As we head into the busy season for real estate in Bloomington-Normal, you may notice a lot less for sale signs than in past years. Inventory, or the number of houses currently on the market, has been low all winter and that trend is continuing into the spring.
We are expecting strong buyer activity during the next few months, largely because interest rates have remained low. Experts have been predicting a rise in these rates for the last 18 months, but despite those predictions rates remain at record lows, making homeownership affordable.
Local consumer confidence in real estate as an investment is back and is also having a positive impact on our market. This combination of lower inventory and steady to increasing demand by buyers is resulting in a slow but steady increase in the value of homes in Bloomington-Normal.
Many of our first time home buyers witnessed a time in the market most of us had never experienced, a short time when values dropped. We all remember the housing bubble bursting in 2007. Markets that experienced rapid appreciation experienced a proportional large loss after 2007.
We in Bloomington-Normal had experienced slow and steady gains prior to 2007. Homeowners felt a loss in equity during that period in time but it was proportional to the previous gains.
Many of our move-up buyers no longer had equity in their current homes and were unable to move up. We went through a period where many of our local transactions were "distressed" situations, meaning they were either foreclosures or short sales (more owed to the bank than the home’s value).
These distressed transactions still exist but they are a much smaller percentage of the overall market than in previous years.
There are several factors that contribute to the optimism in buyer activity. One factor is interest rates continue to remain near historic lows. Another is grants available in mid-March are better than in past years.
This year some grants are available to first time homebuyers and experienced home purchasers. Qualification is based on income. Millennials are expected to make up approximately a third of all home buyers this year. The millennial buyers replace baby boomers as the largest group of buyers.
This is an interesting dynamic because these two groups are looking for two entirely different types of homes. The millennials are looking for open spaces with many upgrades including technology or "smart houses." The baby boomers are looking for one-level living with fewer stairs.
Bloomington-Normal home values have turned the corner. With low existing inventory and great anticipated buyer activity, 2016 is expected to be a banner year for home ownership in our community. This basic economic recipe is good for rising real estate values. This year will be a good year for making that move so many of us have been waiting to do.