This article was published in Savage's The Pointe Neighborhood Winter Newsletter, and was submitted on December 17, 2008.
By Sara Huebener
These days, more than ever before, the status of the real estate market seems to be a hot topic. In a day and age when people have unexpectedly seen home values and retirement accounts plummet, it's true that concern and uncertainty abound. Therefore, it comes as no surprise when people call us to inquire about the current market. Their primary questions regard possible decline in the value of their current home, whether we have reached the bottom of the market, and how long it will take to "get back to where we were".
The years 2000-2004 were incredible times for the Twin Cities housing market as far as most are concerned, especially in The Pointe. The market was accelerating rapidly, and at its peak, houses were selling fast and for top dollar. People were making a good return on investment. Many people used this real estate "bull market" to upgrade their homes and provide a higher standard of living for their families.
This brings us to the current market. Have we hit the bottom? It would appear so, of course, no one can say for sure. Home sales for October and November in the Twin Cities market are already ahead of the same months for 2007. This is a promising statistic.
So what does this mean for homeowners in The Pointe? That depends on particular situations. Those who need to downsize should consider holding onto their existing home for a period of time, to allow existing foreclosures to work through the system, since foreclosed homes put downward pricing pressure on current values. Conversely, those who are planning to upsize (and are in a positive equity position in their home) should do so now. Many higher-end homes are being offered at bargain prices. What might be a lesser sale price than could have been obtained three years ago can quickly be recouped in the savings from the larger purchase. Those who have no intention of selling (or refinancing) can rest easy, knowing that the value of their current home is, for all practical purposes, moot. After all, the value of a home, in a mindset that can be compared to viewing the value of stocks, is most important to those who need to sell.
Now that the tables have turned and we are seeing favorable conditions for buyers, first-time homebuyers have phenomenal opportunities before them. Downward pricing pressure from the rise in foreclosures, paired with a federal $7,500 tax credit offered through July 2009, provides first-time homebuyers with every incentive to get off the fence and make a home purchase now. This is good news for homeowners in The Pointe because when first-time home buyers can purchase a home, the sellers in those transactions (when not bank-owned) translate into more buyers for our neighborhood.
Now is also a terrific time to build personal wealth and expand portfolio diversification. The rise in foreclosures indicates that many people will not be able to purchase a home for several years. The rental market is therefore expected to be quite strong for the next 3-5 years. This high probability, paired with downward pricing pressure, creates a good opportunity to acquire investment properties at a price where profitability is likely.
In this time of uncertainty, two things are apparent: While it is only natural to be concerned about the value of one's home, those planning to upsize have tremendous opportunity to capitalize on this market. And if you have ever wanted to invest in real estate, there is no time like the present. The market is cyclical, and the key is to take advantage of the unique opportunities that each rise and fall present to us.
Chad and Sara Huebener are local Savage REALTORS® with Coldwell Banker Burnet. They have over 16 years of experience and specialize in the West Savage area. They can be reached at [email protected].