to consider additional neighborhoods or fixer-uppers so you have more choices. Or new construction may be the solution if you don’t need to move in right away.
Be ready to make a competitive offer
In today’s market, don’t expect to be the only buyer making an offer on a property. Be ready to compete with other buyers who will be submitting their own offers.
That means acting quickly. In a market where some houses sell within days or hours, you can’t spend too much time thinking about whether or not to move forward. In Weber County, homes are selling seven days faster than last year on average.
Before submitting your offer, talk to your Realtor about the local market conditions. To be competitive, does the offer need to be at or above asking price? Or can you get away with offering less?
Also ask your Realtor about how much the house is realistically worth so you can avoid getting in a bidding war where you overpay.
Watch out for escalation clauses
Some buyers will use an escalation clause in an attempt to win a bidding war. An escalation clause states the buyer’s offer will go up in price should the seller receive a higher offer.
While some buyers have success with this strategy, it is risky. Without a properly written escalation clause, buyers may end up paying much more than they intended for the property. They also risk losing their negotiating power by telling the seller up front the maximum price they’ll pay.
Make sure to work with a Realtor who is experienced in escalation clauses before considering this strategy.
For more tips and to learn more about conditions in your local area, contact a Northern Wasatch Realtor. Find one at NWAOR.com.
– Sonya Smithing
2017 President, Northern Wasatch Association of REALTORS