For the last few years, it has become impossible to discuss our local housing market without mentioning low inventory. As the robust summer selling season continues, it’s important that buyers and sellers alike understand what low inventory can mean for them. Below, we discuss how anyone buying or selling a home in Minnesota and western Wisconsin can make it to the closing table in today’s market.
Why is inventory important?
Inventory is one of the driving forces behind any housing market. When the number of homes on the market surpasses the number of buyers looking, inventory is high. In a high inventory market, buyers have their pick of homes and may be able to negotiate a lower deal, or secure a home that was priced competitively to sell quickly.
In a low inventory market, which we have been experiencing across Minnesota and western Wisconsin for the last few years, the number of buyers looking for homes surpasses the number of homes on the market. When buyer demand is high, sellers may list at a higher price or buyers may enter multiple offers -- both of which drive home prices up.
What’s happening with inventory now?
Home prices have been on the rise for more than three years in our local market area, and homeowners are feeling confident about their ability to sell in Minnesota and western Wisconsin. As a result, our low inventory has been rising steadily over the last few months. In May, however, we saw just a .3 percent increase in new listings over May 2014. (Minneapolis Area Association of REALTORS®)
Of course, in order for the market to truly even out, inventory must rise faster than buyer demand. So far, we aren’t seeing that trend because home sales are spiking across our market area. May’s pending sales were up 14 percent over 2014, so total inventory actually fell nearly 7 percent year-over-year.
What buyers should know about low inventory
If these inventory trends continue, buyers will compete over a shortage of homes this summer. However, this doesn’t necessarily mean that buyers should lower their expectations or increase their budgets. Here are some quick tips that will come in handy for buyers in today’s low inventory conditions.
Start by hiring the right Realtor for your needs. Follow this quick checklist in your interview to be sure he or she knows the communities you are interested in, and that you feel comfortable communicating with them closely over the coming months.
Together with your Realtor and mortgage loan officer, get pre-approved for a mortgage before you begin your search. A pre-approval is an estimate of how much a lender will approve for your mortgage, and home sellers (and their real estate agents) may take you more seriously if you complete this step in advance.
Next, determine your “must-have” features and your “nice-to-have” features. By knowing where you are flexible, your agent may be able to expand your search to a neighborhood or home style you hadn’t previously considered. On the other hand, if you have a very specific type of home in mind, you may find that buying a new construction home is a better fit for your needs.
When looking in a low inventory market, it’s important that you dip your toes in the water first. Together with your agent, you can tour a few properties to get a better understanding of what is available within your price and location parameters.
Last, take a deep breath and dive in. Once you’re looking in earnest, keep a flexible schedule when it comes to looking at properties and be ready to bid when you enter a showing. With the pre-approval in place, and some bidding confidence, buyers in Minnesota and western Wisconsin are finding that low inventory doesn’t have to mean lower standards.
What sellers should know about low inventory
Low inventory is generally good news for sellers, who have the benefit of selling their house for a fair price in a shorter period of time. However, today’s buyers are savvy and they won’t bid on just anything. Here are our top tips for today’s sellers.
First, be sure to spruce up your home by following these summer staging tips. Any home can sparkle with the right combination of outdoor appeal and bright seasonal colors.
Next, talk with your Realtor about pricing the home to attract good offers. Together, you can review recent sales of similar homes in your neighborhood to determine what buyers are willing to pay. Remember: homes get the most attention from buyers in the first two weeks after they are listed, so even in a low inventory market, you don’t want to price your home too high.
A sellers’ market can mean a lot of attention on your home. Ask your Realtor how much buyer interest they expect so you aren’t overwhelmed by showing requests. If your agent anticipates a lot of buyer interest, it may be smart to map out some activities that you can participate in if your house has back-to-back showings. Parks and pools are great options in the summer, or you may want to ask friends in advance if they’d be up for hosting an impromptu game night when you have a nighttime showing. If you have pets, consider what you’ll do with them during showings.
Last, chat with your Realtor about how to navigate a multiple offer situation. While it may seem advantageous to simply take the highest offer, there are other factors that you should consider, like closing costs and dates, or the credibility of each buyer’s lender.
The above is just a short overview of what to expect if you are buying or selling in today’s low inventory market. To have the best vantage point, it’s important to work with a trustworthy community specialist. At Edina Realty, we have more than 2,300 Realtors who have deep insights into our local market, and your best interests in mind. Reach out today to get connected with an agent in your area.
Plus, don’t forget to share your real estate experiences with us on on Facebook, Twitter, Instagram and Google+ using #BuyerInsights and #SellerInsights.