Five ways to avoid getting caught up in property FOMO
As a buyer in the current market, fear of missing out (FOMO) is your biggest enemy as it can easily lead to many years of regret from the moment you unpack in the wrong property, thinking, 'What have I done?'
As a buyer's agent I have never been busier, with the Sydney property market running hot. An astounding number of people are going through properties, and I'm hearing some astonishing sales results. At a recent auction, the property initially had a guide of $3.8 million, which was quickly revised to $4 million and subsequently $4.2 million due to the level of interest. With 10 registered bidders, the selling price was just short of $5 million in the end.
Given this might be what you're up against as scarcity drives prices up and feeds the frenzy, here's my advice: don't panic.
Easier said than done, right? However, I'm going to share with you a few implications of getting caught up in the FOMO trap and what you can do to avoid it.
1. Stick to your list of must-haves
People are so desperate to get into a property that they are ignoring all of their must-haves and bidding on places that they would ordinarily dismiss. I am talking about those properties on arterial roadways like Parramatta Road.
Lesson: Don't lose sight of what matters to you in a home. Make sure you take a breath and see the property at least twice before making a decision. Usually, on the second inspection, the rose-coloured glasses come off and you can view the property and its surroundings more objectively.
2. Don't believe the hype
When you're in the thick of things, it seems that prices will only ever go up, and stock will keep shrinking. According to CoreLogic data from March, Australian house prices had their sharpest monthly increase since August 2003. Also, CoreLogics's monthly home value index revealed a 2.1% increase compared to the previous month. These increases are widely spread around the nation across regional and capital city markets.
When looking at previous hot market history we see that some potential vendors are encouraged by crazy sales results and decide to sell because they believe they're going to make a killing. This means that more properties will come onto the market, buyers will have more choice, and are likely to steer clear of those properties in that wrong location, with that inflated price tag. Clearance rates drop, the market goes from hot to warm, and buyers have less reason to panic buy.
Typically, we will see a market recalibration, albeit slowly, with prices stabilising as opposed to continued steep growth. It is hard to say when this turnaround will happen, as it involves so many moving parts, and the published reports tend to be a bit behind the current situation on the ground.
Lesson: Better to wait than over-commit or make a bad decision. Keep your head.
3. Pay attention to what is going on in the world
I mentioned above that the property market normally goes through a period of readjustment, but these are not normal times, given we are still living in times of a pandemic. So while there are likely to be changes coming in the housing market because of an increase in vendors' willingness to list, we have also seen the end of mortgage freezes and JobKeeper. While we can't predict the fallout from the end of these programs, one thing that will eventually change is the interest rates, so be sure to take any interest hikes into account for the future - after all, buying a property is a long term commitment.
Before you jump into the property market during these times, seek professional advice from a mortgage broker. If you don't feel comfortable or confident with the level of information provided by the first mortgage broker, seek advice from another.
Lesson: Buy within your means. It's never been more important to get your finances and due diligence ticked off before committing.
4. Do your own research
It's best to remove the state of the market from your thinking altogether, so do not buy into what the latest news stories are spouting, and instead focus on doing your own research. Talk to agents about recent sales or look at the sold section of real estate websites so you are across current values. You should approach hot, warm, or cool markets in precisely the same way: only purchase a quality property that ticks your boxes at a price you can afford.
Lesson: Do your own research and don't believe everything you read or hear in the media.
5. Get a second opinion
I heard of a friend of a friend who was about to put in an offer on a house that her husband hadn't even seen. Luckily, he did see it and they decided the bedrooms were too pokey and didn't proceed with the offer.
Lesson: Two pairs of eyes are better than one. Even better, get a second opinion from someone who isn't emotionally involved with the purchase, has experience with buying property, and who isn't feeling the FOMO.