Realtor Reviews Minneapolis Housing Market
Realtor Reviews Minneapolis Housing Market
The 2018 housing market has sure been a wild ride. The year began with rapidly rising home prices and low mortgage interest rates. Bidding wars were the norm for highly desirable homes. It was not unusual for sellers to find a buyer in the first few days after putting their house up for sale, generally at full asking price or even above. Sellers were riding high while buyers struggled to close a deal on a home.
But in the last few months of the year, we begin to see a shift in the market. Prices are finally stabilizing or increasing at a slower pace. Interest rates reach 5.2 percent, an 8-year high. Though now rates have fallen back to 4.59 as a benchmark for a 30-year fixed rate mortgage. The market still favors sellers but to a lesser degree.
2017 compared to 2018
- new listings down -0.3%
- pending sales down -3.6%
- closed sales down -3.4%
- overall median sales price up +7.7%
Now what you have all been waiting to hear. What are the takeaways for the 2019 market?
The economy right now is still vibrant, but showing signs of moderating. Everything that happens going forward is going to hinge on the trade war.
If the US and China reach a trade agreement by March, that should send the stock market soaring and consumer confidence along with it. However, if the trade war continues and the tariffs become even more punitive, that is going to slow down the world economy and the US along with it.
Now you might ask, why do we care and how does China affect the housing market? It’s about interest rates, and how often the Fed decides to raise them based on how the economy is performing.
The cost of securing a loan to buy a home is going to be a significant factor in the housing market for 2019. By the final quarter of last year, affordability was becoming an issue for first-time buyers, forcing many out of the market. By December, the rates dropped along with the Dow Jones average. For the current year, the Federal Reserve has indicated that they expect two rate hikes instead of the three originally planned.
My prediction: The Federal Reserve will not raise rates until June unless there is a trade agreement. Then we might see one in March. At least for the first quarter and possibly continuing into the second, I expect the mortgage rate to bob around 4.50%. When I asked the Magic-8 Ball if rates would end the year above 5% my answer was very doubtful. I’m good with it.
We closed out the year with new listings trending upward and dragging inventory with it. I expect that to continue throughout the year, although not in numbers significant enough to turn the market from “sellers” to balance, and no expectations at all that we will be seeing a buyers market any time soon.
Move up buyers can expect to have more choices and some breathing room to make them. For first time buyers, the market is still going to be challenging. The rise in home values and interest rates are making it more difficult to buy a home. The reality for buyers will be having to make adjustments as to expectations versus what they can afford.
It’s still a great market if you are selling a home. However, sellers need to be mindful that the stories they hear from friends who sold in 2017 and 2018 at full price contracts in a couple of days will not likely hold in 2019. Realistic expectations will be taking longer to sell and offers that will not be for the full asking price in the coming year.
The Impact of Millennials
According to a study done by Realtor.com millennials are expected to account for 45% of all mortgages. They will represent the largest group of buyers in the marketplace. They will be first time buyers and move up buyers as well. The latter will be adding much-needed inventory to the first time buyer market segment as a bonus.
I’m standing firm on my prediction for a strong year in Real Estate. The increases in housing inventory, moderate upward movement of interest rates and a continued slower rise in home values are fueling my optimism. While affordability is going to slow sales down, increased inventory of homes will be bringing the market closer to balance, which over the long term is positive.
Remember it was the tortoise that won the race and not the hare. Even though I don’t expect another year of a housing market moving at the speed of light, I’m still hitting that thumbs up button and giving the 2019 Twin Cities housing market a solid “like.”