February is a transition month in Minnesota.  While brutal weather still pounds our state, thoughts of spring have invaded our minds, as evidenced by home improvement fairs and boat shows around the state. 

Hearty Minnesotans are planners, and despite the brutal cold, your preparations for spring begin now.  Those plans can be greatly aided by understanding the current real estate trends in Minnetonka, Eden Prairie, Plymouth and Maple Grove along with their potential impact to you.

 

Trend 1- Inventory Still Tight (with one asterisk) as Price Appreciation Continues 

While it is accurate to say that inventory continues to be low in the West Metro, this is only partially true.  Statistically inventory in Eden Prairie, Plymouth and Minnetonka is down significantly versus this same time last year and consistent with the longer term trend. 

However Maple Grove is bucking this trend as total listings are up slightly versus a year ago.  The nuance supporting this outlier is an inventory of new construction homes.  While the land-locked and  mature suburbs aren’t seeing as much new construction, it is significant enough to buoy inventory to the North.

 

 

Inventory of Homes for Sale
Dec ’16 – Dec ‘17

 

Eden Prairie

-31%

Maple Grove

+0.7%

Minnetonka

-25.5%

Plymouth

-22%

 

In terms of price trends, inventory woes and the higher price tag associated with new construction have combined to push both median and average prices higher across each of the major west metro suburbs (Minnetonka, Eden Prairie, Maple Grove and Plymouth).  This marks the continuation of a longer term trend.

 

Median Sales Price Changes
Dec ’16 – Dec ‘17

 

Eden Prairie

+16%

Maple Grove

+19%

Minnetonka

+16%

Plymouth

+3.2%

 

 

Trend 2: Tight Inventory to Remain but Seasonally Adjust

Reduced inventories combining with increased sales prices seem to indicate a reluctance among potential sellers to list homes and transition. Many of these are family homes inhabited by aging baby boomers. They likely represent the bulk of the inventory gap in the $300k - $600k range. The reluctance of sellers to list their homes and move on is driven at least in part on a desire to maximize value and “catch the top of the market” combined with little urgency.

Seasonal relief should arrive soon as spring typically provides a large influx of new homes, perhaps even enough to finally signal to reluctant boomers that it is time to get off the sidelines.  Though a more likely scenario is some temporary relief for weary buyers, and more of the same.  Regardless this seasonal uptick should help those buyers who know what they want and are ready to act when they see it.

Trend 3: Rate Changes Looming- May Disproportionately Impact First Time Homebuyers

 

 

Source: Federal Home Loan Mortgage Corporation http://www.freddiemac.com/pmms/pmms30.html

While mortgage rates are still low in a relative sense (December 2017 at 3.95%), the overall strength of the economy and longer trendiness seem to point to rising rates in the near term.  This could have a muted effect on move-up buyers by slightly impacting total housing budget.  Much more likely to feel the squeeze are first-time home buyers (many millennials) who may be seeing rising prices combine with rising rates to move the barrier for home entry even higher. 

While rising rates are something to keep an eye on, the markers of a true real estate bubble do not appear to be forming.  A roaring economy shows no signs of slowing down and inventory is still near historic lows.  This tends to point to the fact that a rise in rates can likely be absorbed by the market in the near term with minimal impact to the underlying fundamentals.

Three clear trends, but what does it mean for buyers and sellers this spring?

For those seeking homes, these numbers mean more of the same. A tight competitive market will stay that way with spring promising some seasonal relief that will lift inventory and offer options.  Successfully capitalizing means several key action items:

  • Engage an expert- a pro with extensive knowledge of your primary search area is crucial to getting the right home at the right price.
  • Build your search criteria carefully and be ready to act (or have a delegate ready) the moment a property that fits shows up in results.
  • If you make an offer, show up well with a preapproval in hand and a clean offer as free from contingencies as possible.

If you have a home to sell

  • Obtain a home appraisal from a local agent to help you to understand any updates you need and how you might price your home. Even if you have a fairly recent appraisal, it won't hurt to revisit it as the market has changed.
  • Ask how you can maximize your sale price by investing in home improvements.
  • Armed with a list of to-dos, begin to make your updates now and be ready in March.  The spring rush is largely weather-related and in Minnesota predicting the first warm weekend is a crap shoot.
  • Discuss with your agent timing of transactions.  It may make sense to buy or sell first and every situation is different based on properties and goals.

The Bottom Line

Zachary Adams has been turning real estate searches into house warming parties for two decades.  His laser focus on the west metro of Minneapolis means he's got the inside track on every pocket neighborhood, valuation nuance and property pitfall from West Bloomington to Maple Grove.  He'd love to help you understand your options and define your next steps. 

If you are ready to make a change or even just considering options, Zach and his team are ready to work hard to identify next steps and serve as subject matter experts to help you along the way.  A no cost consultation is a great first step.