This week the Minneapolis Area Association of Realtors published the housing statistics for June. It shows the median price paid for a home in our area, this June was $242,000, up 5.5% from June 2015. This is a trend that has been going on for the last 4 years since we came out of the Great Real Estate Depression of 2006 to 2012. And don’t let anyone kid you, it was a depression with homes in the 13 county metro falling about 42%. We are coming to point where we have gained all that back. But we are doing that at a rate that should be sustainable at 5.5%. In the years preceding the Depression, from 2001 to 2006, it was rocketing up at a rate that exceeded10%, which is part of what fueled the subsequent collapse. There were other factors also, like, the sky rocketing prices caused many builders to speculate on building new homes at an unprecedented rate. Just when the market reached its peak so did our inventory of new homes.


Enough with the past, the question is where are we now? I believe that a 5.5% annual price increase in housing, although above the historical average when looking back over 80 years, it is probably NOT creating a bubble as we did in the early 2000’s. Although we may see a price adjustment at some point, it is not likely to be a disaster, as it was previously, unless some outside factor comes into play. Although builders are building new homes at a faster rate, there appears to be more custom built, pre purchased homes and less spec homes. The resale market of houses is actually in short supply, as any buyer today can tell you. The other important factor is that interest rates on mortgages remain very low. This week, 30 year fixed rate mortgages hit 3%!! And the current forecast by most economists is for them to remain low, without an upward adjustment by the Federal Reserve until mid 2017. Although the Fed wanted to raise rates this year, the surprising Brexit vote in Great Britain and the accompanying fears that it might cause a global slow down, have apparently delayed their decision to do that.


So, what conclusion can be drawn for sellers and buyers from all this? Sellers can and should expect to get a reasonably higher price for their homes than before. We are very close to full recovery. Buyers, however, in this kind of market, can sometimes stampede and pay too much for a home. Buyers have to know that the smokin’ hot deals of the Depression are a thing of the past. They need to be realistic, in that sellers do not have to give their homes away. In the end, buyers, in their own best interests, need to be realistic but patient. At the current rate of appreciation on housing and based on today’s interest rate, the amount that a monthly payment would increase 6 months from now on the average house is about $15 per month. Buyers, take your time and find the right home for you and your family. You will find it and, if patient, it will also be a good investment. There is a great article on my website, under the Real Estate News tab from Rismedia, that looks at the current market conditions. You can see the local market conditions under How’s the Market tab at the same sight. Please call me with any questions about real estate and thanks for reading.

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David Feerhusen

David Feerhusen

Broker/Realtor, CDPE, GRI, CRB
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