Spring launches another competitive real estate season in Otter Tail county and the surrounding community. This year’s market is shaped by continued low inventory, and new factors affecting mortgage interest rates and tax incentives.
The start of spring also marks the start of another season in West Central Minnesota- putting home up for sale and home shopping. While mortgage rates are still relatively low, tax changes and a lack of inventory will shape the 2018 buying season.
📈 Mortgage Rates are Predicted to go Higher
Last fall, 30-year fixed rates were hovering around 3.78 percent. That number has creeped up to around 4.4% according to Freddie Mac. Several factors determine if the rate will climb even higher this season. Generally, larger budget deficits and a faster growing economy may increase inflation resulting in higher interest rates. Certain political factors, such as a trade battle with China may slow that process. So, even though mortgage interest rates may still be reasonable compared to the 2000-2009 rates of over 6%, that small increase will still take a bite out of purchasing budgets. A survey of homebuyers conducted by the online real estate brokerage Redfin summarized that an increase of interest rates to 5% would not slow down most home buyers.
💲 Changes to the Tax Law
Changes that took effect for 2018 reduce how much mortgage interest may be deducted. There are also limits on how much of property tax payments may be deducted.
Both tax changes will greatly affect areas with high housing prices, with mortgages of $750K or more, but not so much in our area. Ottertail County and the surrounding area had a median closing price (in all real estate categories) of $149K as of 2/28/18, according to Realtor.com. Most home owners will not be affected by new tax provisions.
However, industry experts predict the tax law change to soften price increase growth, especially for higher-end homes.
💵 Supply and Demand Still a Problem for Buyers
Low unemployment coupled with a high number of people looking to buy has created more demand than supply, which will continue into this buying season.
Millennials, who may have held off creating households in the aftermath of the recent financial crisis, are now entering their 30s, getting hitched and having kids. Unfortunately, there are not enough homes for sale for the increased number of first-time home buyers hitting the market. Rural areas farther away from town may see more interest, where buyers can find greater home value per square foot.
Spring is an excellent time to get a jump on the competition, both for buyers and sellers. There will be more homes for sale during the summer, but also more competition among buyers.
As long as there is high demand, prices may continue to increase and sale decisions will be made quickly.
If you are buying, we encourage you to tap into our expertise on how to win in this competitive market. There are great homes out there, including the super cute 4 bed, 2 bath Fergus Falls home in the photo for this article- tulips not included- for $175K.
If you are selling, the first step is our comprehensive evaluation to price your property appropriately for maximum return.
Give us a call, we’d love to help.
Your real estate agent is the best source of information about the local community and real estate topics. Call Tom Verhelst at 218-205-2604 | Karen Zell at 218-731-6836 to learn more about local areas, discuss selling a house, or tour available homes for sale.