South Dakota Real Estate Market: What to Expect in 2024 and 2025?

The current median home sale price of $328,600 is rising slowly at just 3.7% YoY. Moreover, homes have been sitting on the market for 51 days. This indicates that the real estate market in the Mount Rushmore State is now slightly less competitive.

Additionally, only 883 homes were sold in July 2024, down from 884 in the previous year. This slight decline suggests sellers are receiving fewer offers, mainly due to the recent NAR settlement. Concerns about selling prices and agent compensation have contributed to this market sluggishness.

The NAR settlement has removed the buyers’ agent compensation from the MLS. This may drive down home prices further. As a result, buyers will have improved affordability along with low mortgage rates.

Here are some tips for you to sustain in South Dakota’s housing market:

• If You Are a Home Buyer: With an inventory of 3,936 properties and the potential for further price drops, now is a good time to buy your new home. The low interest rates at 6.19% are also in your favor. Consider negotiating for seller concessions to further benefit from the purchase.
• If You Are a Home Seller: The correction in the home prices is long overdue. In the wake of the NAR settlement, home prices may drop a little more. If you’re a seller, you can still make profits on home sale before prices potentially drop.

So, How Is the Real Estate Market in South Dakota?

Balanced!

The number of homes for sale increased by 11.2% in July 2024 compared to the previous year. This is the 7th consecutive month the housing market has witnessed such growth. Single-family homes for sale are up by 8.3%, and condos by 53.7%.

• Median Days on Market: The median days on market for homes for sale is 51 days, up by 6 days YoY. This trend suggests a cooling demand in the South Dakota real estate market.
• Housing Inventory and Supply: As a buyer, you have more options now as the housing inventory is up by 11.2%. There are 3,936 homes for sale in South Dakota, with an average supply of 5 months.
• Average Home Prices: The median home price in South Dakota is $328,600. But, it is expected to decrease due to a rise in inventory in the latter half of 2024. The sale-to-list price ratio is 98.4%, dropping by 0.39 pt YoY.
• Home Sales: As per July 2024 data, home sales slightly increased by 0.8% YoY! Only 883 homes were sold, compared to 884 last year.
• Average Rent Prices: Rental costs vary statewide. An average tenant in Mitchell pays $992, while the one living in Elk Point pays $680. You should check the local rates in your region.

Why Is South Dakota a Buyer’s Market Now?

Buyers have more options to explore. Additional housing supply can balance the South Dakota real estate market and stabilize home prices. Let’s look at some more facts:

• More Days on the Market: Homes are spending more days on the market. This is visible in metro cities like Rapid Valley, Canton, and Dell Rapids, where the average days on market is between 44 and 75 days.
• Low Housing Demand: The demand in Rapid Valley is low, with only 5 homes sold in July, down from 9 last year. Similarly, only 11 homes were sold in Pierre, a significant 26.7% decrease from the previous year.
• More Homes Have Price Drops: In July, 57.6% of homes experienced price drops. This trend indicates a gradual shift toward a buyer’s market.
• Low Mortgage Rates: Mortgage rates remain near historic lows, ranging between 6.25%-6.50%. So, this is a great time to lock in a low rate and get pre-approved for a mortgage now.

South Dakota Real Estate Market Predictions

Here are the predictions for South Dakota’s housing market in the remaining months of 2024 and 2025:

1. Number of Home Buyers Will Increase: As inventory grows and homes stay on the market, more home shoppers are expected to re-enter the market.
2. Interest Rates are Expected to Drop: Mortgage rates hit 6.34% in July 2024. NAR predicts the average interest rate will drop to 6.3% by year-end. This will encourage more buyers to apply for loans.
3. New Home Constructions Will Shoot Up: 33.4% of single-family homes for sale in Q1 were newly built. This rise in home construction will continue due to increased demand from remote workers and favorable mortgage rates.
4. Home Prices Will Drop: After a period of sluggish growth, home prices are expected to begin a gradual decline.
5. iBuyers Will Continue to Make Lowball Offers: iBuyers like Opendoor and Offerpad, which once offered 104.1% of market value in 2021, now offer around 70%. Such lowball offers to sellers will increase opportunities for individual buyers.

Bonus Predictions: Buyer Broker Commissions Will Be Zero!

In a shocking turn of events, the NAR settlement has completely eliminated buyer agent fees from the MLS. Let’s understand its impact:

1. Buyer Agents Will Be Affected: With buyers now responsible for directly paying their agents, many may choose to find their homes on their own. This may very soon render buyer agents obsolete.
2. Seller Concession Will Increase: Without the obligation to pay buyer agent commissions, sellers might see increased requests for seller concessions and offline transactions. Additionally, builders are offering significant concessions to attract buyers, further influencing the market dynamics.
3. Builders Will Compete More: Home builders are persuading buyers to buy new construction homes with mortgage buydowns worth $30K!
4. Sellers May Offer Fees for Services: Sellers may offer at least 1%-2% fees to the buyer agents in order to sell their homes quickly. Increasing competition from builders may also cause sellers to pay extra fees to buyer agents.

Is the Housing Market in South Dakota Going to Crash?

A housing market crash in South Dakota is unlikely.

The median home price is $328K, which is about 21.7% lower than the national average, making it affordable for many buyers. The state has the lowest foreclosure rate in the U.S., with just one foreclosure for every 7,561 homes in early 2024.

Cities like Sioux Falls and Rapid Valley are expected to see continued home price growth, with Rapid Valley experiencing a 16% rise in median home prices. Sioux Falls has a population of 206,410 and is one of the fastest-growing city in South Dakota.

The state’s unemployment rate of 2% also helps keep the market stable​. Additionally, the average cost of living in South Dakota is $52,095, significantly lower than the national average of $61,334.

This affordability, combined with strong economic fundamentals, makes a housing market crash in South Dakota unlikely.

2024: Is It a Buyers’ or Sellers’ Market Now?

The housing market is expected to lean more in favor of the buyers in the latter half of 2024. Home prices are rising slowly, and the number of homes for sale has increased by 11.2% YoY. Buyers now have more choices.

With mortgage rates around 6.19%, buyers also have more purchasing power. Consequently, more homeowners are likely to list their homes on South Dakota MLS. The 5.6% increase in new active home listings in South Dakota has brought back home shoppers.

So, whether you are looking for a condo in Hill City or a single-family primary home in Onida, you will find your dream home in the coming months.

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Disclaimer: This article is for informational purposes only. It does not constitute an offer, solicitation of an offer, or any advice or recommendation. Houzeo doesn’t provide any legal or financial advice. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Houzeo Corp., its affiliates, or its employees. However, the author does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does the author recommend that the attached information serve as the basis of any investment decision.

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