Despair and frustration... This seems to be the narrative of some realtors trying to navigate the current Twin Cities housing market with their clients. While things are proving to be a challenge for a number of buyers right now, there is a lot more happening behind the scenes that many people aren't taking into consideration. Rather than jumping on the bandwagon of doom and gloom, it's important to consider the good things that are coming out of this situation.
Is the current housing marketing challenging? For certain buyers, yes.
Is it bad? Absolutely not.
So, what exactly is going on with the market right now? Long story short, scarce inventory and historically low interest rates are resulting in more people looking to buy a new house than to sell their current one. This state of demand outweighing supply is driving prices up, creating multiple offer situations on nearly every listing in the Minneapolis area. The buyers who are able to secure homes are those who 1) have the best partners, 2) are strong financially, and 3) are willing to see past some of the roadblocks that typically kill deals. For example, buyers are opting to waive appraisal and inspection contingencies when appropriate if it means their offer is more likely to be accepted.
When you put it that way, it sounds like things are pretty ferocious out there. Is any good coming from it? Yes - a lot of good, actually. Right now, the average American is pulling an extra $60,000 in equity out of their home on their sale, so it has - quite literally - never been a better time to have real estate as an asset. This is creating tons of new wealth for middle class families. A typical American household can do a lot with $60K, and this is resulting in homeowners being better equipped to handle financial hardships. Many expected the COVID-19 pandemic and consequent mass layoffs to cause a foreclosure crisis, but instead of defaulting, distressed homeowners are simply selling, which is keeping the economy healthy. Housing is literally driving economic recovery right now.
For the last 11 years of my career, I have seen so many low and zero down payment borrowers trying to squeeze their way into properties with very little money. This is not the case today; We are seeing that most of the buyers who are playing in the market are well-equipped financially and eager to take advantage of lower interest rates.
Lastly, even though home prices are up over last year, the reduced interest rates are in most cases offsetting that loss of buying power almost entirely. This means that even though the price of a home has risen significantly in the past year, your monthly mortgage payment would be roughly the same on that home due to lower mortgage rates.
So, is it frustrating that the market is competitive? Absolutely. However, it is so important to look at the big picture. The housing market is healthy, people are building wealth through real estate, and rates are historically low! While the amount of competition out there is proving to be a challenge for buyers, the most important key to success in this market right now is having the right partners. You would be amazed to know that your realtor's name, knowledge, and reputation can easily help you win in multiple offers, in addition to having a fantastic loan officer. Choose wisely, and happy house hunting!