Simplified: Rising interest rates will start to slow the housing market, but in Sioux Falls, growth is keeping prices high. Here's a look at what buying a house is like right now and what some local realtors predict will happen next.
Why it matters
- Sioux Falls Home inventory levels fell 40.7% in June from the month before, and median sale price increased 21.7% to $310,367 according to RASE.
- The federal reserve raised interest rates to about 1.5% in July, an increase from 0% rates in March of 2020. This means homes of the same value now cost more per month than if purchased before interest rates were raised, depending on your personal buying situation.
- The city is seeing a growing number of new residents from other states moving to Sioux Falls for public policy and work from home capabilities according to Realtor Amy Stockberger. Sioux Falls' low taxes and job market is also attracting out-of state residents according to Jenny Downey with Hegg Realtors.
"I don't look for Sioux Falls to have the housing recession that might be hitting the rest of the country because we still have so many people moving here," Downey said.
When will the market slow down?
Other parts of the country may see a faster plateau in home prices as interest rates go up, but out of state competition is keeping Sioux Falls home values high said Downey.
Downey said she could see prices slow down or plateau by the end of the year. She said had her first offer in without any competing offers since the pandemic began, but most buying situations still require competitive offers.
- She hasn't had an offer accepted under asking price since the pandemic.
Stockberger said home prices were still up 19% at the end of May compared to last year. For Sioux Falls to hit a housing recession, prices would have to decrease by 10%, which she said isn't going to happen with our growth.
"We may see where house prices maybe level off a little bit, but with our growth pattern, there's no way that we can go backwards in prices," Stockberger said. "So even with a higher interest rate, it's smarter to buy in the market right now than waiting another year because house prices are going to be up."
What's it like buying a home right now?
Prospective buyers are sometimes competing with over 30 offers according to Stockberger, and that usually means making exceptions and offering over asking price on a house.
- Most buyers below the $300,000 range should expect to add an appraisal gap addendum to their offer, which states they have the cash to cover the difference if the home doesn't appraise by their mortgage lender at the price the buyer agreed to pay. Stockberger said they even saw this with homes in higher cost brackets, too.
- Keller Williams realtor Ryan Hanten said sellers are also setting strict offer periods and review dates, which lets buyers know just how long they have to get in a house to see it and make an offer.
- Downey said moving forward, we likely won't see as many waived inspections, appraisal gap coverages or as many competing offers, but that buyers should be prepared for interest rates and prices to go up.
"We're looking at making some pretty creative, outside the box things with our offers," Downey said. "It's not a good time to get a good deal."