How to Buy and Sell a Home in the Twin Cities Real Estate Market
Attention Home Buyers and Sellers | Twin Cities Real Estate Market is Hot
If you have been looking for a home to buy or thinking about selling your current home you already know what I am about to tell you. The one extraordinary factor that describes the Minneapolis-St. Paul real estate market is that due to historically low levels of inventory, it favors the seller in a really big way.
How big? The latest data from the Minneapolis Association of Realtors shows us the end of 2016 inventory levels down 26.3 percent while months’ supply of homes was 1.8 in the single-family category, 1.4 for condos, and townhomes a mere 1.1 months of inventory. Looking at this from a perspective of the price range, anything below $350,001 is at 1.3 months’ supply or less. When you take into account that 5-6 months of supply is considered balanced, and the current supply is at an all-time low when we compare it to data going back to 2006, this is clearly an extraordinary situation.
How to Buy New Home in the Twin Cities
As we work through the second month of a brand new year, even given the favorability this market awards to sellers, buyers are not deterred and winter is no longer a slow season. Eager, ready and intrepid, they don their knitted hats and mittens, pull on their boots and slug ahead on their journey to home ownership with their realtors in tow. Desirable properties that show well and are priced according to the market generally have multiple offers in the first few days and are selling at or above asking price, especially in the lower price ranges.
Who Are These Twin Cities Buyers?
The largest segments of buyers in the market right now are Millennials and Baby Boomers. The majority of the former fall into the first time home buyer category and while the Boomers generally do not, these two demographics of buyers are often bidding on the same properties. That may sound like it makes no sense but with larger numbers of older buyers becoming empty nesters they are downsizing to condos and townhomes which put them in competition with younger buyers also looking for a more carefree lifestyle. This explains the lowest inventory situation for condos and townhomes.
What is Driving this Twin Cities Real Estate Market
We have seen a Twin Cities Housing market favoring sellers for several years now with demand far outweighing supply more with every subsequent year going back to 2013. Generally speaking, the same factors have been fueling this market to some degree year after year.
- A strong local job market with low unemployment
- Consumer confidence in the economy
- Rents continuing to climb year after year
- Historically low-interest rates
At just over 4 percent, rates are still historically a bargain and many buyers are anxious to secure a low rate before the next proposed increase by the Fed. The good news is, that although back in December the Fed said 3 more rate increases were likely in 2017, St. Louis Fed President James Bullard said in a speech at Washington University on February 9th that he favors only one increase in the interest rate this year and is not certain when it will occur. Forbes agrees with this analysis as well. Given these factors, we can expect the current situation to continue right into the summer months and possibly beyond.
Given these market conditions, if you are a buyer, expect the competition for desirable properties to be keen so don’t expect a low offer is going to fly. Consider yourself very lucky if you are not involved in a multiple offer buying situation. If you are a seller, don’t mistakenly believe that you do not have to prepare your home and put your best foot forward. Today’s buyers are very savvy and homes that do not show well or are not priced according to market and condition do languish, and at times for months even at the most competitive price ranges and categories.
My Best Tips for Twin Cities Home Buyers
- Be prepared. Don’t even think of making an offer if you do not have that all important pre-approval letter from a lender. Most real estate professions will require that you have one before they will even start showing you properties.
- Work with a realtor. It is always best to have your own professional advising and advocating for you the buyer. After all, the seller will have one and if you do not, it puts you at a distinct disadvantage in this market situation.
- Don’t hesitate. That home you find desirable will most likely look good to several other buyers so if you want a chance to buy this property, be prepared to make an immediate offer to purchase.
- Don’t falter. If a property has several offers in the first couple of days the seller’s agent will probably ask for highest and best within a designated time frame. This means you will only get one shot at having your offer excepted so make it good.
- Be accommodating. If you know the seller is anxious to sell quickly talk to your lender about a 30-day closing window if possible. On the other hand, if the seller indicates she needs more time to move out, offer it to them.
- Be reasonable. In this market do not ask the seller to pay for small, insignificant repairs that might show up in an inspection. Unless you run into a major costly issue, don’t sweat the small stuff and fix it yourself.
- Be creative. If you found your dream home, sit down with your realtor and see if there is something extra you can include in your purchase offer to sweeten the deal and make your offer stand out among the others.
My Best Tips for Twin Cities Home Sellers
- Get a realtor early in the home selling process. His advice will be invaluable right out of the gate with direction on what you should do to improve your chances of selling quickly and for the highest price.
- Prepare. Declutter and clean your home till it sparkles and shines. Even in this market, the better your property shows the higher and more offers you are likely to receive.
- Price your home for the market and its condition in comparison to other properties in your neighborhood.
- If you are selling one home and buying another see all my best tips for buyers above.
- Have a plan. If you are moving up or downsizing and are financially able to buy a home before you sell yours that is a good option. If you cannot make this work, be sure you have a backup living arrangement in place in case you cannot complete the purchase of a new home before you have to move out of your current property.