Monday, June 10, 2013

The BIG Affect a Rise in Interest & Price has on Home Affordability

 

(Or Why NOW may truly be the best time to buy a house.)


For a number of years the housing market in the Minneapolis/St Paul metro has be extremely affordable. Even with the rise in housing prices since the beginning of the year, our market continues to be affordable compared to other areas of the country. A home buyer can find a very good quality starter home for under $200,000 in the Twin Cities if they are flexible with their location. But that appears to be changing.

Housing prices are on the rise across the metro area. And, interest rates won’t be at historically low levels forever. In fact, rates have crept up a bit in the past few weeks. So when a REALTOR® tells you “NOW is the Best Time to Buy”, I’m not just marketing. It will be more expensive to purchase a home next year if the economy and real estate market continue to improve.

Don’t just take my word for it. An article I read on the KCM (Keeping Current Matters) Blog today,  Buying a House: Is NOW the Time? reiterates this point. It shows how the slight uptick in the market really affects the payment on an every day starter home purchase from 2012 to 2013. This is based on prices rising 10% from June 2012 to June 2013. According to KCM, a home priced at $200,000 in June of 2012 would have roughly $100/month higher payment if purchased today. And  the required down payment for the same house would be higher too.

Home prices in Twin Cities north and east metro are continuing to rise. In Anoka County MN, the average sales price of a single family home is up 14% since the beginning of the year. The average sales price of Washington County homes is up 4.5% and Chisago County has seen a dramatic  23% increase in average home value just in 2013.  These rising prices did affect by buying clients this year. Most had to spend more than they had expected as prices changed dramatically from the time they initially began the buying process about 6-12 months ago. Whether they were looking at townhomes in Hugo or single family homes in Blaine, prices jumped since the beginning of the year and it did affect where they bought and what the paid for a home. Almost all buyers were in multiple offer situations too.

Local real estate market remain poised for continued improvement affecting home prices AND interest rates. I don’t need a crystal ball to know that this could be the best time to purchase. Of course, I could look back with my 20/20 hindsight and say that last year was better too. But there are still MANY OPPORTUNITIES in this market still. It would be wise to listen up and realize it isn’t just marketing puffery, NOW is a great time to buy a home!



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