After the year the world has endured, with the pandemic, the dysfunctional presidential election, civil unrest coupled with racism and riots, all I can say is, “wow.” 

It would appear this would be enough, but no. Now the housing market has gone mad. 

It’s a race to the finish with sellers in the lead. 

Home purchases are the highest that I have ever witnessed, and I have been in this industry for more than 30 years. With interest rates being the lowest ever (2-4%), and because there are more buyers than homes, the demand has reached an all-time high, which has created a shortage in inventory, as well as an escalation in offers on properties. 

There are many properties for sale that have as many or more than 40 offers at one time, therefore creating a bidding war. It’s a domino effect for this gouging bidding war that purchasers are unknowingly creating has caused prices of homes to skyrocket far beyond market values. It’s good for the seller right now because they are selling their home in one day, with purchasers offering cash, and some offering up to $30,000 beyond the appraised value. This bidding war has pushed many credit-qualified, deserving home purchasers out of the market, simply because they cannot compete.

There was a time that one would offer $200,000 for value, and if the property’s appraised value came in less, the seller would lower the price to that value because for those financing the purchase with a mortgage, the lender would only lend to the appraised value. 

This is still true, but there is a twist in today’s market. Sellers and their listing agents are adding a clause to the contract stating no matter what the appraisal, if it is less than the agreed purchase price then the purchaser agrees to pay the difference out of pocket. Home purchasers are cashing in retirement funds, 401Ks, IRAs, savings, gift funds, family funds — you name it, they’re probably cashing it in.

What about a new build? 

The new homes sales in many instances have stalled because the cost of lumber went up 150% from a few years ago, and the profit margin for the builder/developer had not been as great. 

This was pandemic cause and effect, slow delivery, skeletal staff and closures of mills but the good news is, according to USA Today, the lumber prices are lowering. But, builders and developers are holding lumber that was purchased at a very high price, wondering if they will break even or lose because the prices of lumber has fallen. This is good news for you.

Well, you may wonder where does that leave the market now and in future? As I look into my crystal ball, I believe, more than likely, many areas will turn to a renters’ market. I have heard instances where investors are purchasing subdivision communities to be occupied by renters, and I am sure that the rent fee will be top dollar.

What can you do as purchasers?

First, I say stand down and let the market cool down a bit, as I can only imagine the frustration in getting your hopes up for a home that you believe to be the one for you and someone come and bids $25,000 over the asking price and puts your heartfelt offer to shame. Or, the seller’s greed takes over and he or she refuses to sell at a reasonable price, again, placing you out of the market.

Second, let’s build together, especially now that lumber prices are somewhat stabilizing. Find a lot, get some plans, and build what you want without the competition.

Third, renovate your existing home. Create more space, update your kitchen, reface your cabinets. I say put some lipstick on your home, make it pop with bright, yet conservation inviting colors. You’ll have the new home that you have always wanted, and it will be one you’re already familiar with. And the cost will be a lot less.

Finally, renovate a fixer upper with an FHA 203K, VA, or Fannie Mae homestyle renovation loan. There may be less competition on this note. At least you get to choose your carpet and paint colors. You can also pick your counter tops and appliances. You make it your own and it will feel just like home.

Dianne Jennings is owner and CEO of Global Mortgage Strategies Inc. in Covington. She may be reached at dianne@diannejennings.com.