You may have been keeping an eye on the housing market for a while now and think you’re ready to buy this year… but think again. 2023 is stacking up to be a different year in terms of homebuying hardships, so you’ll want to know how to find your home in a low-inventory market (yes, they’re pretty much nationwide) and make your offer stand out to sellers.
Related: 5 Strategies to Help You Win a Bidding War
What Is a Low-Inventory Market?
A "low inventory market" is when the number of available homes for sale can’t meet the demand from potential buyers. That’s been the case for a few years now. Although recently the shortage was lessening. According to Realtor.com, starting in late June, the number of for-sale homes dropped for the first time in 59 weeks. Compared to one year ago, new listings were down 29%.
Why are so few homes for sale? Essentially, too few homes are being built to meet the housing demands of a population that’s continuing to grow. That’s especially true when it comes to millennials, a 70-million strong demographic now at prime home-buying age.
At the same time, many buyers were fortunate to purchase when rates were in the three and four percent range. That’s certainly changed: According to Freddie Mac, the rate for a 30-year fixed mortgage soared to 6.71% on June 29, nearly doubling from the previous year.
Such high rates give homeowners with mortgages in the 3%-4% range little incentive to sell since they’d then have to turn around and finance a new home at a higher interest rate. Instead, they may decide to take out a second mortgage for home improvements or debt consolidation and stay for a few years more.
A final contributor to low inventory is rising home prices. According to the CoreLogic HPI Forecast, home prices will continue to rise. The CoreLogic forecast indicates a month-over-month increase of 0.8% from March 2023 to April 2023 and a year-over-year increase of 4.6% from March 2023 to March 2024
Related: What Is a Second Mortgage? Can I Use the Money to Update My Kitchen? Bathroom? Backyard?
3 Tactics for Buying in 2023
Obviously, 2023 is going to be a competitive market for buyers, so you’ll want to be sure you’re ready and able to present your best offer. Here’s how to get started:
- Improve your credit score — Improving your credit score makes a big difference in qualifying for a mortgage and the interest rate you’ll be offered and how much you’ll pay each month. For example, for a $430,000 fixed-rate 30-year loan with 10% down, and a credit score of 740-759, you may pay $3,091/month. With a lower score, say 680-699, you may pay $3,424/month. (Check today’s rates on our site here.) An AMS Military Mortgage Advisor can help you with a plan to raise your score or you can work with a counselor at a HUD-approved housing agency. You’ll want your score in the best place possible before you apply for a loan.
Related: 4 Ways to Help Lower Your Interest Rate
- Get pre-approved — A pre-approval is different from getting pre-qualified because it means a lender has verified information you’ve provided and “runs the numbers” to tell you how much they’re willing to finance. This amount will help you hone in on homes you can afford and because they put this commitment in writing it carries more weight with sellers when it’s time to make your offer.
- Be ready to negotiate — In 2023, 60% of agents surveyed by HomeLight report that most homes receive only one offer — not the dozen or so seen in recent years. In addition, agents say that bidding wars are much less common than they were at the height of the market and that even when homes do get multiple offers, they are still getting fewer. So you’ll want to go with a strong offer and be ready to negotiate. In addition to price, you can negotiate things like who pays for closing costs or repairs. The time to close can also be an attractive bargaining chip with military sellers who may be anxious to move to their next duty station (be sure to work with your lender on closing time possibilities before your agent approaches the seller’s agent on this).
Whenever You’re Ready, It’s a Good Time to Buy
So, is 2023 a good year to buy? That depends on your personal and financial situation, but if you’re ready to buy then it’s always the right time. Remember, if you buy now when rates are hovering around 6.5%, you’ll be building equity as a homeowner vs. paying rent, and when rates drop you can consider refinancing your loan.
There’s no upside in waiting for the “perfect time,” because markets, interest rates, and inventory are all moving parts. The best plan is to educate yourself on the current market in your area (a real estate agent and an AMS Military Mortgage Advisor can help with this), figure out your budget, and start outlining your purchase timeframe.
Looking for more tips? Start with our free downloadable homebuying guide.
We’re Here to Help
Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AMS Military Mortgage Advisor will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.
Ensuring AAFMAA Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!