It isn’t OK to overspend on housing

I recently read an article about how home buyers will go over budget for a house with enough space in the “right” neighborhood.

Dormeneighborhood. For most people, part of what makes a house perfect is the location.

Spending too much on a house has a long-lasting impact. We call it being house poor and being house poor will color every aspect of your life.

Overspending a little happens. Those who overspend by a lot regret it.

People who buy more affordable houses have some flexibility and an easier time to get through job losses and life changes.

Houses need to be maintained which can be hard to afford when the budget is already stretched.

Set a limit when house hunting and stick to it. Your older self will thank you for that. There is no perfect nieghborhood or location or house.

Active home buyers are out in force

Here is a chart from Showingtime that shows appointments to see houses that are for sale. ShowingTime is widely used for appointments throughout the region and the data is always interesting.

showingtime chart – click on the chart to enlarge

Activity is up from last year and the chart shows the dip in March and May due to the stay at home orders. Year over year the numbers are up and as I showed last week home sales are strong.

As an interesting statistic homes that sold in March and April got an average of 6.5 showings before selling. Current averages are 7.6 showings per home.  Year over year showings are up and so are home sales.

Housing cost burden by income

Yesterday I was reading the Metropolitan council housing policy plan. It tells me what I know already and that is that we do not have enough affordable housing. The demand will continue to grow as more people earn less money.

• People are paying too much for housing: At present, more than 282,000 low- and moderate-income households in the region are paying more than 30% of their household income on housing costs. Nearly 144,000 of those are paying more than half their income on housing.

• Needs are growing: Between 2020 and 2030, the region will add 37,400 low- and moderate-income households who will need additional affordable housing. For comparison, in the first three years of this decade, the region added just under 3,000 new affordable units, far under the need.

metro area housing costs
Housing costs in the metro area

There is a shortage of housing in general. The population has grown in the last decade and construction has not kept up with it. Some changes in zoning laws and deregulation may help ease the situation. Building more affordable housing in the suburbs might also help.

Also, see The number of people without housing continues to rise


Buy low sell high

Right now is a spectacularly bad time for most people to buy residential real estate.  Home prices are at historic highs as home buyers outbid each other until they reach new heights. There is a raging pandemic and an economic recession.

I say “most” people because there are exceptions. There are always people who have to move and sometimes it does cost more to rent.

Too many people are making decisions based on the pandemic. They are assuming they will have jobs and that they can work from home long term. Most jobs and conditions of employment are not long term but mortgages are for 10 to 30 years.

There has been a shortage of homes for sale for the last several years and the pandemic has made it worse.  The demand is high and the supply is low and prices are often too high.

It truly is a fantastic time to sell a house. I am not sure there has ever been a better time to sell a house.  Houses sell quickly and they sell for top dollar.

Homeowners can take advantage of a once in a lifetime event and make a nice profit even if they have only owned the home for a few years.

It is also a great time to own real estate, especially real estate without a mortgage. It might be a good time to refinance depending upon your current interest rate and how much you owe.

A better time to buy might be mid-2021 or maybe early 2022. By 2026 the housing shortage may ease up a bit as the oldest baby boomers turn 80.

If you are planning on buying or selling real estate I am here to help. I’ll be here in 2026 too.

Making the offer before seeing the house

There is a high demand for homes for sale. With the “COVID-19” rules we generally will not allow overlapping showings on homes that are for sale. That means that every available time slot to tour a home has been taken.

In other words, if you are buying a house you may need to compete with many other home buyers just for the opportunity to see the house in person.

As a result, buyers have been making offers on houses based on the photographs. They usually make the offer inspection contingent and tour the home during the inspection period.

If you just noticed that the house went on the market so did several other buyers. If the house looks like it is a perfect fit it is also a perfect fit for many other potential buyers which is why you will need to act quickly.

The current seller’s market is challenging for buyers. The very best advice I can give is that if you have to buy a house now plan on making offers on a few or several houses as they come on the market. Be persistent and plan on making offers until one works out.

If there are multiple offers you will need to go over the asking price. If you have some cash offers with larger down payments like 20% or more are more attractive to sellers. Being flexible on closing dates and on other terms also helps.

Buying a house in December or January may be easier than buying one now. When the pandemic is finally over we will probably see more homeowners who want to sell.

Also, see Getting ready for the 2019 home buying season (this applies to the 2020 home buying season and the 2021 home buying season)

The next home buyers market will probably happen sometime after 2025.

Working with a buyers agent 

All about agency. Working with a buyer’s agent who is not the listing agent for the house that is for sale is one smart way to successfully purchase a home.

There are some bargains on the market


There really aren’t many actual “bargains” in the local housing market but there are some opportunities. There are 111 houses on the market in St. Paul in all price ranges that have been on the market for 60 days or more.

Prices start at less than $90,000.

There are 1311 houses on the market in the five-county metro area that have been on the market for 60 days or more.

Houses that have been on the market and that have not had a recent price reduction can sometimes be purchased for less than the asking price. They are also less likely to get multiple offers.

Homes that are priced right sell quickly with multiple offers for more than the asking price. Homes that are priced too high stay on the market and sellers are offered less than the asking price.

After a house has been on the market for a while sellers are more likely to accept a fair offer.