Four things to keep in mind when buying a home this fall
If you’re entering the market to buy a home, you may wonder what the current market conditions are like. Buying a home in the fall is unlike any other time of year, so stay with us as we walk you through what to expect.
Interest rates are (still) low
Interest rates on mortgage loans have been historically low throughout the market correction. These rates remain low now, but prices are rising and experts believe the rates will begin increasing soon, too.
What this means is that you shouldn’t expect low rates to hold. By purchasing now, you can rest assured that you are getting the best house for your budget. When interest rates increase by even 1 percent, your buying power can be greatly affected.
The discount market is over
At the height of the market correction, in November 2009, 49 percent of pending sales in our 13-county market area were short sales or lender owned sales (Northstar MLS). As of September 2014, that percentage had dwindled to just 18 percent.
What does this mean for buyers in Minnesota and western Wisconsin? In past years, bargains were plentiful but many of the homes were in varying condition due to their status as a short sale or foreclosure. Today, prices have risen but so have the quality of homes for sale.
We’re headed for a balanced market
If you watch the housing market closely, you have likely noticed that price increases have leveled off in recent months. For example, our local market reported a staggering 17 percent increase in median sales price in August 2013 (Northstar MLS). This was at the height of the seller’s market. This year, the median sales price increased just 5 percent, showing that the seller’s market was leveling off.
Because the last eight years have seen us swing from one advantageous market to another, you may think these slowing prices are signs of an upcoming buyer’s market. The reality is that we are now headed toward a moderate, balanced market.
Buyers enjoying less competition
Our local market is enjoying its usual seasonal downturn, as many buyers and sellers exit the market to enjoy the holidays. Additionally, as foreclosures and short sales continue to dwindle across Minnesota and western Wisconsin, we are seeing fewer investors buying up homes in our area.
All this is to say there are fewer buyers in today’s local marketplace. If you are seriously considering buying a home in the next few months, you’ll enjoy a less competitive environment as you attend home showings and open houses.
Explains Lawrence Yun, the Chief Economist for the National Association of REALTORS®,“There was a marked decline in all-cash sales from investors. First-time buyers have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”
The bottom line
As a buyer, you have most likely missed the “lowest of the low” prices that came during the foreclosure buildup. But with the current low interest rates and home prices still low in comparison, buying a property in Minnesota or western Wisconsin is still a great investment.
Four realities for sellers in today's market
We are returning to a more balanced market, where neither buyers nor sellers are at a major advantage. Below, we walk through the changing realities for today’s sellers and homeowners to show how you can make the market work for you.
Seller reality: Buyers aren’t negotiating the price down
We often hear sellers request “room to negotiate down” when setting their property’s price. We can’t say it enough – you shouldn’t get your negotiation tactics from reality TV auction shows.
Your home gets the most exposure and interest in the first few weeks after you list. By overpricing your home, you may lose showings and even offers during that critical time.
Even more importantly, today’s buyers are paying the listing price. In our 13-county metro area, sellers in August 2014 got 97 percent of their listing price (Northstar MLS). The idea that buyers will negotiate down is a myth, provided you list at the right price.
Seller reality: You can’t name your price
As mentioned above, buyers are paying 97 percent of the listing price. It’s critical to remember that while this is true, it doesn’t mean that you get to name your price when you sell your home.
Today’s buyers are discerning. They know the neighborhood and home features they are looking for, and how much they are willing to pay. Their primary focus is not to give you what you want for your home – it’s to pay what they believe the home is worth.
We provide a free-of-charge comparative market analysis, which takes into account your property, the neighborhood and other public record data, to help you set your listing price. Once you know how much your home is worth in today’s marketplace, you can determine if it’s the right time to sell.
Seller reality: You won’t make more by listing in the spring
It’s a common stat in the real estate community that 60 percent of all homes will be bought and sold between May and August. This is true – but it doesn’t mean you have to discount your home in the winter to get it sold.
Remember, both sellers and buyers are likely to take a break in the colder months. So while the winter does show a slowdown in activity, the market still hums as a small pool of buyers stomp through snowy driveways to compete over a smaller inventory of homes.
Plus, today’s slowed price growth means that there’s no guarantee your home’s value will continue to increase over the winter. By listing now, you may be able to avoid the chaos of the spring market entirely – and earn the same selling price.
Seller reality: These are the highest home prices in six years
Many sellers think they may have left money on the table by not selling earlier in 2014, when we were in a clear seller’s market. It’s highly unlikely that this is true. While we are seeing fewer multiple offers and less buyer competition, price growth has continued throughout the year.
In September 2014, Northstar MLS reported a median home sales price of $203,000 in our 13-county metro area. The last time we saw prices that high was in September 2008, when our median home price was $204,500. In short, if you sell your home now, you are likely to earn more for your property than if you’d listed in early 2014.
Ready to get started?
The ever-changing market can be difficult to navigate, but our 2,300 local experts can help. Reach out today to get started on the buying or selling process
How does my down payment affect my ability to purchase a home?
When you see a property you like, do you immediately run the down payment math? The 20 percent rule of thumb guides many home mortgage loans, but it’s not the only option you have. Below, we show you how your potential down payment can affect the type of loan you take out, and how much you pay in the long run.
First, let’s take a look at the difference between loans backed by the government, and conventional loans.
When you take out a home mortgage loan, your lender will assess your loan-to-value (LTV) ratio. This is the comparison between the value of your loan and the value of your home.
For example, if you plan to buy a $200,000 home in Eagan, and have saved $40,000, then you have a 20 percent down payment. In this case, the loan-to-value ratio is 80 percent.
So, what do loan-to-value ratios have to do with getting a mortgage? In short, the lower your LTV ratio, the less risk for the lender. A borrower with an 80 percent LTV ratio would be considered less risky to a lender than one with a 95 percent LTV ratio because they have more equity in their home from the start of the loan.
Conventional loans are not backed by the government and generally require an LTV ratio of 80 percent. Borrowers with less than 20 percent down may be approved for a conventional loan if they agree to pay private mortgage insurance (PMI), a monthly payment designed to protect the lender against default until the borrower reaches 20 percent equity.
When you hear someone mention that 20 percent is required to get a mortgage, they are likely talking about securing a conventional loan.
What if you want that Eagan home, but don’t have the 20 percent down? In that case, you may want to turn to a government-backed loan.
FHA loans, which are backed by the Federal Housing Administration, can require as little as 3.5 percent down. In the case of the Eagan home, a borrower may be able to secure an FHA loan with as little as $7,000 down, which would have an LTV ratio of 96.5 percent.
To lessen the risk, borrowers with FHA loans are also required to pay for private mortgage insurance (PMI). Private mortgage insurance costs can vary, so it’s critical that you speak with your lender to determine your total monthly cost (between mortgage payment, PMI, and other recurring costs like homeowners insurance and maintenance) to see what’s feasible for you and your family.
VA loans are backed by the Department of Veterans Affairs. VA loans are the only type of loan that do not require a down payment or private mortgage insurance. To see if you’re eligible for a VA loan, see the eligibility guidelines.
Help for securing a down payment
As you can see, there are many different ways to secure a loan, with or without a 20 percent down payment. But there are also programs in place that help first time buyers and other buyers to buy their dream home.
At Edina Realty, we’ve worked with a company called Down Payment Resource to help you determine which homes may be eligible for down payment assistance from state and local housing finance agencies. Search homes with down payment assistance here. When you find a home you like, click on the down payment assistance icon in the property details for more information on programs for which you may be eligible.
Get the help you need
In sum, finding and securing a home mortgage loan is a personal and private matter that requires the help of a home mortgage consultant. Contact us today to be put in touch with a mortgage consultant who can help you get started on the path to homeownership.
Why it’s a great time to be a luxury buyer in Minnesota and western Wisconsin
It’s been a few years since the national market correction began, and now our local luxury market is following suit. In Minnesota and western Wisconsin, we are seeing great conditions for luxury homebuyers like you.
Luxury home inventory
According to the Minneapolis Area Association of REALTORS® (MAAR), closed properties above $500,000 in the 13-county metro area have increased 10 percent when compared over the previous year.
One reason for this spike is the increase in local luxury home inventory. In September 2014, MAAR reported a 19.2 percent year-over-year increase in new listings over $500,000.
Of course, luxury buyers aren’t only tied to existing homes. New construction is making a comeback across Minnesota and western Wisconsin, and this is especially true for homes in the upper bracket. MAAR is reporting a 30 percent increase in new construction homes priced above $500,000.
“Luxury buyer demand is on the rise, so it’s a great sign that inventory is striving to keep up with it,” said Edina Realty’s Director of Exceptional Properties Nicole Suchy. “Minnesota and western Wisconsin luxury buyers have the highest inventory to choose from since December 2011. With more options of new and existing homes to choose from, buyers may see less competition – even in high demand neighborhoods.”
Price per square foot rising but still low
Price per square foot is important for any listing, but it’s especially significant in luxury homes. As home prices dipped during the market correction, Northstar MLS reported that the median price per square foot for local luxury homes dipped to $166 in March 2012. The current median price in a local luxury home is $174 per square foot.
“Before the market correction began, luxury home prices reached as high as $198 per square foot in our 13-county metro area. The current prices are much more realistic,” said Suchy. “While today’s luxury buyers may have missed the best prices by a few years, the increase in inventory will allow them to pick the right home, in the right price range and neighborhood.”
Ready to begin your search?
If you’re ready to begin looking at luxury homes for sale in Minnesota or western Wisconsin, you can start your search here or reach out to be connected with an agent specializing in your desired area.
Not sure what you’re looking for?
Get a great start by checking out these amazing luxury homes for sale in our local market.
This Kenwood stunner offers a short walk to Lake of the Isles, and a private garden oasis. Enjoy five beds and five baths, and nearly 5,000 square feet, for a price of $1,245,000.
This former model home in Hugo is great for entertaining, and offers a great location for those commuting either to the St. Paul area, or across the river into Wisconsin. A recent price reduction on this five bed, five bath, 5,000 square foot masterpiece means you can call it home for just $627,722.
This newly built Rochester home is perfect for those living in the “Med City.” Set atop a wooded bluff, you’ll enjoy privacy and wonderful views of the Zumbro River and downtown Rochester. This home offers five beds and five baths, and nearly 6,000 square feet for the price of $1,450,000.
Why you should hire a REALTOR® instead of selling your home FSBO
Across the country, 9 percent of home sellers sold “FSBO,” or For Sale By Owner, last year. In Minnesota, that number was much lower, at only 4 percent – and in true Midwestern fashion, 75 percent of these sellers knew the buyer prior to the transaction. (Minnesota Association of REALTORS®)
The number of FSBO homes has been dwindling for twenty years, and for good reason. Here’s why you’ll be better off hiring an agent to help you sell your Minnesota or western Wisconsin home.
Pricing the home
The market correction brought both historic low prices as well as record price increases in only a matter of years. A licensed Realtor will know how to price your home fairly and accurately now that we are in a more balanced market.
When determining the listing price of a home, a Realtor takes into consideration everything from the tax-assessed value of your home, to how your home compares to recently sold properties nearby. This process is called a comparative market analysis, and Edina Realty agents are all licensed to perform this process for free, and without any commitment from you.
The best exposure
In the days of newspaper ads, FSBO homes were often on the same playing field as homes listed by agents. Today’s marketplace is different – the National Association of Realtors reports that 92 percent of homebuyers look for homes online, so an online presence is critical to getting your home sold quickly and effectively.
Edina Realty’s website and mobile apps receive an average combined two million visits each month, and we directly feed our listings to national partners like Zillow, Trulia and realtor.com. In short, when you list with us, you know you are getting the best possible exposure to get your home sold quickly.
The best price
The primary motivation of FSBO sellers is to avoid paying a commission fee.
However, the National Association of Realtors reported that last year’s sellers earned 25 percent more for their homes when they hired a professional Realtor to handle the sale from start to finish. That means that even after paying a commission fee, sellers still come out ahead when using an agent.
The long and short of it
When selling your biggest asset, you need an advocate who isn’t afraid to demand a fair market price. At Edina Realty, we take the business of buying and selling seriously, and we’ll negotiate fiercely on your behalf.
Five fun facts about Halloween in Minnesota
With the perfectly cool weather and changing leaves, there’s no better place to celebrate Halloween than in Minnesota. Here are five facts about the spookiest time of year in our fine state.
1. Did you know Anoka, Minnesota, is the Halloween capital of the world? (Salem, Massachusetts also claims this title, but Anoka has an official congressional proclamation, which is good enough for us.) While the town now has a year-round planning committee to put together their festivities, the Anoka Halloween tradition had a smaller purpose when it began in 1920. After teenage pranksters wreaked havoc on the town by letting out cows and tipping outhouses, Anoka leaders decided to host an official celebration to divert their attention. Today, Anoka’s Halloween celebration includes a massive parade, a button design contest, an orange tie ball, a rib contest and a beer tasting. In short, nobody does Halloween like Anoka does Halloween.
2. Landscape enthusiasts have been creating topiary designs since the 13th century, but no one does a corn maze quite like Sever’s Corn Maze in Shakopee. Currently in its 18th year in operation, the Sever family has delighted audiences by creating everything from an Egyptian sphinx maze, to a sinking Titanic ship to a full map of the United States. This year, the Severs have teamed up with Minnesota Corn to create the “Sever’s Express,” a train-themed maze. Head to Sever’s from now through the weekend of October 26th to enjoy this awesome Minnesota tradition.
3. You likely remember the Halloween Blizzard of 1991 - more than twenty inches of snow fell over the Twin Cities, creating an unsafe environment for trick-or-treaters and the parents who accompanied them. We often joke about the horrors of having to wear snowsuits under Halloween costumes, but the severity of the storm was no laughing matter. Eleven counties were declared federal disaster areas, and more than $15 million in damage was reported. 1991 remains the snowiest October in Minnesota history due to the Halloween Blizzard (National Oceanic and Atmospheric Administration).
4. According to the Minnesota Safety Council, the most common injuries to children on Halloween are due to falls and burns. Make sure your children’s masks, hats and one-size-fits-all costumes don’t impede their ability to see or walk easily. And while the lighting of jack-o-lanterns may seem like the reason for accidental fires on Halloween, flammable costumes are another culprit. Steer your kids away from lit pumpkins, and consider buying flameless LED candles for your own jack-o-lanterns. Last, explain to your kids the importance of not eating treats while they’re out trick-or-treating. Once you arrive home, be sure to look over their loot for candy that has been tampered with or unintentionally opened.
5. Approximately one in thirteen kids has a food allergy. When prepping for trick-or-treaters, consider buying some allergen-free treats like gummy bears, Skittles, Starburst or fruity suckers. If you’d like to nix sweets entirely, head to the dollar store to find cheap Halloween puzzles, games, pencils and more. Remember - with just a little extra effort, kids with food allergies can have a great Halloween!