The housing market is just too hot to handle right now.
Interest rates are low. Supply is still low. Demand is still high. And prices are increasing.
Even people trying to build a house are running into problems with soaring lumber costs.
It's especially difficult for people who are buying and selling at the same time. Moving out of the old and into the new can be difficult when it comes to timing. If you’re not careful, your house could sell too quickly before you can even close on the new home – and buyers are often at the mercy of the seller in this current seller’s market.
But some families are finding unique ways to avoid the market frenzy altogether while finding the home of their dreams.
In 2020, Vanessa Sutton and her husband were ready for a home upgrade. Their home in The Colony was a bit too small and they hoped for something bigger.
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She was trying to sell her old house and buy a new home but doing that during a pandemic and a competitive housing market left her fearing the in-between.
“There was a few moments where I thought, what if we don’t find somewhere to live? Or we don’t get the money that everything else is commanding?” she said.
Her realtor, Gisella “Gigi” Olivo with JP and Associates Realtors, stepped in with an idea.
“It’s our job to be the calm in the storm,” she said. “We try to make it as smooth and stress-free as possible.”
She suggested using a growing trend across the country – the Knock Home Swap.
“It offers that end-to-end solution of being able to buy your house first and then sell your house second,” Olivo said. “We had to figure out ways to be a bit competitive in this market.”
Here’s how Knock works: Consumers are allowed to finance a new home even while they still have equity and a mortgage locked up on the old one. Homeowners basically swap one home for another.
"Selling your home in this moment is not hard, being homeless in the process is hard,” said Knock CEO, Sean Black. “It’s the chicken and egg problem of, 'I have kids, pets, a life, a job. It’s really hard for me to manage all of this uncertainty in six months and I don’t know if it’s going to go through.'”
Black – who shares a wealth of knowledge on the housing market as a founding member of real estate site Trulia – said homeowners essentially get access to all the money they have locked up in their old home so they can make a down payment on the new home and close on that mortgage, before listing the old one.
Olivo, who happens to be a Knock certified realtor, said that financing helped the Suttons win their dream home.
“We were able to offer a non-contingent, very strong, pre-approved offer from the beginning so that gives us a huge advantage in this market,” she said.
Once homebuyers get moved into their new home and start paying their new mortgage, they can also make repairs to the old home or make changes to the new home with an interest-free loan from the Knock Home Swap program.
“We could make changes in advance and do all of the painting and change the floors – change whatever we wanted to change before we moved,” said Sutton.
After the family is settled into the new home, the old home is listed and sold at the maximum price with the help of computer data.
“We use a lot of technology and data science to figure out how much their home is worth, how long it’s going to take to sell, and what it needs to get it on the market to look its best,” said Black. “There are way better ways allowable to us now to buy a home than when our parents did it.”
People qualify for the home swap program like they would for any other lender. Consumers need a Knock-certified real estate agent to get them through the process but any realtor can get that certification at no cost to them.
Knock started before the pandemic but has since grown to 40 markets across the country as the housing demand continues to skyrocket. Sutton was among the very first in North Texas to use the program in August 2020.
They expect to expand to 100 markets in the next year and a half.
"We started five years ago and in general, people are frustrated by the experience of having to close on two homes at the same time,” said Black. “Most people have to sell their existing home before they can buy their new one. And in a market like this post-COVID, that’s pretty impossible."
How Long Will This Last?
Real estate experts say the market frenzy has caused a shift in the way people like the Suttons buy and sell houses now.
"The pandemic just changed the world,” said Mark Johnson CEO of JPAR Brokerage of Texas. “I think we’re going to have some inventory constraints over the next three years. All of this is coming from economists I’ve talked to from the National Association of Realtors to the California Association of Realtors and everywhere in between.”
In order to be competitive to close on a home, Johnson said some buyers are paying in hard-cash and lots of it, sometimes over asking price. Others have resorted to writing letters or even complimentary leasebacks so the seller has time
But there's some promising news. Johnson said in May, the DFW market saw a slight increase in the number of resale homes for sale.
“The resale is where we’ve seen a huge drop in inventory and we’ve seen back-to-back, just a small increase over the last two weeks. I think maybe that could be the market starting to balance itself out,” he said. “Prices continue to go up and that’s going to put pressure on folks. Sooner or later, the consumer is just going to block.”
He said if demand pulls back slightly, that could improve inventory in small ways.
“I think we’re starting to see over the next few months a continued increase in inventory which would be a good thing in this market,” he said.
While Black doesn’t have a crystal ball, he expects home buying to slow down a bit after the summer. Your best bet of having an easier go at buying a home could be around the holidays.
“I think the summer is going to be red hot, with the vaccines and people exploding out of their houses and trying to move before the school year starts,” he said. “I always tell people every year, if you have the wherewithal to look for homes, through Thanksgiving or Christmas you’re probably one of the only ones.”