55% of Home Buyers Think This Year's Market Is More Competitive Than Last Year's. Here's How to Give Yourself an Edge

There's a reason so many people have struggled to buy a home in 2023. Not only have mortgage rates been relatively high, but housing inventory has been notably low.

As of the end of April, there was only a 2.9-month supply of available homes on the market, according to the National Association of Realtors. That's well below the four- to six-month supply of homes that's generally needed to satisfy buyer demand.

Recent data from Bank of America found that 55% of prospective home buyers think this year's housing market is more competitive than last year's, even with mortgage rates being higher today. Only 18% say today's market is less competitive, while 27% think 2023's market is about the same as 2022's.

If you're having a hard time navigating today's competitive market, there are a couple of steps you can take to give yourself an advantage over your competition -- and perhaps make the process of trying to buy a home less stressful.

1. Get pre-approved for a mortgage

A mortgage pre-approval letter is not the same thing as an actual mortgage approval. But it's a step in that direction.

During the pre-approval process, you'll generally need to provide a mortgage lender with financial information -- notably, wage details. You may have to provide copies of recent pay stubs and tax returns so a lender can verify your income. From there, a lender will tell you what mortgage amount you're pre-approved to borrow.

The upside of getting a mortgage pre-approval letter is that it shows sellers that you're a serious buyer whose finances have already been vetted. Now if given the choice between a buyer with mortgage pre-approval and a cash offer, a seller might opt for the latter since it's more of a sure thing. Even with mortgage pre-approval, a home loan has the potential to fall through.

But let's say you and a couple of other buyers are interested in purchasing the same home, and you all make similar offers. If you're the only one with a mortgage pre-approval letter, the seller may be more inclined to work with you. That's because you've taken an extra step to prove that you're capable of getting a mortgage.

2. Make a strong offer from the start

A mortgage pre-approval letter may or may not be enough to help you avoid a bidding war in today's housing market. If you want to steer clear of a situation where you're duking it out with other buyers, aim to make a strong offer from the start, provided it works for your budget.

Let's say there's a home in your target neighborhood that's reasonably priced at $400,000. Let's also say you can afford to spend up to $500,000 on a home.

If you go in with an offer of $410,000, the seller may be inclined to entertain other offers. But if you go in at $440,000, the seller may decide that your offer is strong enough and accept it without waiting for others. That could result in you spending less on a home than what you'd otherwise spend in the course of a bidding war.

Today's housing market certainly isn't easy for buyers. But getting mortgage pre-approval and being strategic with your offers could be your ticket to getting to buy a home this year.