If you're currently interested in buying or selling a home, you're probably wondering: what's going on in the real estate market right now? Inventory is tight and prices are on the rise, but all hope is not lost for buying a home.
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What's going on in the market here in Dane County?
Interest rates are still bouncing around near historic lows and we're still short on inventory, so sellers continue to have a big advantage with median home prices skyrocketing. The number of sales has decreased due to the low inventory; April and May saw the fewest same-month home sales we've seen since 2014 and was also lower than 2012.
Too many buyers for too few listings.
A seller's market is typically categorized as having no more than six months of housing supply for purchase and in a buyer's market, there is above six months. A healthy market has right around six months of inventory. Currently in Dane County, we have less than two months of supply. Homes sales that closed in the last 30 days went from being listed to accepted offers in an average of about 35 days.
April and May saw the fewest same-month home sales we've seen since 2014.
In the Madison area, there is less than 1.5 months of supply currently available. The average days on market for homes closed in the last 30 days is even less than the Dane County average at just 27 days.
So now you ask, what does this all mean?
If you're thinking about selling your house, there's never been a better time. However, it's still a great time to buy a home because interest rates are so low. Remember, a 1% increase in interest rates would raise your monthly payment by 10%, so you don't want to wait for that to happen. As rates increase, affordability falls as more money goes to the interest portion of the payment.
Am I speaking out of both sides of my mouth? Here is my defense...
Example: You are buying a $300,000 home with a 20% down payment, meaning you will be financing $240,000.
If today's 30-year fixed interest rate is 3.875%, the monthly principal and interest payment would be $1,128.57 per month.
If the rate moves 1% higher to 4.875%, the monthly P&I payment would be $1,270.10 (an additional $141.53 or 12.5% more).
∗∗ More math for the numbers geeks (like me): Two arguments
1) Life of the loan perspective - The number of payments (360 months) multiplied by each payment equals $406,284 and $457,236. In this example, the 1% higher interest rate costs the buyer $50,952 more in interest over the life of the loan.
2) Affordability perspective - $240,000 @ 3.875% = Principal and Interest payments of $1,128.57. To reach the same payment at 4.875% interest would require a lower principal amount of only $213,256 or $26,744 LESS HOME TO REACH THE SAME PAYMENT... Affordability suffers.
For advice on getting your offer accepted in a competitive market like ours, click here to check out one of our previous videos on the topic
If you have any questions about our market or you're thinking of buying or selling real estate, give me a call or send me an email soon. We'd love to help you!