Are You Paying Too Much For That Home?
With home prices predicted to keep rising this year, more and more people are struggling to get on the property ladder. Buying rental property is getting more expensive, too. If you’re considering buying a home, you need to know how to tell if the property is overpriced, and if the real estate market you’re buying in might be heading for a crash.
In order to tell if a property is overvalued, you have to be willing to do some research and dig into local property values in the area where you want to buy. You’ll need to consider factors like how long the house has been on the market and whether other houses in the neighborhood are selling quickly. Of course, you’ll also need to know whether you’re about to buy in a real estate bubble. Here’s how to tell if you’re about to pay too much for a home.
The House Has Sat On The Market
If a house has been on the market for an unusually long time, it’s likely that the seller is asking too much. As of December 2022, the average listed house was on the market for 67 days, which is still less time than houses spent on the market before the pandemic. In some markets, houses are going to move a lot faster than that, while in other markets, they may move a little slower. Pay attention to how fast other houses in the same area are selling to get an idea of whether the house you’re looking at has been on the market for an excessively long time.
Other Houses In The Neighborhood Are Selling Quickly
If other houses in the same neighborhood are selling much faster than the house you’re looking at, it either means there’s something wrong with the house, or it’s overpriced. Most of the time, it means it’s overpriced. You’re going to have to do some investigating into how much people are paying for those other houses in order to determine if this is the case, though. It may instead be that the house you’re looking at doesn’t have the same square footage or features that other houses in the neighborhood have.
Nearby Houses Are Cheaper
Get your real estate agent to run the comps for the house for the house you’re looking at to see how much other houses in the area are worth. The comps should tell you how much other, similar houses in the area have sold for recently. If you decide to look up this information for yourself by looking at listings, make sure you look at houses in the same neighborhood that have similar square footage and lot sizes, the same number of bedrooms and bathrooms and similar layouts.
Lots Of Homes In The Neighborhood Are Listed, But Nothing Is Selling
If lots of homes in the neighborhood are listed but most of them are languishing on the market, it could be a sign that the market itself is overvalued. Of course, it could also be a sign that changes are coming to the neighborhood that the current residents don’t want to be around for. Perhaps zoning laws are changing or a new development is expected to increase traffic or bring in a specific type of resident. For example, if student apartments are going up nearby, residents with families may want to relocate to a quieter neighborhood.
You’re In An Overpriced Market
Do you know how to tell if a real estate market is overpriced? Two-thirds of the nation’s housing markets are overpriced, so if you’re trying to buy a house but real estate just seems insanely expensive, you could be at the mercy of an overpriced market.
Signs of an overpriced market include high home prices with buyers frequently expected to offer more than asking price on a listing. Houses move quickly, many selling within weeks of being listed. Bidding wars erupt and open houses are packed. If you want to buy and you can’t move to a better market, it may be worth waiting a while to see if housing prices come down.
When you’re buying a home, every penny counts. You need to make sure you’re paying a fair price for the property, because you’re going to need all of your extra money to provide a financial cushion in case your situation changes or you need to make repairs to the home. Take care to make sure you’re not paying too much for your home, so you can save more and avoid ending up house-poor.