A sizzling housing market with many more interested buyers than sellers sets off a bidding war on many homes.
âInventories are low and demand is high. We find several offers on a lot of properties, and they go well above asking price, sometimes $ 10,000, $ 15,000, $ 20,000 above, âsaid Jen True of True Real Estate.
Some fear that rising prices will cause problems.
âI can’t predict the future, but the writing is on the wall. It’s getting scary, âsaid evaluator Jason Carlsten of JC Valuation Services Inc.
Carlsten said the higher bids lead to homes that are not rated high enough for lenders to approve the loans.
âYou get these properties listed and the agents come up with the most likely sale price for that property. They did their research. Then there are 15 people bidding, âCarlsten said.
Lenders require that a home appraise a certain percentage of the loan amount. Most lenders won’t lend more than 80-97% of the home’s fair market value.
True and Carlsten said that when reviews fail, several things can happen. The potential buyer may try to get the seller to lower the price. The buyer can try to find more money to put on the house to make the loan work. Or the seller can put the house back on the market.
Carlsten said the pandemic has exacerbated the problems of shortages of homes for sale and created “hyper inflation” in the market.
He is concerned that this could lead to problems later.
âPeople who have paid inflated prices in recent years, what will they do in a few years when they want to refinance? They could be above the list price.
Although he’s been busy recently, Carlsten said about 80% of the valuation work he does is for people refinancing to take advantage of low interest rates.
âHome sales valuations are down because stocks are so low. It is not for lack of buyers.
Weak new registrations
At the end of February, the national housing stock fell nearly 30% year-over-year to an all-time high of 1.03 million, according to data from the National Association of Realtors dating back to 1982.
In south-central Minnesota, new listings have also declined.
According to the Realtor Association of Southern Minnesota, in January and February, 226 new housing listings were registered locally, up from 241 for the same period last year.
True said she was starting to see a slight increase in ads. âHouses are starting to hit the market more and more, which is good. I have a few people who are waiting after Easter to list.
While inventories are lower, home sales are on the rise in the region. There were 210 sales in January and February, up from 188 at the same time last year.
In the Mankato region, sellers got an average of 94% of their asking price in February.
While mortgage interest rates remain historically low, they have increased in recent weeks.
The 30-year mortgage interest rate jumped to 3.2% last week, from 2.7% at the start of the year.
True said buyers are doing everything possible to please sellers and close deals, including forgoing the traditional home inspection.
âIt’s not something we recommend, but we see it more. “
She said most of the price ranges are very high, but homes $ 800,000 and above are cooler.
âThe range of $ 250,000 to $ 350,000 is the hot market. And everything below is very good.
The median home selling price in February was $ 189,000 locally, down from $ 182,100 a year earlier.
True said sales in small communities in the area are good and properties on the water are in demand.
âHouses on the lakes sell in a day or two. I just showed one that isn’t even on the market yet.
She said some sellers, such as those looking to downsize, sell their home and then rent temporarily while they search for a home rather than making the sale of their home conditional on finding another first. House.