Local real estate market going strong
The real estate market has been "booming" in 2017, this according to local real estate agencies.
Wolff & Simon Real Estate hired two new agents this month, while Coldwell Banker Clack & Dennis Real Estate added three new sales staff this year to keep up with the demand.
According to both Justin Clack and Diane Dennis, owners/brokers at Coldwell Banker Clack & Dennis Real Estate, on average in 2016, a house at their company was listed on the market for 110 days, which Clack says is normal, but in 2017 the average has been 29 days listed.
"I think people just have a lot more confidence right now. Overall, people have a better outlook on the economy," he said. "Our sales volume is up almost 20 percent from last year — from $21 million to $25 million — and our total sales or transaction sides, because there's two sides for every sale, that's up 33 percent. We had 109 last year in the middle of the year and we have 146 this year. That's pretty significant."
Eric Wolff, owner/realtor at Wolff & Simon Real Estate, is seeing the same positive trend.
"It's bananas right now. It's very busy," he said. "There's a little bit of an inventory problem. We don't have enough houses for the buyers that we have right now so it's created a little urgency. If the right home at the right price hits the market, it's gone."
According to Clack, the statistics at their company show the number of listings have increased 25 percent from 116 in 2016 to 145 in 2017.
Wolff explains, the market fell off in 2006 and it's taken a while to build it back up again.
"The market has recovered enough where people have equity in their homes now. Back when the market fell off, there was no equity. People couldn't sell because they would've had to show up at closing with money to close on it," Wolff said, adding that people at that time were underwater. "That's created some fuel to the fire for sure. Once you start to see some appreciation in the market, more sellers will jump in. There were so many that couldn't back in 2006 to 2010 when prices fell off, they couldn't even get an appraisal to go refinance. And now we've got people that are willing to sell, but I think there's some reluctance to list because what are they going to buy?"
T.J. Simon, owner/realtor at Wolff & Simon, says it's difficult to find city homes in the $150,000 to $200,000 range because there's an influx in demand with retired couples selling their lake homes and wanting to move back to town, and growing families moving up from their current homes.
"We've seen some appreciation in that city home market, so now we've got some move up buyers going from that $100,000 range and jumping up to $120,000 to $130,000," Simon said. "You can sell stuff for $100,000 to $120,000 right now, but there is no inventory between $150,000 to $200,000."
"You also have that demographic of the older retired couple that's been on the lake for 30 to 40 years and they're just done with the maintenance and then they come into town," Wolff added. "It's really tough to replace in order to move up. There's listings trickling in and they're selling, which is a good thing."
Another contributing factor in the healthy market is the fact that more people are transitioning from renting to buying.
"You see the first-time homeowners coming out of renting with rent market being so tight. It's cheaper to buy than to rent," Simon said.
"With intermediate pricing on starter homes in that $75,000 to $100,000, if you look at what your cost is to own that home as opposed to renting, it's cheaper to own," Wolff added. "That's one of the reasons there's not a lot of inventory either."
Both agencies said the favorable market and current interest rates are also helping people to purchase their first home.
"There are still a lot of programs for first-time home buyers and interest rates have remained low, and that makes a big difference," Dennis said.
According to Northwoods Bank President Roger Stewart, the real estate lending business is also currently strong with many people shopping for homes and numerous purchase agreements signed this spring and summer.
"Contrary to some reports of higher rates, real estate loans are very reasonably priced. Today, you can still get a 15-year, fixed-rate mortgage in the mid 3 percent range, depending on the size of the loan and the borrower's qualifications, while 30-year rates are just over 4 percent at this time," Stewart said. "A borrower's qualifications are the same as they have been for many years and underwriting is not any harder than it has been. Some parties are required to provide more documentation than in the past, such as self-employed or parties who work on commissions."
Stewart added that low down payment home loans are still available with as low as 3 percent down in some instances and there are several different options for home financing.
"The key to the real estate market is through lending," Simon said.
According to Clack, their average list price has increased from $172,700 in 2016 to $182,675 in 2017, which Clack says is a healthy growth.
"One good thing about the real estate market in Park Rapids is that we see gradual increases. It took awhile after the housing bubble for the prices to start coming back up, but when they do, in our area, they increase gradually." Dennis said. "In the Brainerd area, they saw these huge leaps in sale prices and it prices a lot of buyers out of the market. So the slow and steady growth is much better for the buyers."
Clack and Dennis say there have been both buyers from out of town looking to upgrade or purchase a second home as well as buyers in the area looking to either upgrade or downsize, and that the demographic is across the board.
"It's statewide. There is stuff in Minneapolis that hits the market on a Thursday afternoon and by Friday afternoon, there's five or six offers and things are selling for more than full price," Clack said
"Whenever the metro market is strong, it bodes well for us because a lot of those people are turning around and investing some of their money in a lake cabin up here," Dennis explained, adding that a lot of the lake market is second home market.
According to Wolff and Simon, pricing has increased on acreage in the last few years. They said there is a fair amount of inventory consisting of five acres or less, which isn't selling as fast because of the increase in building costs.
"You can buy a cheap lot, but now you've got to spend $200 per square foot to build something on it," Wolff said, adding that it's currently more economical to buy an existing home.
"There are some lake lots selling. It's not completely dead, but it's not going as fast as everything else is," Clack said. "I think that if you buy a pre-existing home on a lake, you actually get a discount because it's already there and built, whereas, building a new home right now is expensive."
"The builders are all pretty busy, from what I hear," Dennis added. "Finding a builder in the area who is not super swamped is a bit of struggle right now."
Both companies say that while some property types are in higher demand than others, listings across the board are selling well.
"Now is a good time to list. There are a lot of buyers in the market and the market is great, interest rates are good," Wolff said. "Now is a good time to be involved in a real estate transaction, no doubt."