2015 was one of the strongest residential real estate years since 2005. As reported in the December Skinny Video from the Minneapolis Association of Realtors , home prices continue to recover from the 2007-2008 crash, unemployment continuous to decline, housing demand was at an all time high in the last ten years, and we have seen 45 straight months of an increase in the housing median sales price within the Twin Cities. All are great signs for continued recovery of the housing market, but what does it mean to you as a future buyer or seller? As you start to have the conversations of if it is the right time to buy or sell, I hope to provide useful information that will assist in making the best decision for your situation.
2015 was one of the hotter markets (seller's market) in the last 10 years. What made it so great was the high demand from buyers driven by low interest rates, decline in unemployment and a low inventory of available homes on the market. By November we had a months of inventory of 2.7 which is extremely low. A steady months of inventory is 5-6 months meaning at the current sales rate we have 5-6 months of inventory before everything sold. Looking into 2016 buyers will be facing some changes. Interest rates have been increased, but from what I am reading rates will only go up a quarter percent in 2016, on the high end. This should bode well for sellers as there should still be high demand from buyers.
Beyond that, the low inventory means there will be less competition on the market when you list your home. In working with my buyers in the last couple months it has been slim pickings for good homes. If there was a good home on the market and it was appropriately priced, it did not stay on the market long. We are seeing homes sell and close in less time because of the demand for good homes. Granted this time of the year there is a natural decline in available homes; however, November saw a decrease of 31% compared to this time last year.
Long story short, 2016 looks to be another great year to sell your home. If you appropriately price your home, make sure it is clean and staged right you should have limited problems making a quick sale. In my experience the best time to list is between March and April. Last year the market took off in April, but with the low inventory on the market now, there is a chance to get ahead the other sellers and list a little earlier.
Even though the market looks to be a sellers market, it doesn't mean it is a bad time to buy. I predict interest rates will continue to increase over the next couple years and locking in at a lower rate this year might be the right decision for you. There is still value in owning your home and buying a home has become more affordable for many buyers. Plus you need to buy based on your needs. If you're rent continues to increase like it has for many others or are living in a home that your family has outgrown, it might be the right time for you to start the search. The best advice I can give is to make sure you are looking in areas that have shown to be stable. Look for good school districts, parks, bike paths and well kept neighborhoods. Keeping your focus on this criteria should help minimize the risk of a steep decline in home value.
Because of the decreased inventory of homes on the market we have also seen a emerging demand for new construction. There just isn't a lot of great homes on the market pushing buyers to build their next home. We have even seen a trend of buyers tearing down old homes and building new homes on the lot. Another option that is becoming more popular is to buy an older home that needs updating. Just turn on HGTV and you can see how much you can do with a hammer and an imagination.
Overall 2016 is looking to be another hot market, but I anticipate that will change in 2017 into 2018. While we have seen 45 straight months of increased sale prices, that should not be considered a constant trend. At some point the market will regress back and correct itself. That said if the interest rates stay low, unemployment continues to decline and there isn't much change in the next couple years that regression might be delayed.
If you want to know what your options are or to know any information specific to your situation, don't hesitate to reach out. I would love to help however I can.
Clint Hansen- ClintRHansen@gmail.com