FAQ About the Current Housing Market in 417-land

We’ve all heard it, the current housing market in Springfield is crazy hot. Prices are up 15% so far this year alone! That’s great news if you’re a seller, and not so great news if you need to buy a home these days. Buyers are also finding themselves with fewer options to look at. There just aren’t enough homes for sale to keep up with demand. All of that means the market right now is nuts—just plain nuts. I get questions all the time about whether someone should sell their home, if they should list their home for more than its worth, or if they should sell just because the market is hot. I’ve heard pretty much every question in the book, and because I know so many of you are wondering about the market, I figured it might help if I shared some of the FAQ about the current housing market and the answers. 

Q: So, is this the new normal? 

A:  If only I had a crystal ball! While I don’t see an end in sight to the current market, I also don’t think we’ll continue on this market trend for another year. We’re seeing low inventory and low interest rates, in fact this area (southwest Missouri) has been long overdue for a price adjustment in the cost of homes, so in some ways, we were bound to have a price increase. Our prices are so much lower than the rest of the country! So yes, I do think the 15% increase in home prices will stick around, but I don’t think prices will go up this much every year.

Q: Should I sell now and rent while I wait for prices to come down?

A: No. Sell now and buy now. If you think home prices are high right now, you should go look at rental prices. Just like the housing prices these days, rent is high. The good news is that interest rates are low, so you can borrow money for a new home and worry a little less about being gouged on interest rates. 

Q: Should I sell first and then buy so I have more money for down payment?

A: This is an interesting new idea lenders are offering. Here’s how this works… If your lender allows it, you can buy a home and then sell your existing home and recast your mortgage payment. The perk here is two fold: first, by doing this, your lender will usually agree to let you put down a smaller downpayment. Then, once you’ve sold your home, you can go back to your lender and put down a much larger chunk of money and reduce your mortgage payment. The other reason why this is great for buyers is that it means you can lock in that low interest rate even when you’re putting down a smaller downpayment. Lenders are basically assuming you’ll be able to sell your home quickly, so they’re less worried about an initial downpayment of just 5% or whatever it might be. This method reduces both interest and principal remaining, and you can write up a much more attractive offer on a home since your offer won’t be contingent on you selling your home.

Q: Is my home worth way more now than it was last year? 

A: Probably not that much, but likely yes it’s worth 15% more. The best way to find out your home's worth is not Zillow. I know this is hard to believe since Zillow shows an estimate value for each home, but what it doesn’t take into consideration is what other homes in that same area have sold for. That’s where you need to call a realtor to do the market analysis. That’s how you’ll really figure out an accurate value of your home.

Q: Is it true that people are offering cash with no inspections on houses?

A: Yes! Unfortunately. Every situation is different, but we've seen a lot more cash buyers this year especially from out of state. I’ve also heard of buyers cashing out their 401ks to be "cash buyers" rather than using traditional bank financing for fear of missing out on a home in this competitive. When you’re paying all cash for a house that means there is no bank involved so no underwriting, no appraisal required and you can close in as quickly as 10 days rather than the traditional 30 days. In a housing market with soaring prices this is music to a seller's ears. When waiving inspections you’re at risk of buying a home that has some serious issues you might not catch on your own. I never recommend waiving inspections unless you’re a buyer who can check out a crawl space, attic, roof and HVAC system on your own and know what you’re looking at. Waiving the inspection might make your offer more appealing to a seller, but as a buyer it can put you at much more risk.