3 truths about Twin Cities Real Estate
The surprising drop in new homes being built.
If you’ve been considering buying or selling a home right now, you may feel like you’ve missed the boat. Why? Because the media is constantly broadcasting gloomy news about how the housing market has drastically slowed to a crawl. If you’re picking up on media reports, you may feel badly for not buying or selling earlier.
But has the housing market really dropped so precipitously? Here are 3 reasons why it hasn’t:
1.) Yes, sale prices have dropped since mortgage rates began to cross the 5% line in May but -- by only 0.2%. When you do the math, that number is nearly insignificant. The average price right now for a property in the Twin Cities is $350,000. Based on that average, accepted offers only came down by $700. If you’re selling, or buying a $350,000 home, $700 is almost a rounding error.
2.) Days on Market (DOM) hasn't changed. DOM indicates the speed of the market— how many days a home is on the market before it sells. In March—at the height of the frenzy—the Twin Cities was at an average of 11 DOM. And where are we right now? 11 DOM. A more typical historical DOM is 30-45—in other words, homes are still selling quickly!
3.) Inventory is still low. Inventory is the key driver behind a seller’s market—it enables sellers to set high prices, prompts buyers to sweeten their offers by waiving inspections and the like. In the decades before 2008, about 13 million new homes were built every 10 years. But during the crash, many home builders got out of the business and didn’t return. Since 2012, new home builds have dropped to 7 million units per decade. As a consequence, while we historically have about 18,000 single family homes for sale at any point in time in the Twin Cities—right now, we have less than 5,000!
If you’re a buyer, I won’t sugarcoat the situation. There have been significant increases in mortgage rates, and buying a house right now will be more expensive than it was earlier this year. But we’re still below the 30-year average of 7.7%
And if you’re selling, you’re still in great shape. Bottom line? The changes in the Twin Cities housing market haven’t been nearly as drastic as the media may have led you to believe.