06/07/2022
Everyone would love to forecast where the real estate market is headed.
Who wouldn't want to time it perfectly!
I would however, say it's impossible to do…so we must look at the statistics to truly gauge where things are at and where they are headed.
Nearly 1 in 5 (20%) of Home Sellers Dropped their Price in May… That’s the highest rate of price reductions since 2019…📉
Mortgage applications are down nearly 11-14% year over year…📉
Is the Real Estate Market crashing? 📉
NO, The market is not crashing… The market is simply normalizing to pre-pandemic levels…
What does that mean for buyers and sellers?
🏠 For Sellers:
- Expect your home to take longer to sell. Homes are not going to sell in 24 hrs… It may take 30 to 60 days for the average home to sell.
- Don’t expect 20-40 offers on your home… 1 to 3 offers will be the new normal.
- Not every home will receive multiple offers…
- The average list price to sales price ratio will return to a normal 95-97%.
- You will need to price your home correctly or run the risk of sitting on the market and not selling.
- There will be more homes available for sale which means you will have competition. Buyers will be more selective.
🏠 For Buyers:
- Home values are still increasing. Values are expected to increase by 26% by 2026. Do not miss out on the upside equity.
- The interest rates are expected to reach 6% and some are predicting 7%. Higher rates will reduce your purchasing power and increase your payments.
- You will have more homes to choose from with the increasing inventory levels.
- You will not be competing against 20-40 offers anymore. You may only be up against 2 or 3 other offers on the best houses.
- You will still need to move quickly as the best homes will still sell fast.
- You will still need to write a strong offer with good terms.
So why don't I think the market is going to crash? Here's why...
1. Basic supply and demand. The inventory levels in MN are still at 1 months supply in most neighborhoods… A balanced market is 6 months. That means there is still more demand than there is inventory.
2. The “Millennials” demographic represents 31% of the population 78 mil people… 75% of them are wanting to buy a home… That equals 58 Million buyers. To put that into perspective, the Baby Boomer demographic was only 28% of the population… 😳😳😳 There are more buyers than there are sellers. There are more buyers than there are homes🏠.
3. The price to buy (if you have the downpayment) is still cheaper than renting.
4. Sellers have gained significant amounts of equity through appreciation the last 5 years and will have more options if they experience employment hardship. They won't need to firesale their homes to access cash in a pinch like previous markets. This further compresses inventory.
5. Builders are backed up due to supply chain issues and a shortage of labor. They simply can not build enough homes fast enough. If you've built a home in the last two years you've no-doubt felt this pain..
These are the facts and as always, I'll continue to keep you updated. Remember, a normalized market is great for everybody and home prices are still expected to rise at above normal rates.
If You or Anyone you know are thinking about buying or selling a home remember WHO YOU WORK WITH MATTERS!!!!
If you have any questions, give me a call or text.
Your Local Realtor,
Carl Vagle
218.343.7695
