SIOUX FALLS, S.D. (KELO) — The housing market in Sioux Falls is beginning to slow. This is according to Maggie Miller, realtor for Hegg Realtors and VP for the Realtor Association for the Sioux Empire, who explained the situation as it relates to the last few years.

“When 2020 hit, the market got really really crazy,” said Miller. “It was really in favor of sellers. We had so many people moving to this area, and things like that — there just weren’t enough homes for people to buy.”

Miller said that during this period, people were making offers way over the asking price for houses, and things were selling very quickly. This likely sounds familiar to anyone who purchased a home in the last few years.

“That lasted through 2022 for sure,” said Miller. “Things did slow down — I’d say around the Fourth of July.”

Miller indicated that this slow down was caused by rising interest rates. “When the interest rates on mortgages went above that 6-6.5%, up through 7%, buyers unfortunately lost a lot of affordability. When rates go up one full percent, a lot of buyers can lose up to $50-60-70 thousand in affordability. It makes their [mortgage] payment go pretty high.”

While the market is slowing — Miller says she’s seeing sales take longer — that doesn’t mean there are a large number of houses available.

“Our supply has definitely gone up, or maybe we have this perception that our supply has gone up,” said Miller. “There’s still under 400 single family homes listed for-sale today in Sioux Falls — that’s definitely not a lot.”

As little as six months ago, Miller says things were selling really quickly. “Buyers are taking longer to make decisions,” she said. “They actually have that space to do that, where a year ago — buyers were having to look at a house and make a decision almost on the spot.”

Now, we’re seeing enough of a shift that sellers are having to look for ways to incentivize buyers to make an offer.

“We’re seeing a lot more sellers offer sell-paid closing costs,” Miller said. “We’re seeing sellers have to be a little more creative in marketing their homes — that just was not the case a year ago.”

This, says Miller, represents a return of sorts to the pre-pandemic market, though she noted that pre-pandemic it was more common for buyers to ask for special things, rather than sellers openly offering it.

One area where Miller sees an impact going forward is in the area of “starter homes”; houses that had previously been sold for under $200k. She says that many of the people who locked down one of these homes pre-pandemic, and who managed to lock in a low interest rate, aren’t looking to move now.

“They’re not wanting to move out because they’re going to pay more for a house, and their rate’s going to be higher,” Miller said.

With people content to stay in those “starter homes”, Miller says we may begin to see a gap in that market where there are no options available for those looking to buy their first home.

If you feel like you’ve been seeing more for-sale signs lately, it may not be an illusion, and Miller said part of it may be due to the fact that there’s now time for those signs to actually be put up before a house is sold.

“Our average days on market is 45,” said Miller. “That’s from the list date through today with no offers — it really says a lot about the market and how much it has cooled — I wouldn’t be surprised if our average days on market creeps into the 60s.”

This, Miller clarified, is normal.