In Sioux Falls, South Dakota home values are up about 10% for the year; although the number of units sold are flat with no increase. We tend to think of a hot market where the demand is so high that prices and number of homes increase. I had a person ask me recently, ‘why aren’t both sales and prices up this year?
Naturally, a short supply of homes with strong demand will push prices up. It is one of the economic laws. In our present position, the greatest demand for homes is in the first-time and second-time buying brackets where it’s difficult to reproduce with new construction. The cost of new housing has had a fairly significant increase over the past year. Therefore, with an inventory shortage coupled with high demand, both sales numbers and prices are up only in these price brackets.
The reason for overall flat sales numbers is two-fold; one is due to fewer units selling in the upper brackets which off-set the increase in the lower brackets. The other factor is new construction sales; which are seldom included in the numbers supplied by the Realtors Association.
One question I hear every day is ‘what’s going to happen to the market going forward?’ I presume the question has an underpinning thought about the upcoming election. I hope not to touch on the sensitive political side of this; although, I think nearly everything is political, especially with the emotionally charged environment today.
It is a proven fact, the greatest driving force behind any economy is household income supplied by employment. When people have money they spend it and it multiples throughout our country. The driving force behind this current economy is low interest rates; this hasn’t, and won’t, help much long-term, it just allows us to pay less for things today. In truth, low rates actually hurt those who depend on their savings for income and sets the stage for inflation. Unless more jobs are created and wages increase, there is little logic to think the economy can grow to any level of strength and therefore the real estate market will falter; values will drop. Although, this could be good news for landlords, as more people will rent.
One thing we know for sure, people need a place to live. Regardless of the short term ebb and flow of real estate cycles, ownership has always been a great long-term investment in addition to the lifestyle it creates. The key is to always be invested. And, sometime in the future, when there is no more need to own is at hand, there will be a good asset to call on for greater comfort.
The fall market begins in August and picks up speed until Thanksgiving. If you are thinking about moving, plan 3 to 5 months for the entire process; which means there is time to get settled before winter.
We invite you to call or text. 605.359.4100
Tony Ratchford, Broker, CRS ABR, SRES