As we head into what is typically considered the slow season in Dane County real estate, we may be left with more questions than answers when it comes to responding to the question of “How’s the market?”.
In our last quarterly market review Stark Company President, Dave Stark described the state of the market as “wild”. With the frantic pacing and unpredictable nature we saw through much of the spring, this was certainly a good term to characterize Dane County real estate in 2016. But where does that leave us heading into 2017?
Without a crystal ball we can’t speak in definite terms about what to expect, but we certainly know the following 3 factors will have a major impact on overall market health entering the new year.
Inventory by Price Point
Often people discuss the market as if it’s one consistent creature. Yet within our local market we have a number of variables that affect what people are really seeing with their home sale or purchase adventure.
Notice that nearly 70% of Dane County home sales are under $300,000 while this same price range only makes up a little over 40% of the available inventory.
As prices creep over $300,000 we can see that the percentage of homes available in our market at that price tends to be a greater number than the percentage of what actually sells.
What does this mean?
Until we see a better balance between percentage of available inventory and percentage of homes sold in the overall market, sellers under $300,000 are likely to remain heavily favored while buyers will be forced to continue competing for these more affordable homes.
One major reason we may see this price break around $300,000 is the lack of construction in that lower bracket. In fact, across the board new construction is only accounting for 11% of all home sales compared to 22% of all sales in 2005. In short, construction has not recovered fully from the recession due in large part to the cost of land/development and lack of numbers in the workforce.
Rates are still historically low and looking good, but at some point they have to break. Unfortunately, we can’t keep them under 4% forever but there is no clear indication of when we will see them rise. Each year we catch wind that we can expect to see rates hovering at 4.5% or higher by years end only to enter December with rates still below 4%. For now low rates will encourage buyers to be active and until inventory catches up with demand that will continue to mean rising prices.
For more details on the current market conditions affecting Dane County today check out the complete 4th Quarter Newsletter Here.