What to Expect in Your 2016 Home Search Process?
If you are a first time home buyer or even a buyer that purchased 5+ years ago, the home search process may be at times either frustrating or confusing.
Here are some things to expect:
Prices Have Risen
The median sales price in the metropolitan Chicago area has risen 31% since June 2013 levels. However, interest rates remain at historically low levels. Prices also have not risen in most areas to where they were at the peak of the housing bubble. This means that if you were looking to buy in a community during the peak of the bubble (2006-2008), you may be surprised to find out that you can now afford to move there.
The number of foreclosure sales for the Chicago area are about half of where they were at June 2013. Foreclosures activity varies greatly at the different price levels. Foreclosures represent only 14% of total homes sold for 12 months ending June 2016 but 41.5% of homes sold under $100,000. Also, don’t expect that foreclosed property to necessarily be offered at a discounted price. Most foreclosures are priced at or close to market value (taking into account property condition and time on market).
Multiple Offers Are the Norm
Expect your offer to not to be the only one being considered by the seller. The supply of homes in the Chicagoland area is tight and considered a seller’s market. The supply is 15.4% lower than prior June 2015 levels overall. For homes sold between $100,000 – $300,000, the supply is almost 25% lower than 2015 levels. Your realtor should prepare you for the realities of the current market while making sure you create the best opportunity of getting your offer sold. You can’t control what others offer but you can make sure that you are not paying more than market value. You also don’t want to lose out because of a delay from not being prepared for the home search process.
Mortgage Guidelines Have Tightened
Mortgage guidelines seem to tighten year after year since the housing market fell. As a matter of fact, FHA passed a number of guideline changes in 2015 including how student loans are factored, employment history guidelines and rules for down payment gifts. I have heard many buyers assume that a higher credit score and great income will be a “slam dunk” for the home loan approval process. However, that is not necessarily true. Consult a lender early in the process. You want to make sure how much of a loan you qualify for and if there are any issues to address. Also, expect a 2nd and 3rd verification of the information given. As a matter of fact, the lender is likely to make sure that nothing has changed in your information up to the date of the close. This will be a third party verification so if you have a bankruptcy, past foreclosure or judgement not disclosed, it is likely to be discovered.
It is a great time to buy and sell. For buyers, interest rates have been held at low levels for the past eight years. This is likely to change after this year. Prices will continue to rise. For sellers, the current supply levels in the market favor sellers. And if you are buying a new home in conjunction with your sale, you will want to take advantage of conditions that maximize your combined net effort.