Homeownership is considered by many to be the pinnacle of the American dream. For generations, buying a house has signified taking the next step into adulthood and putting down roots. While the goal of homeownership has remained unchanged, it has become increasingly difficult to buy a home in certain metro areas. Talk to anyone who has bought a house in a highly competitive market, and they more than likely had a few offers fall through before finding the one. It’s the result of a simple economic principle — supply and demand. In a competitive market, there’s more demand than there is supply, necessitating buyers to make increasingly competitive offers.
Most people would assume somewhere in California tops the list of the most competitive housing markets, but it’s not in California at all. Actually, Denver, Colorado has the most competitive homebuyers in the U.S. going into 2019. In 2018, the average cost of a home in metro Denver was $540,624 — a 10% increase from the previous year! Interestingly though, Denver isn’t among the cities with the highest down payment sizes. So what does get you ahead? Here are some tips for competing in fast-paced housing markets, even if you’re a first-time homebuyer:
- Get preapproved for a mortgage. If you’re a first-time home buyer, you may be so excited to look at houses that you jump the gun on meeting with a mortgage lender. In competitive housing markets, the majority of homeowners shop around for a mortgage before they even pick a house. By getting preapproved before making an offer, you can act fast once you do find the right house. Start by checking local mortgage companies. If you’re in the Denver area, 5280 Lend can help you find an affordable rate.
- Improve your credit score. The same study that named Denver the most competitive housing market found that over half of buyers in the 10 most competitive metros have good or excellent credit. If your credit score is not already there, be sure to pay off debt, keep your balances low and take other steps to repair your credit.
- Avoid contingencies, if possible. In competitive markets, it’s highly likely you’re not the only one putting an offer on any given house. Contingencies like needing to sell your current house before closing on the new one could make your offer unattractive. Avoid adding these as part of your offer if at all possible.
- Go in with your strongest down payment. Even if it means saving for a little longer, there’s no denying that having a strong down payment will play to your advantage. That being said, don’t stretch yourself so thin that you drain your savings account. Be sure you’ll still have at least an emergency savings fund after making your down payment.
While these things can’t guarantee that you’ll find your dream home right away, they certainly help. Sometimes it’s the little things that can put you over the edge in competitive markets. Good luck, and happy house hunting!