The inventory of homes for sale is up approximately 35% for 2006 compared to 2005. This is on top of a similar increase for 2005 compared to 2004. 2005 was a record year for home sales. However, now that interest rates have risen and taken the edge off of the hot housing market, sales volumes are down 10-15% depending upon which city or suburb you reside in in the Twin Cities.
Generally speaking, appreciation rates are remaining positive in the 2-5% range from many communities. But with the growing inventory, sales times are increasing as is the competition. There will be some communities that will see flat to slightly negative appreciation for ’06. I know that doesn’t sound good, but the Twin Cities has seen very steady price appreciation for the past several years.
Could the market be cured if everyone took a 10% price reduction? No. But that doesn’t mean many homes today aren’t 10-20% overpriced for today’s market. And that’s a challenge for both Realtors and buyers and sellers. The buyers are paricularly challenged today because there is so much to look at. Since many sellers start with an inflated asking price, it’s hard for the buyer to know where the real selling price will be. Because of that they wait and continue to look.