We’ve heard a lot about real estate market inventory shortages over the past few years, both here in Washington and also nationwide. Low levels of supply have challenged home buyers, especially in the more populous parts of the state like the Seattle metro.
But when it comes to buying a home in the state of Washington, there’s a solution for almost every challenge. Today, we will offer some tips for buying a home in Washington during a persistent inventory shortage.
Update on the Housing Inventory Shortage In Washington
The U.S. real estate market has suffered from an inventory shortage for many years, and there are several over overlapping factors driving it. Here in Washington, we have experienced three major shifts over the past few years with regard to real estate supply:
- The first shift occurred during the first half of 2020, when the COVID pandemic caused a sharp increase in home buying activity. Shortly after that, housing market inventory levels sank to an all-time record low, fueling fierce competition among buyers.
- The second major shift occurred in early 2022, when the real estate market cooled down due to rising mortgage rates. This trend caused inventory levels to rise again, giving home buyers in Washington more options to choose from.
- The third shift began at the start of 2023. Elevated mortgage rates made many homeowners reluctant to sell their homes, out of concerns that they would take on a higher rate with their next purchase. This and other factors caused a sharp decline in housing market supply in Washington and nationwide.
When this article was published, in late summer 2023, the state of Washington had about a 1.5-month supply of homes for sale. That’s an improvement over the record lows experienced in 2021, but still well below what’s considered to be a balanced estate market.
All of this underscores the challenges home buyers in Washington are facing, due to the ongoing inventory shortage. So let’s shift gears and talk about the things you can do to improve your chance for success.
Getting Get Pre-Approved
Underwritten pre-approval is a crucial step toward securing your new home. Unlike a basic pre-approval, which provides an initial assessment, an underwritten pre-approval involves a comprehensive underwriting process. Typically, this step occurs once you’ve identified a property and are prepared to submit an offer. However, you also have the option to proactively undergo underwriting before house hunting, enhancing the strength of your pre-approval.
Throughout this meticulous process, an experienced underwriter will thoroughly review every aspect of your file, except property-related elements like appraisal and title policy. While this requires a greater upfront investment of time and effort, it ultimately expedites the loan finalization when you’re ready to make your home purchase.
Upon securing underwriting approval, only a few final components require endorsement before sealing the deal and progressing towards closing: appraisal, title, and insurance. Once these last steps are successfully navigated – assuming the property and title are issue-free and adequate insurance is secured – your path to homeownership reaches its culmination.
Take control of your home-buying journey today – take the proactive step of securing an underwritten preapproval and pave the way to the home you’re aiming for. Get started on your path by obtaining pre-approval now.
Adopt the appropriate mindset.
When there’s an inventory shortage in the housing market, sellers tend to have more negotiating leverage than buyers.
That’s not always the case. Sometimes we have low inventory levels along with slower home sales, two conditions that can balance each other out. But in most cases, tight supply conditions tilt the market in favor of sellers.
If you’re planning to buy a home in Washington during the latter part of 2023, or in 2024, you’ll want to adopt the right kind of mindset. Start by researching current conditions within your local market, to find out if it favors sellers over buyers. If that’s the case, you’ll want to keep that in mind when making an offer and negotiating with sellers.
Create a budget in case of multiple-offer scenarios.
During a housing market inventory shortage, like the current situation in Washington, multiple-offer scenarios become more common. This occurs when more than one home buyer makes an offer on the same property at the same time.
In popular neighborhoods located within high-population areas, some properties can receive a dozen or more offers within the first few days of being listed. This is a tricky situation from a buyer’s perspective, and it emphasizes the importance of creating a budget ahead of time.
If you find yourself competing with other buyers in a bidding war, you’ll want to know the maximum amount you can spend on your monthly housing costs. It’s best to do this kind of math before you even start house hunting.
In a fast-paced real estate market driven by inventory shortage, you might not have time to revisit your finances each time you make an offer. Things happen quickly in a tight market. So it’s best to have your budget and spending limits established before you get into the thick of it.
Research your local market, with an emphasis on sale prices.
Understanding local market conditions can help you make a timely offer and negotiate swiftly. And that’s a recipe for success when buying a home during an inventory shortage.
A lack of market awareness, on the other hand, could require you to do more on-the-spot research before making an offer. And there’s not always time for that.
An experienced real estate agent can help you review comparable sales while you’re actually visiting a home. But a little advanced research goes a long way, especially when it includes recent sale prices in the area. This kind of information is available online for free, so take full advantage of it.
Make a strong, data-based offer for the first time around.
The ongoing housing inventory shortage in Washington has accelerated the real estate market, as such conditions tend to do. The typical time it takes to sell a home has declined steadily since the start of 2023, a direct result of shrinking supply levels.
In this kind of real estate market, it’s important for home buyers to present their strongest offer the first time around. You might only get one shot at it, especially if other buyers are competing for the same property you’re interested in.
In a slower real estate market, there’s often more back-and-forth negotiation between buyer and seller. The buyer might present an initial offer, followed by a counteroffer from the seller. This might happen several times before both parties agree on a sale price and other terms.
But that’s rarely the case in a competitive market with an inventory shortage. In multiple-offer situations, sellers typically accept the strongest offer of the bunch, and dismiss the others.
The point being, you can increase your chance for success by making a strong offer backed up by comparable sales data. This is where that market research mentioned earlier comes back into the picture.
If you know what similar homes have sold for in the area, you’ll have an easier time determining how much to offer on a particular property.