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The current housing market is so hot that it is breaking just about every real estate record that exists: Lowest inventory, highest prices, and shortest time on the market, to name a few.

So what is a buyer to do? Is buying a home in this hot housing market a mistake? Let’s look at some things to help decide whether to buy now or wait until things cool off.

Buying a home right now means dealing with the reality of a seller’s market, also called a “hot” housing market. This means that there are not enough houses for sale to meet buyers’ demand. This lack of housing inventory leads to high sales prices, and even bidding wars, for the few houses that are on the market.

There are a few things that created the current real estate market. First, the largest demographic in the United States right now are Millennials. This group ranges in age from about 25 to 40, so they are likely to have established careers and are starting families or already have children. In other words, many are ready to either buy their first home or upgrade to something bigger and more family-friendly. The housing demand is not driven entirely by Millenials, but they are definitely having an impact.

The Coronavirus pandemic has also played a part in increased house hunting. Remote work and school led to reexamining priorities for the home. It revealed issues like too little space and distance from loved ones, or that an open concept is not necessarily best for everyone. For some, working from home became permanent, opening up the possibility of living in an entirely new environment without worrying about commuting. 

At the same time, the construction industry has slowed, resulting in fewer new homes. This was largely due to breaks in the supply chain and high material costs (which were other effects of the pandemic).

Adding to these market conditions: Americans have more savings than in prior decades, and interest rates have been at all-time lows, making it cheap to borrow. In other words, people have the money to buy homes.

The result? It doesn’t matter if buyers are looking at small starter homes or luxury listings. Demand is high, supply is low, and homes are selling for more than ever.

Trying to time the real estate market is even riskier than timing the stock market for investing money. No one knows when prices will go down or when more homes will be available. And even if prices drop, interest rates are starting to go up again, offsetting any savings.

While buying a house is an investment, unless it is bought as a rental property or to flip, it should not be thought of that way. It represents shelter for the family. Yes, it needs to maintain its value, but its primary purpose is not to make money.

Without a crystal ball, it’s impossible to advise whether someone should buy now or wait. There is no right or wrong answer. Instead, each buyer must consider their reasons for moving, their ability to find what they want, and whether or not they can afford it.

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For those considering buying a home in this market, the pressure is undeniable. Multiple offers come in well over the asking price, and sometimes in cash. Buyers are going to extremes to sweeten the deal. People are willing to waive contingencies or even make offers on houses they have not seen in person. 

It’s easy to understand how this happens. People are afraid of missing an opportunity. The more people line up at open houses and snatch up homes the minute they are listed, the more dire it seems to someone who needs to move.   

Compromises are common when looking for a house. Buyers might widen their search area or opt for a fixer-upper instead of something move-in ready. But in a hot market, it is easy to get carried away. Overpaying or taking on too much work can leave a buyer feeling trapped in a house that is less than ideal. 

It is important to keep in mind what is a reasonable compromise, and what is a risky decision. Buyers need to keep their financial and personal well-being in mind. Understand the difference between something that the family can live with and true deal breakers that should not be ignored. Settling on a bad property (or one that is wrong for the family) can be a source of regret, not to mention difficult to sell later on.

Just like knowing what features are necessities and which are deal-breakers, buyers need to understand where they must draw the line when it comes to cost. When someone’s heart is set on a certain house, or when they are tired of having offers rejected, it’s tempting to push the budget to its limits. 

Find a mortgage lender to find out precisely how much you can borrow and get pre-approved before you look for homes. Remember that interest rates can impact how much house a buyer can afford. For example, a buyer might be able to afford the monthly payment for a $300,000 home right now. But if the interest rates go up next month, the same mortgage payment might only get them a $250,000 house. 

In addition to the purchase price of a house, don’t forget about insurance, property taxes, Homeowners Association fees, and maintenance costs. Be cautious about being able to buy a house, but not being able to afford to live in it and keep it up.

To buy in a hot market, know that houses will cost more and be prepared to be flexible. It is good to start a home search at the lower end of the budget so there is room to expand. But it’s also important to be very clear about the final budget and stick to it. 

In the past, renting was almost always the more affordable option. But the rental market is hot now, too. Rent is higher than ever almost everywhere in the country. 

The landlord is responsible for paying taxes and maintaining a rental unit—something that a person might miss once they are a homeowner. But owning property means building equity and having an asset that will hopefully grow in value over time. 

In some markets, living in an apartment might actually cost more than buying a house—provided a buyer can find one. Every home has a break-even point where buying becomes “worth it” over renting. Now, more than ever, it is important to crunch the numbers and consider the pros and cons of both buying and renting.

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If a buyer does not have to move right away, there are some advantages to waiting out the hot housing market. 

Waiting can provide an opportunity to pay down debt, improve credit, and save more money for a down payment. It can allow a buyer to consider their wants and needs and budget accordingly. All of these things will put them in a better position when they do decide to buy. 

Although the market is more stable than it was before the mortgage crisis of 2008 many homes that were bought in haste over the past few years might end up back on the market. Some might even end up in foreclosure. Eventually, there might be deals to be found. There are no guarantees, however, and as we mentioned above, it is unwise to speculate on exactly what the market might do. 

Everyone’s tolerance—both emotional and financial—is different. If the stress of dealing with the hot market is too much, or if buying now means compromising too much or stretching the budget too thin, there is nothing wrong with waiting. 

For others, it is clear that moving will improve the quality of their family’s life. Perhaps they have found their dream home or the neighborhood they have always wanted to live in. A new school district, a commute that is a fraction of what it was before, or getting enough space for their growing family can make buying worth it—provided they are not overextended financially.

If this is the case, understand how the hot housing market will affect the experience of buying a home. Be realistic. Know that a bargain isn’t likely to fall into your lap. Have your financing squared away and be prepared to go up against other offers. 

Most importantly, partner with an experienced buyer's agent. The agents at Berkshire Hathaway HomeServices Select Properties are experts in guiding buyers through the hottest of markets. They will help prepare you to make the ultimate decision—to jump when the time is right, or walk away when it isn’t.