Money Bite-Size Read:
- In a hot property market, more people want to buy property.
- This can create a fear of missing out or FOMO that pushes people to buy.
- Here’s how to avoid home buying FOMO so you can keep your cool when buying a home in a hot property market.
The MoneyBites Take:
While you might feel the fear of home buying FOMO, it’s important to remember why you’re buying a home and know your budget so that you don’t overextend yourself.
Does buying a home seem out of reach?
You’re likely buying in a hot property market, where more buyers are flooding the market. There are more interested buyers in these markets than a supply of homes, driving up prices. Houses quickly enter and exit the market as buyers snap them up quickly, reducing supply further.
In Australia, house prices are rising sharply.
Prices in Sydney and Melbourne have risen by 19% and 15% respectively in the past year, with record low-interest rates contributing to this rise. With more buyers in the market and scarcity creates fear, many people are experiencing home buying FOMO. The problem with FOMO is it can push you into decisions that aren’t right for you. Home buying FOMO gets expensive, and it’s time we kick it to the curb, so you end up with a home you love at the right price.
Here’s how to avoid home buying FOMO:
1. Talk to your family and friends
The inner circle of people you trust likely have your best interests at heart. Bring them with you through the process. When you talk to friends about money, you can verbalise your goals, test ideas and have an accountability buddy to help you reach your goals. They can also call you out if your decision is based on fear rather than being aligned with your goals.
2. Be wary of real estate agents
Real estate agents love a hot property market because they’re paid through commissions. Properties selling quickly for higher prices is music to their ears because they get paid more often and with higher commissions when they get a percentage of the home sales price. Keep this in mind when you talk to them, and allow them to push you into making a fear-based decision.
3. Look at the market you’re buying into
When you buy a home, people often talk about the importance of doing your research. The news is full of stories about rising property prices, designed to facilitate FOMO, as it means that they sell more property advertisements. Instead, do your own research by examining the areas you want to buy in, and identifying what you can get for your money.
4. Write down what you want
You’ll only make a bad property buying decision if you buy something you don’t want or can’t afford. Start by writing down what you want in a home. Write down the type of home, the number of rooms you need, and locations you’d consider. You can then negotiate from there as to what is essential and what you are willing to compromise on.
5. Aim to view the property before you buy it
During COVID, many realtors were advertising properties for online viewing only. The issue is that photos can be misleading, including making spaces look bigger than they are. A better approach is to view the property, ideally more than once and have a building inspector identify any issues upfront.
6. Get clear on what your price range is
When you start looking for property, you’ll be asked what your budget is. You can calculate this by identifying how much money you have already and whether you need more time to build a home deposit. Most people need to take out a home loan so see how much you can borrow from a bank and check whether you can get preapproved finance, which makes the process easier.
7. Know what life will be like with a mortgage
A mortgage is a loan from a bank that you will spend anywhere from 10 to 30 years paying back. Those repayments will need to come out of your budget and will limit your future spending. Before buying a house, consider the opportunity cost and whether you would be better off pursuing other goals like investing first.
Remember that there will always be other homes on the market.
It may feel like you’re missing out, but the right home will be one in your price range that you feel happy living in. So whenever you feel the anxiousness of home buying FOMO, recognise this fear for what it is and what you’re working towards.