Archive for August, 2014
Comments Off on Duplex Sellers Give A High Five
Five doesn’t sound like a big number.
But it is when you convert it applies to new Minneapolis and St Paul duplex listings for the week ending August 16, 2014.
There were five more new listings that week than there were during the same week in 2014. And that small number translates into a 15 percent increase in the amount of new inventory for buyers to choose from.
Last year, 87.5 percent of the new listings belonged to sellers with equity. This year that number was 88.9.
The good news is the number of sales and their resulting prices were also up. There were 17 duplex, triplex and fourplex owners who accepted purchase agreements this year. On average, the final list price as they left the active market was $239,653.
In 2013, the week saw just 12 sellers accept offers; 67 percent of whom walked away from closing with a check in their hand. Perhaps as a result of more distressed duplex sellers, the average sold price for this group was just $138,904.
The single family market saw the number of new single family listings rise 3.3 percent while pending sales decreased 6.6 percent. Overall, total inventory increased 9.7 percent, which continues to suggest a shift toward a more balanced market.
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This morning I saw a headline stating high rents may be keeping potential buyers from owning homes.
While this wasn’t news to me, it is something duplex owners need to pay careful attention to. According to Zillow’s July Real Estate Market Report, just 12 metros of the top 100 in the country have affordable markets for both housing and rent.
Zillow found that in July, national home prices rose to $174,800. This represents an increase of 6.5 percent from the median price last year.
The Twin Cities saw a 3.4 percent year over year increase in Median Sales Price, finishing July at $215,000.
Meanwhile, tenants who signed leases at the end of June saw a whopping 29.5 percent of their income go toward rent. Rent used to take 22.1 percent of a renters monthly income.
Frankly, owning a house is more affordable. At the end of the second quarter, home buyers were paying an average of 15.3 percent of their income toward their house payment.
So why don’t tenants just buy a house? Simply put, rents are so high, they can’t afford to save a down payment. And for many, especially the millennial generation, they are still facing a tenuous job market and are carrying enormous student debt.
Going forward, these numbers will be especially important for duplex owners and landlords to watch. If interest rates go up, housing will become less affordable. This will also reduce cash flow to any new buyer if you’re considering selling your duplex.
If rents go up, however, we may see a migration toward home ownership. This will result in greater vacancy rates, which may ultimately result in lower rent, which will once again, impact cash flow.
For now, however, it continues to look like a great time to be a landlord.
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As the markers of summer’s end approach in the form of back to school announcements and food on a stick, the Twin Cities duplex market shows no sign of letting up.
Twenty-two duplex, triplex and fourplex sellers accepted offers the week ending August 9, 2014. Of these, 86.4 percent have equity in their properties. There weren’t any spectacularly expensive sales, and just two pended at list prices below $100,000. So, on average, the group left the market at a final list price of $214,075.
During the same week last year, 21 duplex owners accepted offers on their investment properties. While 90.5 percent of them did not need to involve the bank in negotiations, they sold at an average price of $205,174. While this is below this year’s pended price, it’s important to note sold prices in the current market may be 3-4 percent below the listed price.
There were 31 new listings the first full week of August. As has been the trend over the last year, most (83.9 percent) are being sold by traditional sellers. There were 29 new listings for buyers to choose from last year during the week, and just 72.4 percent of them did not involve distressed property sellers.
The single family home market saw the number of New Listings rise 8.7 percent for the week. Meanwhile, Pending Sales decreased 5.6 percent. Those two metrics moving in opposite directions resulted in a 9.4 percent rise in inventory.
During July, the Median Sales Price for a single family home in the metro was up 3.4 percent to $215,000. It’s important to watch the Months Supply of Inventory, as it is an early indicator of a changing market. That measure was up 15.8 percent to 4.4 months. This may signal the return to a more balanced market, which is usually achieved when there is a 5 – 6 month supply.
A return to a balanced market, where buyers and sellers are on equal footing, should slow outlandish price increases and return to the market to a more measured, healthy pace.
said on August 18th, 2014 categorized under: Tenants
Comments Off on Duplex Sellers And Tenants Afraid Of The Dark
Many duplex sellers and their tenants believe there’s a monster under their beds.
Sellers fear deciding to sell their duplex will either scare off the tenants they already have, or keep new tenants from moving into the building.
And many new and existing tenants worry that new ownership will mean a sudden change in living; whether it be an immediate spike in rent or sudden change in rules.
In both cases, those fears are largely unfounded.
The lease follows the property, not the owner. In other words, no matter who owns the property, they must honor the terms of any existing lease, unless the owner and tenant mutually agree to a change them.
So a tenant can’t move out until the lease expires. The landlord can’t change the amount of rent either.
The only thing that should change for the tenant is who they send rent checks to.
Granted, tenants may experience rent increases when that lease expires; especially if they are currently paying well below market rents. However, those tenants have no guarantee their current owner won’t raise rent at that time either.
And sellers can still expect their tenants to pay rent on time, and begin eviction proceedings if rent goes unpaid.
Explaining this to tenants in clear, understandable terms often goes a long way toward obtaining their cooperation in showing units while the property is on the market.
More importantly, doing so helps everyone involved sleep better at night.