Buyers Now Willing to Pay More for Homes

Published

May 29, 2013

Credit.com is the only company of its kind to be founded and run by leading credit experts including journalists, authors and consumer advocates. We're committed to helping consumers understand and master the confusing world of credit and improve their financial standing by recommending products and actions that are in their best interest.

The housing market has made considerable steps toward recovery in the last several months, and that has led to higher prices thanks to increased buyer interest and a constrained inventory. However, for the time being, it looks like shoppers are willing to pay slightly more for residences.

Today, more than two-thirds of prospective homebuyers say that they believe it’s a seller’s market, up from slightly less than half who felt the same way just a quarter earlier, according to the latest Real-Time Homebuyer report from real estate data firm Redfin. Possibly as a result of this, as well as the general lack of availability for existing homes on the market today, buyers are now far more willing to pay more than they would have earlier. In all, more than two in five said they would add more money to their offers, up from slightly more than one in three a quarter ago, and just one in four in the same period last year.

That additional desire to pay slightly higher prices now is likely driven by concerns of just how appreciable increases could be in the near future, the report said.

[Related Article: The First Thing to Do Before Buying a Home]

About four out of every five buyers said that they think home prices will increase in the coming 12 months, and slightly less than a quarter felt they would rise “a lot.” Already, nearly half of buyers said that they thought increasing prices were a major concern already, and that’s up from just four in 10 who felt the same way three months earlier. Meanwhile, 65 percent said they thought a tight inventory was a major problem as well, and that was down one percentage point from the previous quarter.

The reason the majority of borrowers — 56 percent in all — said they were planning to buy a home now was the current low interest rates, but even that number was down two points from the previous quarter, and from more than three out of five a year earlier, the report said. Just 12 percent cited current low home prices, while 41 percent said they were worried prices would rise soon.

Many experts project that the housing market will see appreciable increases through the end of the year at least, though these will likely be smaller than those observed in 2012, which may have been unsustainable.

Image: iStockphoto