It’s official. The U.S. economy has slowed down. Thanks in part to the COVID-19 pandemic that is gripping the nation, consumers are cautious, businesses are worried, and investors are downright jittery.
What does this mean for Rochester’s real estate? Well, like everything else in the real estate business, that depends on who you ask and where they’re located. But the consensus is that the lively pace the Rochester real estate market enjoyed during the last year is showing no sign of slowing down.
“By far the biggest surprise of 2020 is that Rochester’s real estate market stayed the course, was strong, active and consistent with the past few years in activity,” says Ron Wightman, real estate agent with Wightman-Brock Real Estate Advisors in Rochester. “While the market went quiet during the first pandemic shutdown from March into April 2020, toward the end of April, normal home sales activity resumed. And it has been quick paced market since then, even into December.”
The closed home sales for Southeastern Minnesota numbered 6,066 through November of 2020. Those sales totaled 5,676 through the same period in 2019. The Rochester-specific numbers were 2,199 in 2020 compared to 2,107 in 2019.
Currently, the median price for homes in Rochester and within 15 miles surrounding the city is $259K, up from $245K in 2019. Days on market dropped to 42 this year compared to 52 in 2019.
BJ Pederson, realtor at RE/MAX Results in Rochester, agrees that the biggest surprise of 2020 has to be how well the housing market held up, considering all the challenges COVID-19 has presented with the economy and job market, while also taking into account that 2020 was also an election year.
“The market has outperformed expectations for the year and is on pace to have the most sales since 2017,” Pederson says. “COVID definitely slowed the market in the second quarter. However, the market bounced back very well and turned what could have been a very bad year into a good year. Overall COVID might be the reason we had a good year and not a record-setting year.”
Jennifer Mitchell, real estate agent with Edina Realty in Rochester, agrees that for all the turmoil that COVID-19 has brought to myriad industries, the real estate market has fared well.
“Our market has been experiencing an inventory shortage for a few years now and COVID-19 added an additional layer to that,” Mitchell says.
This was due in part to homeowners’ concerns about having potential buyers in their home and their safety from a health standpoint. In addition, being displaced when selling a home, even for a brief period of time, also proved challenging.
Indeed, homeowners who could manage multiple potential buyers visiting the home throughout the day were having to give consideration to children doing schooling from home and others working from home, while also trying to accommodate home showings and also vacating the property for potential buyers to look.
Mitchell says additional challenges included employment issues, delays in timelines due to COVID-19 restrictions, and the overall uncertainty of COVID. These were coupled with what the presidential election was going to mean for the economy, interest rates, and individuals’ overall financial portfolio.
“On a day-to-day basis it impacted the manner in which we met with clients, showed homes, obtained signatures, conducted inspections, and facilitated closings,” Mitchell says. “As a real estate community overall, we were fortunate to be deemed essential so that we could ensure that our clients and community members that needed to move during this time could do so and we could help facilitate that.”
- Of course, individuals’ needs and desires to own a home are always present no matter what the economy and market are doing—people get married, divorced, grow families, pass away, change jobs, and have a whole host of other life events that take place on any given year. For others, real estate property is seen as an investment opportunity.
“Specifically in 2020 we experienced record low interest rates,” Mitchell says. “During the recession, many folks shifted to savings and we are now seeing them invest in real estate both for their own personal use and to add to their investment portfolio.”
While some real estate buyers looked to expand the size of their homes within Rochester, others set their sights on properties farther away.
Lisa Janisch, broker/realtor with Janisch Realty, experienced an increased sales in recreation properties being purchased and investment properties or second homes.
“The market in the Arrowhead region of northeastern Minnesota picked up significantly starting in June 2020. This was not only the impact of COVID-19, but also the riots and folks realizing they could work from home,” Janisch says. “People realized they did not have to stay in or near a larger city for work, but could go ahead and buy the ‘someday’ home and work from there.”
While the economy continues to coast along, the incentive to purchase a home continues to rise, thanks to the almost historic low mortgage interest rates. As Wightman explained, buyer interest in certain “must have” amenities in home layout and design has also shifted—especially as it relates to considering a “home office.” It is now being evaluated much more as a necessity with specific criteria.
“Work at home and distance learning has forced thoughtful consideration with respect to where an office is located in the home and how large the space is,” Wightman says.
In fact, several past clients have contacted Wightman and his team because they have unexpectedly run out of space in a home they purchased just a short time ago.
“We are hearing things like, ‘I need office space’ or ‘I’m currently working at home in the laundry room next to the washer and dryer.’ Several have run out of space or the lack of private space for work at home and distance learning,” Wightman says. “Neither were considerations when their home was originally purchased.”