Throughout 2016, St. Paul and the East Metro real estate markets followed national trends making gains across the board. Home sales and prices grew, distressed home sales declined, and first-time home-buyers were back on the rise.
In 2017, St. Paul and the East Metro will be impacted by mortgage interest rates, low inventory, and mortgage insurance premiums on Federal Housing Administration (FHA) backed loans. Ultimately, total sales and prices are expected to grow over the next year, both locally and nationally.
St. Paul and the East Metro had a great 2016 that continued the trends established by the last five years of growth and recession recovery. The total number of closed sales continued to tick up for the area.
Along with the increase in number of sales, the median sale price of the homes also continued to grow with all areas making gains.
Decline in Distressed
Distressed homes, those sold with the mitigation of a lender (foreclosed properties and short sales), dropped for the fifth straight year to 9% in St. Paul and 15% on the Eastside, contributing to normalizing market conditions. We’ve come a long way since 2010 and 2011 when distressed sales made up over 50% of the Eastside market. If you are looking for a good deal on a bank owned property, you better act fast.
First-time Home-buyers Come Back
The first-time home-buyers are a critical component to the overall health of the real estate market. Existing homeowners need first-time home-buyers in order to sell and trade to a new home, whether it’s an upgrade or downsize. First-time home-buyers ratcheted up to 35% of the market after three straight years with no gains.
This will play out in St. Paul and the East Metro since the affordability of the area will continue to attract buyers seeking the lifestyle amenities the area has to offer. Many sellers are ready to sell their homes now that prices have recovered, and first-time home-buyers will be there to ignite the market cycle.
First-time home-buyers interested in learning more about buying a home should check out Home Stretch classes offered right here in our neighborhood or online.
The rise in interest rates expected over the next year has long been anticipated. Rates have been below 5.0% since February 2011. As a point of comparison Freddie Mac mortgage rates peaked at 18.45% in October 1982. July 2016 rates hit the all time low at 3.44%. For our serious history buffs, here is a 5,000-year timeline of interest rates.
Many neighborhoods in St. Paul and the East Metro attract buyers who are seeking affordability. An increase in interest rates, no matter how small, will leave some buyers behind. The best thing for buyers looking to minimize their interest rates and monthly mortgage payment is to buy sooner than later. The historic nature of mortgage interests rates indicates they will rise again.
A major factor driving sales and prices is inventory. In Realtor speak we use the term “months supply”, which is the number of months the amount of properties that are currently for sale will take to sell based on the current rate of closed sales. 2017 is starting off with record low inventory with St. Paul and the East Metro having under three months supply, with the majority of the area hovering just above 2 months supply. In fact, Oakdale has 1.7 months supplied. Stable real estate markets will have closer to four or five months supply, suggesting that this market is desperate for more sellers.
FHA Mortgage Insurance Premiums
FHA announced they would ease their mortgage insurance premiums, reducing the pesky charge on many homeowners’ monthly mortgage payment by nearly 30 percent (up to $500 a year). As U. S. Department of Housing and Urban Development Secretary Julián Castro said, “After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families.”
However, on the very first day in office, the President rescinded these reductions. The move is said to leave 30,000 to 40,000 buyers behind, according to the National Association of Realtors (NAR). FHA financing makes up nearly 20 percent of the buyers in St. Paul and the East Metro. Almost 30 percent of buyers for homes under $250,000 are FHA buyers. FHA qualified buyers will indeed be keeping their eye on this factor.
What Does It All Mean?
St. Paul and the East Metro real estate markets are in a healthy position. In fact, according to smartasset.com, Oakdale is the 4th healthiest housing market in the State and 34th healthiest in the nation.
The National Association of Realtors (NAR) forecasts that 2017 will see modest gains in home sales. Prices are also expected to grow slightly. St. Paul and the East Metro are sure to keep pace. For example, Zillow forecasts that in 2017 Dayton’s Bluff neighborhood will have the fifth highest home price index increase (up 6.9%) compared to neighborhoods throughout the metro. In 2016, Dayton’s Bluff home price index went up 12.4%. The Star Tribune covered the story here.
The number of closed sales and the prices that homes sell for will both continue to grow in 2017 making it a great year for sellers. It truly is a great time to sell, especially for those who have been waiting for the recovery. Are you ready to sell? Let us know, and we would be happy to provide you with a market analysis of your home – for FREE!
Interest rates will remain low, despite their expected rises, making the purchase of real estate appealing. Rates are expected to remain under five percent, which is great news for buyers, especially as demand will continue to add pressure to rising prices. Are You Ready to Buy? First-time home-buyers can learn more about the home-buying process, lending, and down-payment options at a Home Stretch Class. Classes are offered by 1st Home Network. Classes are offered online and in person in Dayton’s Bluff.