July saw a dramatic turn in the real estate market.  After June’s record sales numbers, July was much slower.  We won’t have statistics for the month for about a week but I believe that the number of houses that went Pending Sale in July will be down 10% or more from June.  Realtors, Loan Officers and Title Closers are all commenting that business is slowing down dramatically from its record pace of the last few months.

This slowdown was expected.  With the summer half over and interest rates slowly on the rise, Buyer demand is waning.  This is a traditional seasonal pattern that happens around this time every year but it seems to be shaking up Realtors more this year than last.  For Buyers that are still out looking, your options haven’t been this good in many years.  For Sellers, expect that your home will be on the market longer and at 30 on the market you should consider a price reduction.

June was another record-breaking month for home sales in the Minneapolis/St. Paul area.  Interest rates slid all the way back below 6% for a 30 year, fixed rate loan of $150,000 or more.  Even though the Fed raised interest rates this month, that rate is not directly tied to the mortgage market.  According to the Mortgage Bankers Association, by this time next year rates are projected to be at about 7.1%.  With the rates still so low, I expect that July and August will be fairly brisk with sales, though September and beyond promise a slowdown in activity due to seasonal trends.

Even as sales are at and near all-time highs, the number of homes for sale are also high.  There are currently more than 23,000 single family homes for sale on the MLS right now.  That’s more than double what it was five years ago and up double digits from last year as well.  This is a boon for buyers as it allows for more buying decisions.  Sellers are having to realize that most homes no longer sell in the first week on the market.  In fact, I’m seeing price reductions on many homes for sale more than 30 days.  This is not a sign of a “price bubble burst” but rather a very normal market.  Sellers that want top dollar will need to spend more time “staging” their home for sale so that it shows well against the increased competition.

June is National Homeownership Month. According to Minneapolis Area Association of REALTORS, Minnesota’s overall home ownership rate now stands at 77%. Unfortunately, the home ownership rate for minorities is still well below 50%. Each year more Minnesotans purchase their first home and REALTORS such as myself are glad that we are able to help them achieve their dreams. While low interest rates have helped the last few years, there are still many people renting homes that could be owning homes with the right assistance. We can all work harder to help those around us succeed if we just take a few moments to show them that we care.

If you read the latest statistics from the Minneapolis Area Association of REALTORS, you will see what appears to be the formation of a maximum in the New Listings and Pendings (offers accepted) data. In a typical year, new listings and offers both begin to slow down as the summer approaches. Last year, the entire summer stayed strong due to the low interest rates. It’s uncertain whether or not this will continue this year or if we will fall back into a more “normal” summer. Interest rates haven’t moved much since last month and the job market outlook is improving so all the signs point to a relatively strong summer season.

If you’ve been thinking about waiting until fall to find a home, consider this: if rates move from their current 6.25% up to 7% by fall, your monthly payment will go up by MORE THAN 10%.

April new listings and sales were again at record levels.  It was a busy month for myself and everyone in my office.  Even though sales were very strong, there’s still a great inventory of homes on the market.  Buyers seem to be increasingly looking for homes that are in “move-in condition.”  Sellers looking for a quick offer should take time to evaluate the layout of furniture or “flow” of each room and consider carefully whether replacing carpet, painting walls, updating lights and window treatments may provide a favorable return on investment at time of sale.

Interest rates have jumped since last month’s lows and are currently around 6.25%.  Most economists and loan officers feel that the lowest interest rates our behind us and that rates will continue to slowly climb throughout the rest of the year.  It still looks like a great year for both Buyers and Sellers!

The monthly employment numbers for March came out April 2 and immediately sent the bond market interest rates higher.  Just a few weeks ago rates were down to 5.25% but have now “bumped up” to 5.675%.  While that sounds bad, the rates went up because the economy and job market are looking stronger and stronger with each new report.  The employment report was well above expectations and therefore really shook up the market on Friday.  Housing is very strong right now!  Reports of houses being sold in multiple offers are increasing and traffic at Open Houses is getting strong.  The one thing I’ve noticed recently is that there are many buyers writing offers that are unprepared to do so.  Some buyers have shaky financing, others just are not ready to purchase or don’t understand that existing homes will have items that need repair when an inspection is performed.  Some agents and loan officers are so busy or distracted that client education seems to be going by the wayside.

When buying a home, it is VITAL that you understand the entire process up to and including closing before you even write the offer.  Likewise as a Seller, you not only need to understand what is involved in selling your home, but also have an agent who will do their homework on the buyers who do write an offer on your home so that you know they are prepared as well.

March started off very busy and so I’m a little slow in posting an update here.  At the start of February, interest rates had jumped back up to 6%.  Since then, the rates have slid all the way down to 5.25%!  The economic forecast by economists came in lower than expected which has caused interest rates and the stock market to fall much of February and the first part of March.  As the weather has warmed up, the buyers have come more and more into the market.

As is typical in a good market, the best homes for sale at the best prices are still being swept up in a matter of days.  I was very pleased to have a home in Crystal sell in 5 days with multiple offers and a townhome in New Hope sell in two weeks with multiple offers.  The sales for the first two months of this year is lagging slightly behind last year’s record pace but are still well above the 5 year average.

The rest of March looks great for both buyers and sellers since we have such a great balance of the two right now.  If the interest rates continue to stay this low, you may see more hurried purchasing in the months to come.

Just a few days ago, the Federal Reserve released a statement from their most recent meeting that suggested that their policy of keeping key interest rates at record lows may be changing. Previously it was expected that the “Fed” would not raise rates until Fall. Now it appears the first rate increase may come sometime this Summer. While interest rates on home loans are not tied directly to the “Fed Rate,” it is impacted by rising rates, especially ARM products. Rates during January fell to as low as 5.375% on a 30 year fixed before rising to almost 6.0% by the end of the month. The latest round of snow storms and subzero temperatures has cooled off the Open House traffic but buyer activity is still strong. There’s been a bump in new listings on the market in the last week or two, which I expect to increase even further as we head for Spring. February looks to be a good month for buyers and sellers. Interest rates are expected to hover around 6% and housing demand should rise as the month goes forward.

January has started off great!  Between Thanksgiving and Christmas the market slowed down dramatically (as is normal for the time of year) but has since picked up nicely.  Many homes that were still for sale in late 2003 expired close to the end of the year and I am seeing some of those houses come back on the market, as well as some new homes.  Interest rates are still hovering around 5.75% on a 30 year fixed rate loan which means buyers still have ample opportunity to take advantage of the good deals in the market right now.

I expect January to be more active than December but there will be an even greater pickup of new listings and new buyers in February and March.  While I am still waiting to see final compiled statistics, 2003 will go in the record books as the best year in Twin Cities real estate history.  With the stock market continuing to push upward, jobless claims continuing to fall, low interest rates, and warmer months ahead, we are shaping up for another strong “Spring Market” for real estate sales.

If you are a buyer, this is absolutely the best time to make an offer… before most buyers hit the market in the coming months.  If you are a seller, you should be working on preparing your home for sale now.  Please see my tips for suggestions on how to prepare your home for showings.