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The State of the Real Estate

With our local economy continuing to be strong with low unemployment, job security, and interest rates remaining at historically low levels, the Omaha real estate market is slowing down more than normal for this time of year. Presently listing inventory is very low, currently at 2702 active residential listings. The number of new pending properties in July of 2016 was 1245 versus 1336 in 2015 (down 6.8%). This compares to June 2016 new pending’s of 1554 versus 1578 in June of 2015 (down 1.5%). In addition, July closed residential properties was 1354 in July 2016 versus 1579 in July 2015 (down 14.3%). Thus, the July numbers show the market is slowing down more than seasonally expected. I look at this market in three categories. Homes below $225,000 who are first and second time buyers, homes $225,000-$350,000 make up the middle market and then the homes over $350,000 would be the upper end executive market. The first and second time buyer market was on fire the first half of this year having many multi-offer contracts, thus forcing prices up. We’ve seen this activity slow down, one of the reasons I think we’ve continued to have appreciation in this segment is the lack of new construction options. When Hearthstone left the market 5 or 6 years ago it left us with only Celebrity as a volume builder in this price range. Celebrity’s Houses start in the mid $170,000’s. Thus, leaving people looking below that point to only buy existing homes. Also, less competition from $175,000 – $225,000 is forcing up prices. I expect our market should be stable to slightly down for the balance of 2016. I believe most sellers are currently overly optimistic and think their homes are worth more than what the market is telling us. Also, more buyers than normal are backing out of contracts year to date. This continues to be a seller’s market but is slowing. The middle market has been stable for the first half of the year. We have noticed the market slowing down but I expect this price range to remain fairly neutral (not a buyer’s market and not a seller’s market) until spring. Activity may be slow so you may need to encourage price reductions if you have a motivated seller. The $350,000 plus existing market continued to be slow this year. The number of showings on all listings have slowed down but most especially in this price range. I believe much of this can be attributed to two things, the fact that existing competes with new construction and many buyers are picking new over existing. Second, these buyers make up a small percentage of the total market, thus there are not as many buyers looking. If you have a seller that is motivated to get their home sold. It must be in move in condition and priced right. You may need to get price reductions. But if doing so, make sure they are meaningful and will catch the attention of buyers. You may consider asking your seller to pay a bonus. In summary, we need to be realistic and understand we’ve had a really strong 5 year run, we should expect the market to slow down and adjust periodically. The number of buyers coming to open houses and the number of showings on listings has slowed down. The first and second time market ($225,000 & below) has gone from a strong seller’s market to a weak seller’s market. The upper end existing market of $350,000 plus is currently a buyer’s market. Make sure that you stay in touch with all your clients and have open lines of communication. Below is some additional data.

UNEMPLOYMENT RATE:

homeU.S. – June 2015 5.3% vs. June 2016 4.9% ↓.4 % Year over year

Omaha – April 2015 2.7% vs. June 2016 3.5% ↑.8 % Year over year

CONSUMER CONFIDENCE: July 2016 is 97.3 vs. July 2015 90.9

CLOSED RESIDENTIAL UNITS: June 2016 6802 vs. June 2015 6793

FLAT AVERAGE CLOSED RESIDENTIAL SALES PRICE: June 2016 $200,200 vs. June 2015 $193,826 ↑3.3%

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