TRANSITIONAL HOUSING MARKET:

WHERE ARE WE NOW?

With Spring officially starting in one week, real estate professionals are gearing up for the busy season. As temperatures rise and the sun shines brighter, customers emerge from the comfort of their warm homes and enter into the home buying and selling process. Many are asking about the changes to the housing market. Right now, the market is in a place where, unlike the last three years, sellers might get a handful of showings and few offers, even when a home is competitively priced. Buyers might actually have the time and chance to make an offer and ask for an inspection, which, in the previous market, was difficult. It's not your imagination; the housing market is transitioning. We are not seeing a full reversal to a buyer's market, but we are seeing a more balanced trend.

The main catalyst for the slowdown would be the rise in interest rates seen over the last year from the previous historic lows. To be honest, the transition in the market might be just what we have needed. The pace at which houses were selling was not sustainable for buyers, sellers, or developers. The inventory could not keep up with the demand, and the pause helps builders, developers, and the construction industry a chance to regroup.

More good news for sellers is that if your house is competitively priced, it will still attract attention and will most likely sell within a month or two. It's important to be aware that with the slowdown, more and more buyers are going to refuse to pay for houses that are priced too high above market value. Additionally, the slower market helps give buyers time to do an inspection and add an appraisal clause or two in their ask. And sellers, not to worry, an inspection helps both parties remain on the ethical-up-and-up. It's protection for everyone.

What does the transition mean in the long term? Will there be more volatility? What does the slowdown mean for first-time homebuyers? Is it still a good time to sell? Mostly the future looks bright. First, the chances that prices will ever drop dramatically in Minnesota are, frankly, slim. We have seen price drops at 10%, compared to elsewhere in major markets where you have seen 30%. The strength in housing equity, coupled with the lowest unemployment rate in the nation, are key indicators that create insulation in our state v. national economic trends. Probably the worst news continues to be for first-time homebuyers. The average starter home in Minnesota communities just doesn't exist anymore. For workforce housing, the less expensive house is more likely to be in the high $200,000s, which is beyond the means of many low-to-moderate income households. Finally, for those homeowners still looking to sell in the Spring, there is a large influx of buyers and listings on the market, so price appropriately, possibly setting the stage for multiple offers and bidding wars. If you're one of those homeowners, don't be afraid to enter the housing market during this time of transition. The price is relative, and it's still a good time to sell.