By Heather Chambers
Vice President, Western Idaho Division Manager, WaFd Bank
Although the COVID-19 pandemic has created economic uncertainty nationally and globally, residential real estate markets have remained strong across our region. Ranked the No. 1 hottest real estate market for 2020 by Realtor.com, Boise continues to see an influx of workers relocating from around the Pacific Northwest and California. The pandemic appears to have accelerated trends in place before COVID-19, along with new challenges as buyers increasingly find themselves in bidding wars and more likely to get priced out of homes.
Seller’s Market Driven by Low Interest Rates, More People Moving to Idaho
Buyers from places like Seattle, Portland and the Bay Area are making their way to the Treasure Valley, drawn by the slower pace, friendly people and easy access to the outdoors. Factor in the comparatively low cost of living, and it’s easy to understand the region’s appeal.
Idaho has long been a draw for people looking to escape the congestion and high cost of living of larger metropolitan areas, and the extended shift to remote work created by the pandemic has seemingly accelerated the Treasure Valley’s explosive growth. In fact, Idaho has had the largest net gain in population in the country since start of the pandemic, with Business Insider estimating a net 194% gain in inbound migration for our state since March 2020.
This influx of new people means demand for housing is at an all-time high, making the homebuying experience highly competitive. According to Heather Chambers, Vice President, Western Idaho Division Manager at WaFd Bank, there are several steps buyers can take, whether it’s their first time through the process or their tenth time, to position themselves for securing a new residence.
Get Pre-approved Before Shopping
Before shopping for a home, unless it will be paid for in cash, mortgage pre-approval is the No. 1 homebuying preparation tool. In a hot seller’s market, inventory tends to be scarce, and time is of the essence. Getting pre-approved gives buyers a leg-up on the competition, allowing them to make an offer with confidence: they can show they are serious and have the means to follow through on a purchase.
“Getting pre-approved before you begin house hunting is absolutely critical,” said Chambers. “That goes for putting in an offer, too. It’s a tough market for buyers right now. We’re seeing multiple offers on every property, listings going over asking price and people paying above appraisals. People who are starting the process need to have a pre-approval letter in hand to make an offer, or they won’t even be considered.” In essence, the moral of the story for buyers is to shop for money, then shop for a home.
When it comes to the pre-approval process, buyers need to bring five things with them when they meet with their lender: proof of income, proof of assets, good credit, employment verification and identity verification – driver’s license, social security number, etc. “WaFd Bank can work with a potential buyer to get preapproved quickly,” said Chambers. “Just remember that the more you bring to your appointment with your lender, the faster and smoother the process will go.”
Be Prepared for Buyers Offering Cash
What is making the Treasure Valley’s real estate climate even more competitive is the prevalence of cash offers. Such offers can be appealing to sellers, who may be able to close faster and avoid the risk of a buyer’s financing hitting a snag or falling through completely. Also, it’s not unusual to see buyers agreeing to pay a certain amount over an appraisal — even some cash buyers, who are often opting not to do an appraisal at all.
“It used to be that an appraisal below the contract price was a negotiating point for the buyer. That’s not the case anymore. In fact, buyers are agreeing upfront to pay over the appraisal out of pocket,” said Chambers. That said, having extra cash beyond what is required for down payment can be helpful.
A Thoughtful Letter Can Go a Long Way
For families trying to purchase a home, letters to the sellers have proven to be powerful in some cases. “Writing a letter talking about your family and including some pictures can sometimes go a long way,” said Chambers. “I’ve heard multiple stories where sellers have chosen to accept an offer below other offers because the sellers wanted their home to go to a family instead of an investor.” Of course, it depends on the seller, but letters can be a powerful tool for families to stand out in the crowd and get their offer accepted.
Keeping Up With Demand Amidst COVID-19
It’s not just the buyers and sellers who are trying to keep up with the competitive market — builders are experiencing some pain points operating in the new normal. The biggest challenge is they cannot seem to build fast enough to meet demand. Their production is impacted by a range of factors including unexpected supply chain shocks and spikes in lumber prices, which tend to happen in summer months, but also may be arising due to COVID-19 safety measures instituted by suppliers.
Like all industries, builders now must also address potential health and safety risks tied to the pandemic — a significant investment of time and resources. “By establishing a relationship with a local banker, a regional lender can help provide financing at a steady pace and enable continued investment in inventory, particularly during times of change,” added Chambers.
Local bankers are here to help
The bottom line is local banks, like WaFd Bank, want to see the communities they serve thrive. Before buyers begin shopping for homes, they might consider consulting with a lender to learn more about the process. It can save a lot of heartache and headache later.
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