If you ask a typical home buyer, currently seeking a home in the Twin Cities area, how their home search is going they will probably reply “frustrating”. With mortgage rates remaining low at 4.25% – 4.5% (30-fixed conventional mortgage) and home prices on the rise buyers are out in force to get while the getting is good. The problem is there are not enough choices for the typical home buyer. In high demand areas the problem has become acute. As a result, many buyers must make quick, above list price offers. This is something that makes any buyer uncomfortable. Being fast and aggressive doesn’t guarantee you will get the home you made an offer on either. There is a good chance another buyer or buyers will outbid you. It’s understandable for a buyer to feel frustrated after putting themselves out on a limb only to be rejected.
The shortage of listings has resulted in 12.6% fewer sales compared to the same time last year. The listing shortage has also boosted home prices. The median sales price as of April 1st 2014 is $189,000, a 9.9% increase over the same period in 2013. It’s no wonder buyers would like to make a move before the prices rise further.
There is a singular solution to this problem; more newly listed homes. While I expect the market to remain challenging for buyers, there has been an increase in new listings. There were 10.2% more homes listed in April 2014 than 2013. Concurrently, distressed property sales (foreclosures and short sales) have decreased significantly. We hope this decrease will be backfilled by traditional listings. It appears this is happening, albeit not quick enough for current buyers. Traditional new listings rose 25.7% compared to last year at this time, while foreclosure and short sale new listings fell 41.6% and 49.6%, respectively.
With the Federal Reserve making noises of backing off it’s tapering (of the stimulus program) that have kept rates low, rates should remain relatively low (below 5%) through the year. This should provide more time for buyers to take advantage of low interest rates. Now, those buyers need new and more choices!
Of course, it is a great time to sell a home. Sellers might think that waiting for prices to rise is a good choice, and it might. However, with interest rates and listing numbers rising who knows what market conditions will be a year from now?
I wish I knew. Stay tuned!