Inventory is down while home prices are up. Laker Real Estate Services is calling a double top in the housing market as noted in our recent blog post “Minneapolis St. Paul Housing Market Explained in 8 Charts… Where Do We Go From Here”.
Although prices are up compared to April of last year, they are roughly in line with the top of the market we saw in Q2/Q3 of 2021. The latest trend in the Minneapolis St. Paul Twin Cities market over the past several weeks are new price reductions and a noticeable slowdown in buyer activity. This latest activity is not reflected in the newest housing report yet.
See the full Minnesota Housing Report in the link HERE.
The stock market/ debt market sell off is frightening buyers as they are seeing reduced buying power via the higher interest rates and reduced retirement savings as 401ks and IRAs begin to tank. Signals point to a liquidity crisis forming on the near horizon.
We know, many homes that would have only taken a weekend to sell a few months ago are now on the market for 2 or 3 weeks already. Many of those homes have had price decreases within the last month. If you go to any homes currently for sale you will notice, there are not 10 other buyers there looking at the home for sale like there were only a few months ago. This past weekend we looked at 3 homes with buyers and there were no other buyers at any of the 3 homes we looked at. It was a bit shocking to see no other buyers at these homes where literally just months ago there would have been at least, several other buyers at the homes. This sudden drop off in buyer activity is a result of interest rates continuing to climb rapidly.
This is not a good leading indicator for sellers being that the spring and summer are the best time by far in terms of normal buying/ selling activity in the Minneapolis St. Paul Twin Cities metro housing market. A buyer slow down this time of the year does not forecast well for Q3 Q4 of 2022. Many experts are also predicting we will not even reach a recession until sometime in 2023. Sellers thinking about selling should not procrastinate or get too comfortable with the idea that the Minneapolis St. Paul Twin Cities housing market is at all-time highs again.
In a recent Bloomberg interview Black Rock CIO Rick Rieder said, “We are holding our cash with both hands” and preached the importance of patience in this market. View his full Bloomberg interview is HERE. Rick expressed his thought that investors should continue to hold cash and sit on the sideline until the federal reserve was done with their current tightening cycle.
The only caveat is that no one knows when this will end or how badly markets may react in the meantime. When markets are at all-time highs opportunities for buyers and investors are minimal while opportunities for sellers are at a maximum.
The only problem with selling now is sellers will have to find somewhere else to go. This means selling makes the most sense for those who 1. Have more than one home 2. Wanting to move out of state or at least 15 – 20 minutes outside of the Twin Cities metro area or 3. Looking to downsize from a larger home to a smaller home or move from their home into a townhome, condo or senior community.
If you have more than one home and are thinking of selling or looking to downsize or move out of town a bit to take advantage of the all-time high real estate market, be sure to contact Laker Real Estate Services. We will help you with a smooth sales transition and ensure a seamless real estate transaction experience. Many other sellers are deciding to keep the equity in their home and rent their homes using the cashflow to help fund their purchase of a new home. Different sellers will have different needs and we can tailor a plan to help maximize the value created in your individual situation.
As far as being a buyer, other larger local well-known firms are encouraging buyers to not wait and still go out and buy a home. They are encouraging buyers to reduce items on their wish list or settle for a smaller home or settle for an area they may not want to be. We view this advice to be a bit overzealous.
Buyers with strong balance sheets or ability to put down a sizeable down payment or cash buyers or buyers with a lot of equity in their home shouldn’t be deterred from buying in this market but should be very cautious. Buyers should be writing several offers to find motivated sellers thus ensuring they are getting a deal and not overpaying in an all-time high market environment.
First time home buyers or buyers with a minimal down payment or buyers who do not have an extra savings cushion will need to be extra cautious in this housing market. They should be looking to work with experienced agents who are keeping their individual situations in mind, not pushing them into homes that don’t meet their needs or pushing them into much smaller homes or pushing them to buy in areas way outside of their desired locations.
If the buyer’s home of choice is just out of reach, they should be patient for now and follow the advice of experts like Rick Rieder and others who lead and closely monitor financial markets which will have a grave impact the Minneapolis housing market.
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