Home News As interest rates rise, some sellers in the Twin Cities decide to wait before buying again

As interest rates rise, some sellers in the Twin Cities decide to wait before buying again

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This summer, burglars Nancy and Dan Lynch decided to sell the Chanhassen home they had lived in for 25 years after seeing the changing housing market.

The house sold quickly and was much more expensive than they were asking, but the couple decided to move into renting rather than looking for another home right away.

“Our biggest motivation was wanting to take advantage of the hot housing market before things slowed down,” Nancy Lynch said. “Flexibility is our new mantra.”

Home sales in the Twin Cities are slowing as mortgage rates double and the supply of homes for sale has decreased. Recently, more and more people are buying after selling.

It’s a dangerous move. From baseball cards to commodities to stocks, timing the market is always difficult in all kinds of financial investments.

But the strategy of “sell, then borrow, then wait to buy” is closer to gambling in the Twin Cities than elsewhere, said Rick Tucker, chief economist at Zillow.

And with Twin Cities housing inventory so tight, price declines are likely to be small and short-lived.

“There are likely other buyers waiting on the sidelines for this same scenario, so if prices drop to a certain point, the bidding war could reignite and push prices back for most buyers. “It’s very high,” Tucker said.

Meanwhile, uncertainty over mortgage rates is likely to persist for the rest of next year. Federal Reserve policymakers have suggested they don’t expect to cut key interest rates under their control until 2024.

“I can’t say for sure that mortgage rates will go down any time soon,” Mr. Tucker said. “This summer looks like inflation and monetary tightening will last longer than many hoped,” he said.

And interest rates continue to rise. On Thursday, Freddie Mac said its 30-year fixed-rate mortgages rose to an average of 6.92%, the highest in 20 years.

As of the end of September, only 8,934 homes were for sale in the Twin Cities Metro, also 73 fewer than last year, according to the latest data from Minneapolis Area Realtors. Compared to last year, new listings increased slightly.

House prices are still on the rise, but only about half as fast as they were earlier this year. According to Minnesota Realtors, for the month of September he had a median of $365,000 in all sales in the seven-county metropolitan area, up 4.7% from last year.

Zillow rates the Twin Cities as one of the metro areas least likely to see price adjustments over the next 12 months. Cities that saw prices rise sharply during the pandemic, including Boise, Idaho, Austin, Texas, and Raleigh, North Carolina, are likely to cool the fastest.

Statewide organization Minnesota Realtors’ September sales report found homes were sold in 29 days, slightly slower than last year, while closing rates were down 24%, but sellers still paid 99% of list prices. won.

According to Fannie Mae, confidence in the housing market is at its lowest level since 2011, with just 19% of those surveyed saying it’s a good time to buy a home in September. That’s down from her 22% the previous month.

The main reason the Lynchs decided to sell the property this summer was the startling bidding wars and excessive pricing they had heard.

“We were aware of how quickly and at what price homes in our neighborhoods and communities sold, and we expected the market to level off at some point,” said Nancy Lynch. We didn’t want to be the overpaying buyer in a bidding war.”

They decided to rent because they didn’t want to get into a bidding war or pay more than they were asking sellers when prices were falling. From start to finish, it took just 88 days to clear most of my belongings, sell the house, and move into a two-bedroom apartment not far from the one I sold.

“I’m likely to buy again, probably within the next 12 to 36 months, depending on what happens in the real estate market,” said Nancy Lynch.

Their sales agent, Jim Schwartz, and several others at Twin Cities say many other sellers are doing the same.

“Sellers cash out and then move to rent, so they have 100% flexibility in their next move,” Schwarz said.

Rising mortgage rates have reduced the pool of first-time buyers, while rising borrowing costs have also reduced the number of eligible buyers. expensive stuff.

Zillow says that in 2021, 55% of all sellers will buy a home that costs more than the one they sold. So far this year, only 44% of those sellers have made more purchases. This may have been due to higher mortgage interest rates resulting in lower loan amounts or cash payments from the sale proceeds.

Of course, even if interest rates go down, refinancing is always an option for today’s buyers if their home equity is high enough.

Like the Lynch family, Jeff and Julie Burroughs are empty nesters who decided to downsize after their kids went off to college. This summer they listed a home in Edina in an attempt to hit the peak of the market, but it didn’t pan out.

The house sold quickly, but they never quite got the asking price. However, they received offers to waive testing contingencies and were even able to choose a deadline date.

“My neighbor sold it the year before and had some offers,” Julie Burroughs said. “I expected that. Not this time.”

Rather than invest the profits from that home in another home, they moved into a rental in Minneapolis’s North Loop neighborhood. This gives me the flexibility to spend a few months with my son living in France and evaluate my next move.

After meeting four other American couples who have purchased property in France, the Burroughs are now exploring that option for themselves. Twin Cities also lets you explore your options and decide which building is best for you by renting in neighborhoods that you might end up buying.

Meanwhile, they’re keeping a close eye on what’s happening in the housing market.

“It’s never been as hot as it used to be,” said Julie Burroughs. “I want to be flexible while I decide what to do next.”

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