By Chad & Sara Huebener
If you know of someone buying a home in the price range below $120,000 (or if you are looking in that range for investment purposes), they (or you) are going to have to move fast. The Southern Twin Cities Association of REALTORS reports there's only 2.9 months of supply in that range, which places it in the extreme seller's market category. The reason for the tight inventory picture? There's been a huge upsurge in home buying activity—sales are up 127.5 percent in that category over the last twelve months.
Our Association also reports that the number of new construction properties available for sale continues to shrink rapidly as builders pull back from creating new inventory. The current inventory of 2,426 listed new construction properties in the MLS system represents a drop of over 1,200 units from a year ago. Unfortunately for builders, new construction home sales have also rapidly declined, falling by 18.8 percent (over 800 units) in the last twelve months.
We have certainly seen the flood of homebuyers scooping up properties because of the $8,000 tax credit, as well as investors taking advantage of steals of deals when the market was in a deep state of stagnancy - particularly last winter. Heck, we took advantage of it as well, and picked up another rental property for dirt cheap.
The statistics above are changing things considerably: First time homebuyers in the $175,000 and under price range have very little wiggle room for negotiating on the basis of price. When the state of the market in that price range is that hot, seller's in that price range don't need to sell at a discount any longer.
Additionally, FHA has a flipping rule in place prohibiting FHA buyers from purchasing properties that sold less than 90 days ago. Although controversial, we can lend some credence to investors who buy "junk homes", fix them up and turn around and sell (or "flip") them in turnkey condition to buyers. FHA will not insure these loans based on the no flipping rule. Since most first time home buyers are FHA approved, and as a general rule, FHA-approved buyers cannot purchase homes that need extensive repairs due to FHA requirements, this restriction narrows their housing supply pool even more.
So what might all this information mean for West Savage? Sellers in the lower-range price point can move up to the price ranges we have in West Savage. And if people are opting not to build, that keeps more buyers in the pool looking for existing properties. (Personally, we have seen the opposite - more and more people -even first time homebuyers- looking to build homes, and this affects existing sellers, particularly those in our West Savage price range.
We need to take the continuous changes in our housing market one step at a time, and right now, the true test of how West Savage will be impacted first requires following what happens with any extension of the tax credit, followed by getting through the winter.
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