Residential Home Market Update
By: Kate A. Ostlund
The single family home market has shown signs of improvement in the past several months and may be on its way to recovery from the economic slump. Historically, the luxury home market moves at a slower pace than the general single family market. It has seen prices decrease and sales slow down, but not at such a drastic rate compared to average single family homes. However, if the economy continues to languish, it is likely that the luxury home market will fall further.
In general, the market for average, single family homes has benefited from low mortgage rates and the Federal First-Time Home Buyer Tax Credit which combine to offer historic affordability. According to the Minneapolis Association of Realtors, home sales below $150,000 jumped 72% from over a year ago as first-time home buyers rushed to take advantage of the tax credit. With many people purchasing their first homes, some of the excess supply was absorbed which helped to stabilize communities.
In contrast, the luxury home market does not benefit from this tax credit and, while it has limited access to lower mortgage rates, it has become increasingly more difficult to secure financing for any luxury property. There has been a descending trend in luxury home sales over the last few years. Nevertheless, the luxury home market has shown signs of stabilization in recent months with some notable sales.
Single family and luxury home markets are expected to continue on the path to recovery as the economy heals and people take advantage of low interest rates.