A Housing Deal — if You Can Afford It

Quick!  Assuming the Buyer has the financial wherewithal, which is a better deal:  buying a $300,000 house for $320,000, or getting a $425,000 house for $400,000?

Don’t follow?

In the Twin Cities housing market right now, homes in move-in condition at a price that first-time Buyers can afford — roughly, up to about $300,000 or so — are selling briskly.

I’d attribute that to two things:  1) all the loan programs and cheap money available to Buyers, and in particular, first-time buyers; and 2) the fact that first-time Buyers, by definition, don’t first have to sell.

Surprise, surprise — Sellers of such homes have caught on to this “mini Seller’s market,” and have adjusted their prices accordingly.


As a result, I’m now seeing Twin Cities homes that might have been listed for $300,000 six months ago ask — and get — $320,000 today.

Move-up Math

By contrast, homes that appeal to move-up Buyers — priced above $350k or so — have been (relatively) tougher sales.

That’s because Buyers for such homes would typically be moving up from a $150k or $200k home.

If they purchased that home 5 years ago, it’s a given that their home equity has taken a hit, and they may even be underwater (owe more than the home’s worth).

Neither scenario makes for robust move-up demand.

Constrained Demand

Perhaps that explains why there seems to be more inventory at higher price points — and why owners of such homes are pricing more aggressively (and taking price reductions sooner).

So, it’s not uncommon now to see a home that might have initially listed at $450,000 a few months ago be discounted to the low $400’s.  

Bottom line:  in many Twin Cities neighborhoods at the moment, Buyers can score a better home value a couple price rungs up.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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