Low rates and lower inventory: Why this spring’s market might be tight
First-time buyers are set to enter the market in droves, but many are concerned that our market’s low inventory will affect their ability to purchase. Below, we outline the spring market conditions and what they mean for both buyers and sellers across Minnesota and western Wisconsin.
By the numbers: Low inventory, low rates
In February, our 13-county metro area saw a 23.2 percent increase in new listings, a good sign for our low inventory market. However, the new inventory isn’t making up for what wasn’t there to begin with; even with February’s new listings, there are still two percent fewer homes for sale this year than there were in February 2014.
Meanwhile, prices rose year-over-year by 10.4 percent, and the median sales price of a home in our area is now $202,000. Buyers were undeterred by these escalating prices, and pending sales rose nearly 22 percent in February.
What does it all mean? In short, the spring market is all about inventory. Let’s entertain two scenarios: one where inventory rises, and one where inventory does not.
Scenario 1: Inventory rises
From the above, we see that listings increased in February. If this trend holds and even rises, the spring market could be the best in years for buyers.
Why? Think back to your high school economics class and the rules of supply and demand. A rise in homes for sale across Minnesota and western Wisconsin would give buyers more options—and they would not have to compete over quality listings. Fading buyer competition would curtail the rising prices we’ve come to expect over the last three years.
Scenario 2: Inventory declines or stays stagnant
On the other hand, if inventory falls or remains at its current level, then supply would decline and demand would exceed it. In this situation, buyers (including first-time buyers, who will make up a large portion of the spring market) would compete over a more limited number of listings causing prices to rise as buyers enter multiple bids.
What will happen?
You’ve likely realized over the last few years that the market is not as predictable as it seems. While prices (and equity) have risen high enough that homeowners may be ready to sell their homes, there is no guarantee that enough people will list their homes for sale to create a less competitive market for buyers this spring.
What about affordability?
The good news for buyers, including first-time buyers, is that mortgage interest rates are below 4 percent and seem to be holding. These low rates are keeping home prices affordable even as prices rise.
It’s not just interest rates that are keeping buyers in the game, though. Our strong local economy and cost of living are also giving Minnesota and western Wisconsin homebuyers a leg up. According to a recent study, homebuyers in the Minneapolis area need to earn just $47,626.53 annually to afford a median priced home. While it’s not the lowest in the country, Minneapolis is much more affordable than Denver, where homeowners need to earn more than $60,000, and San Francisco, where the average homeowner needs to earn more than $142,000 annually to buy a median priced home.
The long and short of it
Across the country, rising prices and slowing inventory are creating a slowdown in pending sales. Here in Minnesota and western Wisconsin, we aren’t seeing that—remember, pending sales were up nearly 22 percent in February. This is a good sign that, between low rates and high affordability, today’s homebuyers are undeterred and many are finding homes that fit their price range and needs.
Whether you’re buying for the first time or reentering the market, keep in mind that persistence is the key to finding the home you’ll call your own. Reach out todayReach out today to start the home buying process.
What buyers and sellers should know as we head into open house season
Open house season is upon us! Whether you’re a buyer or a seller, here’s what you should know about the weekend home-selling activities.
Try to see your own dirt
Think about the type of deep cleaning you undergo for family holiday gatherings—that’s what you need to do for an open house. In addition to dusting and vacuuming, be sure to wipe down your blinds and walls (including baseboards) and check corners for cobwebs. Wash windows both inside and out, using balled up newspapers to minimize streaking. Focus on the outside of your home too, making sure all walkways are cleared and that the front landscaping is in great condition.
Empty your closets
Unlike your family holiday gathering, it’s not appropriate to hide all your excess belongings in your closets during an open house. Overflowing closets will give buyers the idea that your house doesn’t have enough storage space. Try to downsize your belongings or rent a short-term storage unit to hold your overflow as you sell.
Nothing is off limits
While buyers shouldn’t dig through your closets or drawers, it’s unrealistic to keep a room or closet off-limits when your home is being held open. If you usually cordon off areas from pets or children, be sure to remove the gates or barricades. Don’t forget about locked storage spaces in your garage—the more access you give buyers, the more appealing your home will be.
Clear the premise
While you may think that you have great feedback to share with open house attendees, it’s important that you leave your home during an open house or showing. Buyers need to see the property uninterrupted and they may not be honest with themselves (or you) if you remain onsite.
Remove the pets, too
If possible, remove your pets from your home during the open house. Whether you bring them to a local dog park or ask your neighbors to keep them inside their fenced yard, it’s important not to turn off buyers who aren’t keen on animals.
Bring a measuring tape and keep track of the sizes of the rooms that are most important to you. If you have a “must-keep” antique banquet, be sure that it fits the back wall in the dining room. Similarly, see if your full bedroom sets will fit in each of the bedrooms. These aren’t necessarily deal breakers, but you may find that if you’re trying to choose between two homes, room dimensions can be the deciding factor.
Pay attention to light
Most open houses happen during the brightest hours of the day, so pay close attention to how well-lit the house is and where the light is coming from. Homes with closed floor plans usually have less natural light than those with open floor plans. If you happen to see the home on a dreary day, be sure to return on a brighter day to see the best-case lighting scenario.
Put on your friendliest face
Be sure to chat with the REALTOR® showing the property and try to make a connection so they remember you later. If you end up putting an offer on the property, you want to be in the good graces of the listing agent.
Ask the tough questions
Even as you’re making friendly conversation with the agent, it’s okay to ask why the seller is leaving the property and if there have been any offers. You may also want to ask about the neighborhood, including schools, parks and the area’s average tax rates.
Pay attention to demand
Try to listen to what other buyers are saying as they look over the home. If they think the home is underpriced or overpriced, that could change your bidding plan. On the other hand, try to keep your feedback to yourself until you’ve left the property, so you don’t give away your hand. If the listing agent asks you any questions about your budget or interest, remain neutral.
Whether you’re buying or selling, the next few months will be marked by balloons and signs on street corners. By following these basic rules, you’ll be destined for open house success.
Ready to get started? Edina Realty hosts hundreds of open houses each weekend, but the next Edina Realty Open House Weekend is April 11 and 12. If you’re in the market for a new home, you can search for all upcoming open houses here.
Five mistakes first-time buyers make, and how to avoid them
According to the National Association of REALTORS® (NAR), first-time homebuyers are the fastest-growing segment of the market. If you’re exploring the spring market and hoping to find your first home, it’s important to be educated, curious and to work with local market experts. Here are five mistakes that first-time buyers commonly make, and how to avoid them.
1. Relying on online information only
It’s easy to assume that the internet knows all, and we understand the appeal of doing your own research. But the reality is that buying a home is likely the biggest purchase you’ll ever make, and it’s also an extremely personal one.
Many first-time buyers start out by researching homes online, getting pre-qualified online and attending open houses to see what’s available. This is a great introduction to the home-buying process, but it’s also important to have local experts by your side.
As a professional, licensed Edina Realty REALTOR®, I can guide you through the process of buying a home, and our Edina Realty Mortgage loan officers will help you find a loan that best fits your personal financial situation. Every homebuyer is different, and so are their needs and wishes. Once you’ve completed your initial online research and prep work, reach outreach out to get customized information about what you can afford, and best next steps.
2. Not having the right paperwork
To stand out in this low-inventory market, it’s important to get preapproved by a lender in advance. By having a lender-approved estimate of your buying power, you can confidently search for homes in your true budget. Sellers and their agents may also take you more seriously if they know that you can obtain the necessary funding to buy the home.
Request to get preapproved by an Edina Realty mortgage loan officer today.
3. Focusing too much on the down payment
If you’re planning to buy soon, you likely have a nest egg saved away for your down payment. While this is an important part of getting a loan, lenders will also closely scrutinize your debt-to-income ratio. This ratio assesses how your debt will impact your ability to pay your mortgage principal and interest, and home taxes and insurance.
Together with your mortgage loan officer, we can help you determine if you need to lower your debt obligations in order to secure a mortgage. From there, you can pay off higher than the minimum on credit card payments and installment loans, like student loans, car loans or even child support payments. Additionally, it’s important that you not take on new debt, so avoid purchasing a new car, large electronics or other expensive products when applying for a loan or buying a home.
4. Moving too slowly
As prices grow and first-time buyers enter the market, low-priced listings (often called “starter homes”) can be scarce. In conditions like these, buyers may have to move quickly—but anyone who has bought a home will tell you not to rush into it. So, what’s a buyer to do in this unique, low-inventory market?
This is where working with a local agent comes in handy. Together, we can identify the “must-have” features of your future home, then tour a few homes to get a feel for what is realistically available in your price range. When you know what’s most important to you, you’ll be able to quickly disqualify homes that aren’t right, and make a faster offer when you walk into the home you’ve been waiting for.
5. Saving money by forgoing a home inspection
Many buyers start to get sticker shock as they calculate the cost of the closing, home insurance, taxes and future upgrades. While it can be appealing to nix some home-buying costs, it’s vital that buyers go through with a home inspection.
According to NAR, 92 percent of buyers go forward with a home inspection before closing on a home—that’s company you want to keep. By hiring a professional to inspect the home, you can be sure that the systems and appliances are in working order and that the home is free of issues related to foundation, ventilation, roofing system, water damage and more.
The American Society of Home Inspectors says that the average cost of a home inspection is $450. While that may seem like a lot, most issues or defects identified in the inspection would cost much more than that to fix down the road.
The market is hot for first-time buyers, but playing the game smart is the key to your home buying success. To get started on buying your first home, call or email today, and we’ll provide insights that will help you avoid the above mistakes and secure the home you’ve been waiting for.
Six first-time seller tips
The buzz about first-time homebuyers is undeniable, but what about those selling for the first time? As you prepare to list your first home, you may run into questions surrounding inspections, pricing and staging. Below is a guide that will help anyone selling their first home in Minnesota and western Wisconsin.
Get started on your next move
The total number of homes for sale in our 13-county metro area is tight, with less than three months’ supply of inventory currently on the market. That could be great for you as a seller, but if you’re also planning to buy another home, we’ll work together with a mortgage loan officer to get started on the buying process.
The best way to be thoughtful about your next step is to get preapproved on a mortgage so you know what you can afford. In the preapproval process, you submit all pertinent financial information to a lender, along with a mortgage application. The lender reviews your full financial, income and credit history and offers a specific loan amount that you can expect (provided loan interest rates hold).
Prep for buyers
Though we are in a sellers’ market, you should still aim to list your home in tip-top shape. Start by staging your home, a process where you try to present a neutral, but appealing, palette so any buyer can easily picture themselves living in your home.
To get this effect, it’s important that you remove the majority of your personal photos and knick-knacks, and clear out rooms that have too much furniture in them. If you have rooms with themed décor or extremely bright patterns, you may want to swap for something less bold.
Last, don’t forget that inexpensive aesthetic upgrades go a long way. Consider repainting the walls and cleaning or even replacing carpet, especially if damage or wear are apparent.
Make way for the inspector
Of course, it’s not all about the physical appeal of the home—buyers also want to know that the house is in good working order. In fact, 92 percent of buyers will request a home inspection before purchasing a home, so it might benefit you to order a presale inspection yourself. By doing so, you can ensure that you are taking care of any issues upfront and marketing the house fairly.
Keep in mind that 13 cities across the Twin Cities metro also require a “truth in housing” inspection. These inspections are focused more on the health and safety of your home, but can still be a hurdle homeowners need to pass. Here is a guide to the cities requiring the inspection, along with tips on how to pass this safety inspection.
Hire a professional
An inspector isn’t the only professional you should hire to help you with your home sale—it’s also highly recommended that you use a real estate agent instead of selling your home For Sale By Owner (FSBO).
Of course, we may be a little biased in this regard. But the numbers don’t lie—in 2014, sellers who used a real estate agent netted 25 percent more on their home sale than those who completed a FSBO transaction (National Association of REALTORS®). That means that even after paying agent commission, sellers who hired a REALTOR came out ahead.
It’s not just about the money, though. By hiring an agent you can also outsource the process of listing your home, marketing the property online and offline, offering showings and open houses to buyers, and even the negotiations and final closing paperwork. In short, as your listing agent, I’ll spends dozens of hours making sure your house sells at a fair price in the least amount of time. By working with a REALTOR, you’ll save lots of time and stress—and you can use that energy to focus on where you and your family are moving next.
Price it right
Our slight sellers’ market doesn’t mean that you should overprice your home. While you are at an advantage, the reality is that today’s homebuyers are savvy, and many are willing to wait for the right home at the right price.
According to the National Association of REALTORS®, the majority of home activity occurs within the first two weeks after a home is listed—and most homes in 2014 sold in just five weeks. By pricing your home fairly, you may get more showings and bids upfront. When activity comes early, you are more likely to earn close to the listing price. When buyers see a home has stayed on the market for months, they are more likely to underbid in hopes of securing a great deal.
Together, we can work to assess your home’s current market value by taking into account its condition, as well as the prices of recently sold homes nearby. Can’t wait? Get a free, no-obligation analysis of your home’s value today.
Once you’ve priced your home and it’s on the market, try to be as flexible as possible about home showings, broker opens and open houses. Remember, it just takes one eager buyer to close the deal. By cleaning up the dishes every morning and regularly doing the laundry, you’ll be more likely to allow last-minute showings that could lead to a sale.
Plus, we’ll work together to set expectations of the selling process. Are you comfortable with having a lockbox on your front door so buyer’s agents can show the property at their clients’ convenience? Do you want to communicate via text, email, phone calls—and should your partner be included on all communications? By having these conversations upfront, we can be sure that the selling process is as painless as possible.
It’s go time
Remember, the average home sells in as little as five weeks. That means that by planning for the next phase and staying patient, you can sell your current property and be onto your next phase sooner than you think.
Ready to get started? Call or email today and we’ll begin the process of listing and selling your home.