Get ready — real estate experts say this spring will present the toughest homebuying market since the recession.
Already the busiest season to hunt for a house, spring this year could be especially daunting for those in the market, whether they're first-time buyers or not.
How to navigate this fiercely competitive market? Look no further.
Know what you're up against
Spring is especially competitive because it's when many homebuyers with children start looking to buy so they can move into a house by summer, before the next school year starts.
Sellers respond to this spike in interest by putting their houses on the market around March. It doesn't hurt that homes show better in the spring, with yards often looking their flowering best.
More homebuyers may be jumping into the game because they're worried about rising interest rates. The 30-year fixed-rate mortgage averaged 4.3 percent last week compared to 3.73 percent a year earlier, Freddie Mac reported, and the upward trend is expected to continue.
Everybody will be competing for a limited pool of homes. Jordan Levine, senior economist with the California Association of Realtors, said inventory is especially low now because home construction hasn't kept up with population growth.
Homeowners also face disincentives to selling. Those with a good chunk of equity in their homes could face capital gains taxes, Levine said. Should they sell, they'll have to turn around and find another home in this brutal market.
"It’s great to sell high and buy high," Levine said. "At the same time, it’s not clear that you’re that much better off."
Get pre-approved for a loan right away
Mortgage broker Fred Arnold of American Family Funding in Santa Clarita advises shoppers to seek loan qualification, whether you're planning to make a purchase three weeks from now or three months. This way, you can move swiftly if you want to make an offer, and you show the seller that your income, credit and assets have been verified. "That way the seller knows with confidence that you're going to qualify for a home — unless you quit your job or something happens to your job in the interim," Arnold said.
Hire professionals who know the neighborhood
The experts recommend using agents and lenders who've been recommended by friends or relatives. But they say it's also important to work with people who know the housing market you're targeting, be it Westwood or Frogtown.
Arnold said a well-connected agent will know when a house is going to go on the market because of their networks. He said working with a mortgage lender who knows a neighborhood can burnish your bid. "If someone's expert in the community," Arnold said, "they can call and let the listing agent know that you're well-qualified for a home loan, which adds credibility to your offer."
Set an upper limit
Levine of the California Association of Realtors recommends that prospective homebuyers figure out what they're willing to spend. Given the short supply of homes, bidding wars often break out over the best listings. Homes end up selling tens of thousands of dollars above the asking price.
"It’s easy to feel the competitive pressure," Levine said."Having a good sense of what's feasible and sustainable will help ground negotiations so you don't end up getting something that you can't afford in the long haul."
Have a 'love letter' ready to go
Coldwell Banker listing agent Eric Larsen said it is the standard these days for buyers to write letters to the seller, expressing their appreciation for the house. If all the offers are comparable, the letter could push one offer above the rest.
"That emotional connection can go a long way," Larsen said.
Larsen said also be prepared to woo the seller with other incentives, such as reducing the length of time a listing is in escrow or offering the seller more time to stay in the house.