Over the last several years, there wasnâ€™t any pressure on the buyer to adjust their offer for three reasons:
They buyer could find another home easily for probably less money and a lower mortgage rate. There was no downside to not â€˜upping the anteâ€™. However, in todayâ€™s market, things have dramatically changed.
A normal real estate market has between 5-6 months worth of inventory. Over the last several years, the inventory of homes for sale had skyrocketed to 10 months. Most buyers in almost any price range had a multitude of houses to choose from. Today, the national monthâ€™s supply of inventory has fallen below five months. In many markets, there is not enough housing inventory to satisfy the current demand.
Conclusion:Â If the buyer loses the house they are bidding on, there is no guarantee they will find a similar home anytime soon.
Becausemof the limited inventory, home prices are again appreciating. The Case Shiller Pricing Index revealed that house prices rose by 6.8% in 2012. Experts are projecting home prices to increase by 5% to 8% in 2013.
Conclusion:Â If the buyer doesnâ€™t get this house, there is a good likelihood that a similar home will cost more in the future.
The â€˜costâ€™ of a home to a buyer is determined by the price of the house and the expense associated with the financing. MortgageÂ rates are projected to inch upÂ in 2013. In a recent forecast, the Mortgage Bankers Association predicted that rates could climb as high as 4.3% by the end of the year.
Conclusion:Â If interest rates do inch up, the â€˜costâ€™ of the next home could be impacted significantly.
If a buyer truly loves the house they are bidding on, it probably makes sense to raise their bid now instead of waiting for another dream house to appear.