I have a good friend who's an actress. She'll occasionally get stopped in the street by fans, and the most recent time I was with her when it happened, I asked, "Doesn't that bug you, having people coming up and commenting on your work all the time?" I thought that maybe she felt it was intrusive. Her honest and immediate answer was, "Why would it
ever bug me to have people coming up to me telling me how great I am and how much they love what I do?" Good point, dear friend.
As a real estate agent in 2011, I tend to get people coming up to me all the time, too. So often, in fact, that I should probably have some sort of T-Shirt made with my stock response. But unlike my friend, people who approach me normally do it with trepidation, much like they're about to ask me about the death of one of my loved ones. Their hand gently touches my arm, as they ask with grave concern, "How's the market? How are you
doing?" We've all heard it; the market has been challenging (to say the least). My job hasn't been easy these past few years, but it
has continued to be the best career choice I could ever imagine for myself. In spite of market challenges, my business has continued to grow 11+% year-over-year since 2007... Not bad for a supposedly horrible market.
So, how IS the market? A vague question, with an equally vague answer: "It depends." How you'll view this market and whether it's time to buy or sell now will depend heavily on your pricepoint and your goals. If you're trying to get the best possible deal, you'll fall into one of these categories:
Entry-level purchase:In the Twin Cities, this would be categorized as houses in the $150K-$300K pricepoint. I believe that pricing in that range has probably bottomed out, although there are areas of the Twin Cities that might see a bit more decline. However, it's important to remember as a buyer trying to get the best deal in this market that your mortgage interest rate also plays a huge factor in how far your dollar will go. Interest rates are poised to rise (a topic I'll tackle another day), and you need to remember that a 1% rise in interest rates equates to about 10% less purchasing power (in other words, if you're buying a $200K home today at a 5% interest rate, you'll pay the same monthly payment on a $180K home if interest rates go up to 6%). So even a moderate price reduction on a property still won't make up for the lost purchasing power if interest rates go up. If you're thinking about getting into home ownership, the one-two punch of affordability and interest rates is a nearly unbeatable combo right now.
Move-up Buyers and Sellers:I categorize this group as the price point of about $350K-$700K (in Minneapolis and the western burbs). Speculation says that prices here could go a touch lower still (driven by pressure of foreclosures and shortsales). Keeping in mind the purchasing power scenario from above, if interest rates were to rise a full point (which, again, they are poised to do), you (as a buyer) end up with the same monthly payment on a $450K house purchased a year from now as you would on a $500K house purchased today. So, if prices in this range drive down another, say, 5%, you're still coming out ahead by purchasing now.
As a seller in this price range, it's also very important to factor in your 'next step' when thinking about whether making a move now is the right thing to do... Assuming you sell and subsequently purchase a home within the same market timeframe, you'll recognize the same percentage "discount" of this market on both sides (in other words, you might sell at a 10% 'discount' over what you could've gotten in our peak market, but you're going to purchase a new home at that same 10% discount). If you're moving up to a more expensive home, you'd be wise to consider making your move now, as the actual money saved will be greater now than when the market bounces back. If you're dowsizing, you might want to consider waiting out a market turn.
Upper bracket:The upper bracket has been hard-hit in the last few years, and I think we have a little more pain to come. Lending restrictions have created a smaller pool of qualified buyers for these properties, and we're still seeing extended market times and an increase in lender-mediated properties in this price range. With pricing in this market poised to drop further (possibly 5%-10% in the next year), this could cancel out any benefit of the lower interest rates of today (vs the speculated 1% rise in the next year), making the timing of this market a probable wash.
As always:
Buying or selling a home isn't just about the financials, and it certainly isn't just about "timing the market." It's about making sound decisions for you and your family's current and future lifestyle and needs. The financial piece certainly has a role to play, but it's definitely not the only thing that should drive your decision.
If you want to talk further about the market, I'm always open to it. You'll be able to find me pretty easily. I'll be wearing the T Shirt that says, "Business is great, thanks!"
