SOLD!

With all the talk of the downturn in the real estate market one would think buyers can take as much time as they want to make a decision because the property will still be available while they make up their minds.

Well, my experience just the last few days has shown that not to be the case. I had one client write an offer on a property to find that she was competing with another buyer...it happens in any market. I can't tell you how many times I have shown a property that has been on the market for a long time then ends up in multiple offers.

The lesson here is...if you find a property you really like, don't wait...it only takes one person to buy and you never when that person is going to come along. If you're thinking about making an offer on a property, ask yourself how you would feel if you decided to buy and it was gone. If you find yourself feeling extremely disappointed or have knots in your stomach...it's time to make an offer!

I'm going out with a buyer today who had selected three properties to view. Since yesterday morning, one by one all three have sold! Now we're starting over with a new list...hopefully we'll have some properties to see today.

Interest rates have been on the rise...could that be inspiring the buyers who have been waiting to see what the market is doing to make the move?

Market Update

Last week's market report compiled by the Minneapolis Area Association of Realtors shows that new listings are relatively flat compared to last year, but newly signed purchase agreements continue to decline, now over 20% behind this same time last year.

When you look at this year's activity in the chart below, you see that the trend is for increasing listings but relatively flat sales...resulting in the buyer's market you have heard so much about.


One factor contributing to the decrease in buyer activity is a tightening in lending standards. In recent years "subprime" mortgages opened up homeownership to people who traditionaly couldn't buy because of weak credit or little money for a down payment. The volume of "subprime" mortgages is expected to drop by about 30% this year, according to the Mortgage Bankers Association in Washington, DC. This means a smaller pool of qualified buyers.

The after effects of those lending practices are also causing a sharp increase in short sales and foreclosures due to a combination of declining values, no appreciation, 100% financing and unaffordable monthly payments due to increasing adjustable rate mortgages. This means an increase in the number of homes for sale, especially bank owned properties.

Many people seem to think that bank owned properties are the best way to get a good deal. My experience has shown that while that may sometimes be the case, you'll more often get a better value buying an owner-occupied property. Not only will you usually get a home in better condition, you may also get a better price. While owners may be willing to negotiate to get a sale, banks are often in no hurry to sell...they know what price they want for a property and are often willing to wait until they get it. They are also often slow to respond to an offer, with response time sometimes stretching into weeks.

In spite of public perception that the housing market is anything but certain right now, this is a good time for buyers if you're ready to buy. Homes in the Twin Cities are more affordable than in recent years, interest rates continue to be historically low inspite of the recent increases and there continues to be a big selection of homes from which to choose.

Market conditions aside, buying a home is about finding a comfortable, safe place to live...something that is always a wise investment when you're financially ready to buy.

To Buy Now or to Wait...that is the Question

There's no doubt the market has been putting buyers to the test trying to decide whether it's the right time to make a move or whether they should wait a bit longer.

I was talking with a trusted lender who said he had been thinking about this very question and felt it was rarely beneficial to wait if you're ready to buy. The two primary factors to consider are rising interest rates and falling housing prices. He calculated that if interest rates rise .5%, housing prices would have to fall another 5% to make up the difference. Overall housing prices are currently relatively stable, neither rising nor falling significantly, indicating waiting isn't likely to be of benefit.

The past decade has been one of low interest rates coupled with unsustainably high home price appreciation as the supply of homes available for sale struggled to keep up with demand. As a result, home prices increased a dramatic 50.6% from 2000 to 2005. Unfortunately, consumer income didn't keep pace with housing prices, rising only 12.9% during the same period. This resulted in decreased housing affordability, which planted the seeds for our current market conditions.

In 2006 we saw a needed pause in the market...not only natural and expected after unsustainable price growth, but much needed to put our market back in balance. Home price growth stabilized in 2006, with prices relatively unchanged over 2005. Jeff Allen, Minneapolis Area Association of Realtors Research Manager, predicts that 2007 should be pretty stable with 2006 overall, with a bounce back beginning in the later part of 2007.

Flat housing prices and continued historically-low interest rates have improved affordability, creating a good environment for first-time homebuyers...a necessity for a continued healthy and growing housing market. If you're ready to buy, it's a good time to make a move.

Click to see the full Twin Cities Metro 2006-2007 Market Analysis by Jeff Allen, MAAR Research Manager.