WHAT'S MAKING THIS RAPID CITY REAL ESTATE MARKET TICK?
So many people are having difficulty understanding why our Black Hills real estate market isn't tanking. I'll try to explain.
Here's some specifics.
First, note that the market has sunk for some real estate agents. Volume is down 1/3 from the peak in 2007. Only the most tenacious, creative and effective agents are still growing business. (My own client roster is growing gangbusters, thank you.)
OK. We got the worst news out of the way. Some real estate agents are having a rough year. But(!) real estate buyers and sellers are doing GREAT compared to the rest of the U.S. As an irrepressible former research engineer, I can't keep from conducting deep-diligence experiments on all that juicy data in the MLS system. Here is some really interesting statistics I dug up. (I limit this analysis to the mainstream of homes that are priced from $100,000 to $300,000 and on less than 1/2 acre of land. Contact me if you'd like more details on methodology.)
Since the peak of the national housing bubble in 2007, Rapid City area real estate volume is down about 1/3. Those 1/3 are probably comfortably sitting in the wings waiting for some one to blow the all-clear whistle.
I suspected that one reason the "Sold Price" average is down is simply because people are selecting lower priced (smaller) homes. Not true! Like 2007, we are still buying homes with (on average) 3-1/4 bedrooms and 1.9 bathrooms. But, notably, we are now buying larger(!) homes than in 2007, with more square feet now (1,700SF) than in 2007 (1,600SF).
Furthermore, while we are buying homes with 7% more square feet now, we are now paying about 6% less per square foot ($94/SF now versus $101/SF in 2007).
So, with this sharp decline in volume of sales, are unsold homes stacking up like unwanted corpses? No, not at all. In fact, our Inventory on Hand (number of unsold homes) is right even now (873) with the 877 unsolds in 2007.
But with such a drop in volume, are home sellers cutting easier deals for buyers by dropping prices? No, not at all. In fact, the average price paid per home this Year to Date ($161,388) is up(!) from the housing-bubble peak of 2007 ($160,989). Keep in mind we are examining only the mainstream homes, priced $100,000 to $300,000, with median price around $170,000.
Well shoot! There must be some blood on the floor somewhere, right? With all that bloodshed in the national market, we must be in a hurt some where.
Nope.
How's this? The number of Pending Sales (those are future sales about 1-2 months away) is up 64% Year to Date. And on top of that, our current sellers, the ones who are competing with each other to sell in this market, are asking 4% more for their homes this year than at the highest point of the national housing bubble in 2007. It appears some one agrees with me, things look good going forward.
But wait. There's more! There may be a perfect storm brewing in our area market, structurally. Take a look at the charts below. Did you notice that the number of New Listings is in decline, while the number of Pending Sales is climbing? That implies we may be depleting our Inventory on Hand faster than it is being replenished. And we know what happens to prices when there is a shortage of something. Stay tuned...
I hope this helps explain what makes the inards of this market tick. Got questions? We have answers. If you would like to discuss these matters, call me at Prudential Real Estate, cell phone 605.863.0806.
Here's some specifics.
First, note that the market has sunk for some real estate agents. Volume is down 1/3 from the peak in 2007. Only the most tenacious, creative and effective agents are still growing business. (My own client roster is growing gangbusters, thank you.)
OK. We got the worst news out of the way. Some real estate agents are having a rough year. But(!) real estate buyers and sellers are doing GREAT compared to the rest of the U.S. As an irrepressible former research engineer, I can't keep from conducting deep-diligence experiments on all that juicy data in the MLS system. Here is some really interesting statistics I dug up. (I limit this analysis to the mainstream of homes that are priced from $100,000 to $300,000 and on less than 1/2 acre of land. Contact me if you'd like more details on methodology.)
Since the peak of the national housing bubble in 2007, Rapid City area real estate volume is down about 1/3. Those 1/3 are probably comfortably sitting in the wings waiting for some one to blow the all-clear whistle.
I suspected that one reason the "Sold Price" average is down is simply because people are selecting lower priced (smaller) homes. Not true! Like 2007, we are still buying homes with (on average) 3-1/4 bedrooms and 1.9 bathrooms. But, notably, we are now buying larger(!) homes than in 2007, with more square feet now (1,700SF) than in 2007 (1,600SF).
Furthermore, while we are buying homes with 7% more square feet now, we are now paying about 6% less per square foot ($94/SF now versus $101/SF in 2007).
So, with this sharp decline in volume of sales, are unsold homes stacking up like unwanted corpses? No, not at all. In fact, our Inventory on Hand (number of unsold homes) is right even now (873) with the 877 unsolds in 2007.
But with such a drop in volume, are home sellers cutting easier deals for buyers by dropping prices? No, not at all. In fact, the average price paid per home this Year to Date ($161,388) is up(!) from the housing-bubble peak of 2007 ($160,989). Keep in mind we are examining only the mainstream homes, priced $100,000 to $300,000, with median price around $170,000.
Well shoot! There must be some blood on the floor somewhere, right? With all that bloodshed in the national market, we must be in a hurt some where.
Nope.
How's this? The number of Pending Sales (those are future sales about 1-2 months away) is up 64% Year to Date. And on top of that, our current sellers, the ones who are competing with each other to sell in this market, are asking 4% more for their homes this year than at the highest point of the national housing bubble in 2007. It appears some one agrees with me, things look good going forward.
But wait. There's more! There may be a perfect storm brewing in our area market, structurally. Take a look at the charts below. Did you notice that the number of New Listings is in decline, while the number of Pending Sales is climbing? That implies we may be depleting our Inventory on Hand faster than it is being replenished. And we know what happens to prices when there is a shortage of something. Stay tuned...
I hope this helps explain what makes the inards of this market tick. Got questions? We have answers. If you would like to discuss these matters, call me at Prudential Real Estate, cell phone 605.863.0806.
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