Are we in a bubble? How to know for sure
As our local market continues to improve, buyers, sellers and homeowners are wary that prices may be rising too much. To determine if we’re in a bubble today, we analyzed current market stats against some of the conditions related to the housing bubble that peaked in 2006. Let’s explore what they mean.
In the years before the bubble burst, our local market showed six years of double-digit price appreciation; the average appreciation year-over-year was 12 percent. Today, we’ve seen just 20 months of moderate appreciation – and the average appreciation in that time has been between 2-6 percent.
Prior to today’s market correction, interest rates were higher and some lenders were lending irresponsibly. In some cases, lenders were even issuing “no-doc” loans, where the borrower didn’t have to prove their income to get approval on a mortgage. Today’s lenders have tighter underwriting standards and for the last several years, interest rates have been low so homebuyers are able to gain equity on their homes more quickly.
Before the bubble burst, inventory across our market was strong. Today, we see chronically low inventory across most market segments, especially on homes priced under $250,000.
New construction and investment buyers
In the lead up to 2006, builders were working on demand from speculative buyers, and new construction was booming. Investors who saw the high home price appreciation were buying up developments in droves. While builders today may have a few spec homes available, entire developments are no longer being built on sheer speculation alone. The new construction market is growing slowly and steadily.
Factors driving price growth
As the bubble grew in the 2000s, price growth was driven by home appreciation and loose lending practices. Today, prices are driven by low inventory (and high buyer demand) and low interest rates.
Rate of change
Changes in the market happened very quickly as the bubble grew in the 2000s. Homes moved very quickly, changes were dramatic and the pace for everyone—sellers, buyers, builders, agents and lenders—was accelerated. The speed of today’s market is much more moderate and methodical, with different market segments experiencing different change patterns and slow, steady change overall.
The verdict? A healthy market shift
As you can see, today’s market stats don’t match the data from the lead-up to the housing bubble. Because lenders are lending responsibly and rates, inventory, speculative buying and appreciation remain low, we believe that today’s housing market changes are the product of a healthy market shift.
But I heard the market is too hot!
For months, reports have told a story of a hot real estate market with buyers snatching up homes in no time and sellers enjoying competitive offers. While this is true in some markets and market segments, it doesn’t ring true for others. In most cases, statistics used to measure the market are aggregated across every market segment in our 13-county metro area and they can leave out key pieces of the puzzle.
A tale of two markets
A closer inspection of statistics in our local market reveals what is essentially two markets: one for first-time buyers (generally anything under $250,000) and another for higher priced homes ($500,000-plus), which we’ll refer to as upper-bracket homes.
Stat #1: Single-family homes in the 13-county Twin Cities metro sold in an average of 35 days
- $190,000– $250,000 homes || Sold in an average of 29 days
- $500,000+ homes || Sold in an average of 80 days
Stat #2: The number of homes for sale in the metro is down 15.7 percent
- $190,000– $250,000 homes || Inventory fell 24.7%
- $500,000+ homes || Inventory rose .3%
Stat #3: Our inventory is at a three-month supply, making it a sellers’ market
- $190,000– $250,000 homes || Supply is 1.9 months – Sellers’ market is even stronger
- $500,000+ homes || Supply is 8.3 months – The luxury market is a buyers’ market
Stats based on year-over-year data for 13-county metro area in August 2016 Stats provided by Northstar MLS
As you can see, the low-end market is suffering from a lack of inventory, which is driving the demand and creating an even bigger sellers’ market. The luxury market, on the other hand, has plenty of inventory and is in desperate need of buyers. To see how you can measure for a buyers’ market or sellers’ market, check out this infographic.
Want help navigating the market?
Selling an outdated house? Five fast fixes that buyers love
- Rather than upgrading whole rooms, select a few updates that buyers love
- Heated floors and tankless water heaters will delight winter buyers
- Top aesthetic updates include stainless steel appliances, barn doors and farmhouse sinks
Wondering if you need to remodel your whole kitchen, or if you can get away with just a few fast fixes? A recent study of listing descriptions (and their related sales data) has given us a clear indication of what buyers are looking for as they search online and in person. Below are insights you can use to fix up your home and delight today’s discerning buyers.
1. Tankless water heater
Winter approaches — and so does the threat of running out of hot water in the morning! Buyers love modern tankless water heaters because they never run out of hot water, take up less space and can even reduce energy bills.
2. Heated floors
Imagine if your first steps out of bed – even in January – were onto a warm, heated floor instead of a cold bedroom floor and bathroom tiles. If you have old flooring that needs to be replaced, consider adding in heated floors.
Houses with heated floors were shown to sell 28 days faster than expected.
3. Barn doors
Open floor plans are all the rage, but “pocket doors” are no longer en vogue. The solution? Barn doors allow for open appeal and the option to make certain areas private when desired
Buyers must agree because 13.4 percent of homes listed with barn doors sold for above their expected value.
4. Stainless steel appliances
Stainless appliances are a kitchen staple, but they still hold major appeal with today’s buyers. In recent years, darker stainless (or black stainless) has gained popularity because its finish minimizes the appearance of smudges and fingerprints.
The study showed that homes with stainless steel appliances sold 42 days faster than expected.
5. Farmhouse sink
Anyone who’s seen a kitchen renovation on HGTV knows that farmhouse sinks are fashionable. These sinks sit slightly in front of your cabinets, and the sides of the counter overhang the sink slightly. The design allows for water to wipe easily from the counter into the sink, and for water splashing out of the sink to land on the floor instead of running down your expensive cabinetry.
Perhaps most importantly, these sinks add a rustic charm to any kitchen and buyers love them. Homes with farmhouse sinks were found to sell 58 days faster than expected.
Prepping to sell?
Edina Realty’s 2,300 REALTORS® help homeowners sell their homes every day. Get a no-obligation home estimate today, or reach out directlyreach out directly to get an expert opinion of the upgrades you’ll need to sell your home for top dollar.
You can also find more advice on selling by following #SellerInsights on Facebook, Twitter, YouTube and Instagram.
How to prep your home for fall and winter in Minnesota
- Don’t wait until the first snowfall to prepare your home for the winter
- Focus on fixing issues that may be increasing your winter energy bills
- Prep your lawn and clean gutters so you can benefit in the spring
The 2017 Farmer’s Almanac is predicting a winter with average snowfall – but they also project colder-than-typical temperatures in Minnesota and Wisconsin. While we may have learned how to get through those “polar vortexes,” our homes need special care to prepare for the elements.
Here are insights you can use to prepare your home for this year’s winter.
Clean your gutters early and often
It’s hard to know when the first snowfall will come, so be sure to keep your gutters free of debris as the autumn leaves fall.
Prep the lawn
Rake and bag your leaves at least once per week during the fall season. Be sure to rake briskly so you remove any moss or deeply-entrenched debris that could impede drainage over the winter. Spike holes in your lawn (using a garden fork) to aerate the lawn before the first snowfall and fill in any trouble areas with lawn repair mixture.
Check windows and doors for air leaks
According to the Environmental Protection Agency, the average household spends more than $1,000 on heating and cooling costs annually. One way to lower your energy bills is to ensure that your heat doesn’t leak out as cool temperatures arrive.
Check for leaks by holding a lit candle to your windows, door frames, baseboards and the vent leading outside from your dryer. If the candle flickers as you run it past the area, fill in the leak using caulk from the hardware store.
Add insulation and seal off attic
Many homeowners ignore their attics, especially if they are unfinished. Attic leaks are extremely common, so insulating your attic can immediately lead to lower energy bills. Attic insulation also has the highest return on investment of any local home improvement project, so you may even earn back more than you spend on this project over time.
Still not sold on the benefit of attic insulation? Consider this: When hot air escapes from your attic, you put your home at risk for ice dams, which can be costly and nearly impossible to fix.
Upgrade to a smart thermostat
If you’re still turning the thermostat down when you go to bed and up when you get home from work, consider upgrading to a smart thermostat. These devices can learn when it’s safe to lower the temperature and when to boost the thermostat because everyone is at home after a long day.
Nest is the most popular smart thermostat, but there are plenty of other options on the market.
Hoping to sell this spring?
If your winter preparations are based on your desire to sell your home this spring, reach out todayreach out today to get a no-obligation home value estimate, or to learn more about local market trends.
Subway tile and barn doors: When and where to use HGTV’s hottest trends
- Subway tile is an inexpensive way to refresh almost any kitchen or bathroom
- Barn doors can provide an element of privacy to homes with open floor plans
- When installing subway tile or barn doors, it’s important to match the design to your home’s original aesthetic
Whether you’re addicted to Fixer Upper on HGTV or have a Pinterest board full of remodeling ideas, you’ve likely come across the two biggest trends in home design: Subway tile and barn doors. These elements are popular for a reason – they can instantly transform a space without breaking the bank
Below, we explore common ways to incorporate subway tile and barn doors into your home and insider insights you can use to get started.
You won’t be surprised to hear that subway tile was first used in the New York City subway system in the early 1900s; the subway designers created simple white three-by-six-inch tiles and staggered them to add visual appeal. The bright white tiles were held in place by light-colored grout, and the minimalist look has been popular in transit, residential and commercial design ever since.
Where to use subway tile
- Kitchen backsplash
- Bathroom walls
- Bathroom shower or tub
- Traditional: White tiles with light-colored grout
- Gritty: White tiles with gray or black grout
- Modern: Colored tiles with white grout
- Broken up with glass mosaic tiles or matching four-by-four-inch tiles
Quick tip from the pros: If you’re planning to install subway tile yourself, be sure to tackle one small area at a time – by tiling a large area, you may not leave time to wipe off excess grout before it dries. Follow these tips to ensure you get the job done right.
Perhaps the most popular question on remodeling TV shows is, “Is this a load-bearing wall?” The desire for open floor plans has been rising for the last decade but some homeowners are finding that the lack of privacy they create can be a problem.
One common solution is to install a sliding interior door, commonly known as a barn door. In a recent study that analyzed the features that sell homes faster and for the best price, barn doors were the top feature that buyers desired. And unlike traditional swinging doors, barn doors can economize space, making them a perfect addition to smaller homes.
Where to use barn doors
- Block off TV / entertainment rooms from main living space
- Entry point to laundry room or mud room
- Entry point to bedrooms from main living space
- Rustic: Finished or unfinished wood; dark hardware
- Modern: Brightly painted one color; stainless hardware
- Wild: Mural-style painting; matching hardware
Quick tip from the pros: Be sure to match every element of your barn door – including the sliding hardware – to your home’s overall aesthetic. Here’s a great tutorial on the items needed for a modern barndoor, and some more rustic hardware options.
Prepping to sell?
If you’re upgrading your home because you hope to sell in the next few years, check out even more fast fixes that buyers love. To get in touch with one of our leading sales experts who can help you assess your property value with no strings attached, reach out todayreach out today.
Hoping for more seller advice? Follow #SellerInsights on Facebook, Twitter, YouTube and Instagram.