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Home Buying in South Dakota

Rapid City South Dakota

The expansive state of South Dakota offers a unique blend of rural charm, vibrant small towns, and outdoor adventure, appealing to homebuyers seeking a laid-back midwestern lifestyle. Whether you're drawn to the iconic beauty of the Black Hills, the historic city of Sioux Falls, or the wide-open spaces of its farmlands, the Mount Rushmore State has something for everyone. Known for its low cost of living, strong job market, and no state income tax, South Dakota is an attractive option for many homebuyers.

The median home price in South Dakota is around $310,000, below the national median and either in line with or below the median home price in neighboring states. Houses for sale in South Dakota typically stay on the market for roughly two months before they sell.

Unfortunately, South Dakota struggles to meet housing demands. While growth rates in the state have fluctuated over the years, the state's population has consistently increased year after year, dating back to the 1960s. A shortage of homes, combined with rising prices, has resulted in a competitive seller's market, and homebuyers face many challenges.

The state government has responded by emphasizing expanding housing options, particularly in rural areas. New developments and policies have been initiated to address housing shortages and make it easier for first-time buyers and those looking to upgrade.

If you're considering purchasing a home in South Dakota, thorough research is essential to a successful buying experience. Start by determining your housing needs, such as the type of property, preferred location, and desired amenities. Next, connect with a knowledgeable realtor who understands the local market and can guide you. Preparing your credit in advance is also key, as it will help you secure better mortgage terms.

South Dakota Real Estate Trends

Conducting thorough research, particularly on current South Dakota housing trends, is crucial for homebuyers who want to make an informed buying decision.

Here are some important considerations:

  • South Dakota Median Home Price

    At $310,000, the median home price in South Dakota is generally more affordable than the national average, making it an attractive option for buyers seeking a lower cost of living. It is also lower than in some neighboring states, like Minnesota, Montana, and Wyoming, where home prices tend to be higher. In the Sioux Falls and Rapid City metropolitan areas, home prices are often slightly above the state average, with median prices ranging from $350,000 to $400,000. Still, the state remains one of the more affordable housing markets in the region.

  • Number of Homes Sold

    In South Dakota, approximately 900 homes are sold each month, with activity varying depending on the season. The housing market in larger cities like Sioux Falls and Rapid City tends to be more robust, particularly in the spring and summer when homebuyers are more active. Rural areas of the state see fewer transactions, but they still experience increased activity during the warmer months.

  • Median Days on Market (DOM)

    In South Dakota, the median days on the market (DOM) for homes typically hovers around 55 days. However, homes in more competitive markets, like Sioux Falls and Rapid City, tend to sell faster, with a median DOM of around 25 days. The median DOM may be even shorter in highly sought-after neighborhoods within these cities, reflecting strong demand and limited inventory. Rural areas often experience longer listing times.

  • South Dakota Housing Supply

    South Dakota has faced challenges with limited housing inventory. While the state has seen steady growth in residential construction, it hasn't kept pace with rising demand. Recognizing the rate of new construction will need to accelerate to meet the growing need, especially in Sioux Falls and Rapid City, state officials have been launching initiatives to address housing shortages. However, achieving a balanced market will require more robust development efforts.

How to Find the Right Home to Buy

How to Find the Right Home to Buy

If you are considering buying a home in South Dakota, finding the right property begins with determining your housing needs. Are you looking for a rural setting, a suburban neighborhood, or proximity to urban amenities? Working with a knowledgeable real estate agent can help you navigate the state's diverse market.

A South Dakota realtor will work with you to determine your financial health, lifestyle needs, and long-term goals to help you find the perfect home. When looking for an agent, look for individuals with strong communication skills, local experience, and strong references. You can also ask family or friends for referrals.

Finding the Right Home in South Dakota

Here are key factors to consider when buying a home in South Dakota:

Location

Whether you're interested in living in an urban center or prefer the tranquility of rural living, location is a critical factor in your decision-making process.

  • Urban vs. rural living: Cities like Sioux Falls and Rapid City offer abundant opportunities for employment, education, and entertainment, along with access to amenities such as healthcare, dining, and cultural attractions, making them attractive to homebuyers. On the other hand, rural areas in South Dakota provide larger lots, lower home prices, and a slower pace of life, appealing to those seeking more space and affordability.
  • Proximity to work and amenities: When choosing the location of your home, consider how close you need to be to your workplace or desired amenities. If you work remotely, you may prioritize more space or a quieter area.
  • School districts: South Dakota's school districts play a crucial role in the home-buying decision for families or those planning to have children. Urban areas generally offer access to larger school districts with various educational resources, while rural districts may provide smaller class sizes and a more tight-knit community. Researching school ratings, extracurricular opportunities, and proximity to schools can help you choose the best district for your family's needs.
  • South Dakota Property Tax Rates: South Dakota boasts one of the lowest tax burdens in the country. The state has no state income tax and a relatively low property tax rate of 1.17%. However, it is slightly higher than the national average, and property tax rates in South Dakota often vary by county.

Home Type

In South Dakota, homebuyers can access various housing options to suit their lifestyle and budget preferences. Whether looking for privacy and space or a low-maintenance urban dwelling, the state offers something for everyone.

  • Single-Family Homes: The most common type of housing in South Dakota, single-family homes offer space, privacy, and autonomy. These homes are ideal for families and individuals who want more room and enjoy having control over their property. Single-family homes can be found in urban and rural settings, from historic neighborhoods to modern developments.
  • Multi-Family Homes: Multi-family homes, including duplexes, triplexes, and fourplexes, are generally more common in South Dakota's urban areas like Sioux Falls and Rapid City. These homes can serve as investment properties or living spaces for multiple families, and they offer a balance of affordability and convenience.
  • Condominiums and Townhouses: Condominiums and townhouses are a great option for those who want the benefits of homeownership without the high-maintenance responsibilities of single-family homes. These properties are commonly found in South Dakota's urban areas and provide an attractive option for young professionals, retirees, or anyone seeking a low-maintenance, community-focused lifestyle.
  • Manufactured and Modular Homes: For buyers seeking affordability, manufactured and modular homes are cost-effective alternatives to traditional single-family homes. These homes are often found in more rural areas and offer a practical solution for homebuyers looking to maximize space and value.
  • Rural Properties: Rural properties are a popular choice for those interested in agricultural activities or simply enjoying the wide-open spaces of South Dakota. These properties range from hobby farms to large ranches, making them ideal for buyers interested in farming, gardening, or raising livestock in a serene, natural setting.

The Typical Home Buying Process in South Dakota

Here is an overview of the typical home-buying process in South Dakota:

  • Get prequalified for a home loan.
  • Partner with a local real estate agent.
  • Make an offer.
  • Schedule a home inspection.
  • Close on your new home.

Financing Your South Dakota Home Purchase

Financing Your South Dakota Home Purchase

Homebuyers in South Dakota have several financing options, ensuring there's a solution that fits their budget and long-term goals. Understanding these financing methods will help you make informed decisions.

Traditional Home Loans

South Dakota homebuyers typically choose between two main types of traditional mortgages:

  • Fixed-Rate Mortgages: Fixed-rate mortgages are a popular option for many homebuyers. They offer stability with a consistent interest rate and predictable monthly payments over the life of the loan. This type of loan is ideal for buyers who plan to stay in their home long-term and want to avoid fluctuating interest rates.
  • Adjustable-Rate Mortgages (ARMs): ARMs typically begin with lower interest rates than fixed-rate loans, but the rate can change periodically based on market conditions. ARMs can be advantageous for buyers who expect to move or refinance within a few years but carry more risk if interest rates rise over time.

Most South Dakota homebuyers turn to national lenders such as Wells Fargo, Bank of America, and Chase for home financing. However, local lenders like First Bank & Trust and Great Western Bank are also popular choices. They offer personalized service and mortgage products tailored to the specific needs of South Dakota's real estate market.

Government-Backed Loans

Several government-backed loan programs are available to South Dakota buyers, offering affordable financing options with specific benefits:

  • South Dakota Housing Development Authority (SDHDA): SDHDA has several loan options for first-time homebuyers and repeat buyers.
  • FHA (Federal Housing Administration) Loans: FHA loans are designed to help low-to-moderate-income buyers by offering lower down payment options and more flexible credit requirements than conventional loans.
  • VA (Veterans Affairs) Loans: Available to veterans and active-duty military members, VA loans come with attractive benefits, including no down payment and competitive interest rates, making homeownership more accessible for those who qualify.
  • USDA (United States Department of Agriculture) Loans: Buyers looking for homes in rural areas of South Dakota may be eligible for USDA loans, which provide zero down payment options and favorable interest rates for qualified applicants.

Down Payment Assistance Programs in South Dakota

Several programs in South Dakota can help with down payments and closing costs, making homeownership more affordable. For example, the SDHDA's Fixed Rate Plus Loan offers up to 5% in downpayment and closing cost assistance to qualifying homebuyers. Some South Dakota cities and counties may also have their own downpayment assistance programs. Be sure to check with local housing authorities for additional resources.

Home Insurance in South Dakota

Home Insurance in South Dakota

In South Dakota, homeowners are not legally required to have home insurance, but it is highly advisable. Home insurance protects your financial investment against unexpected events like natural disasters, fires, hail damage, and theft. If you're financing your home, your lender will likely mandate a home insurance policy as part of the mortgage agreement.

The average annual cost of home insurance in South Dakota is approximately $2,800 per year, significantly higher than the national average. However, rates can fluctuate based on factors such as the value of your home, the type of coverage selected, and your previous claims history. Understanding these variables can help you find the right coverage for your needs while ensuring peace of mind as a homeowner.

Home Buying Challenges in South Dakota

While South Dakota's housing market offers many opportunities for homebuyers, there are some unique challenges to consider:

  • Inventory Shortages: Certain regions in South Dakota are experiencing inventory shortages. This can make finding a home that meets your needs challenging. Also, heightened demand in desirable areas often increases buyer competition.
  • Weather Risks: South Dakota is known for its harsh weather conditions, including severe winter storms and tornadoes. Homebuyers should consider the location of their potential homes, any storm mitigation features, and the cost of obtaining adequate home insurance coverage.
  • Rural Living Challenges: While rural living in South Dakota offers benefits, it can present challenges for those unfamiliar with the lifestyle. Rural areas often have limited access to amenities, longer commutes, and fewer job opportunities. Prospective buyers should carefully weigh the advantages and disadvantages of living in these areas before deciding.

South Dakota Home Inspections

South Dakota residents experience a mixed bag of weather, including tremendous storms, hail, tornadoes, derechos, blizzards, flooding, drought, and extreme heat and cold. These types of weather can severely damage property and cause other long-term problems. Anyone looking to buy real estate in South Dakota should have a home inspection before purchasing. A South Dakota home inspection can reveal any hidden issues, damage, and inoperative systems, saving the buyer money.

A home inspection in South Dakota covers many items (listed below), including evaluating the structural integrity of the home, checking major systems and safety features, and assessing the appliances that come with the home.

  • Structural Elements: The inspector will review the foundation, walls, floors, ceiling, and stairs for signs of decay or damage.
  • Roof: Inspectors check the condition of the shingles, flashing, gutters, and chimney, examining them for leaks or other signs of wear and tear.
  • Home Exterior: They will also check the home's exterior (siding, windows, doors, etc.), looking for leaks or signs of damage.
  • Heating, Ventilation, and Air Conditioning (HVAC): Inspectors will test the heat, air conditioning, and ventilation systems to ensure they operate correctly and comply with safety codes.
  • Plumbing: The inspection also includes checking pipes, fixtures (tubs, sinks, toilets), and the water heater, as well as looking for any leaks, damage, or other issues.
  • Electrical: Inspectors will also examine wires, outlets, electrical panels, circuit breakers, and light fixtures for safety and compliance.
  • Attic: Attics, too, can have issues that could be costly to fix, like insulation, ventilation, water damage, and rodents.
  • Foundation: An inspector will search the foundation for water damage, leaks, and cracks, indicating more significant problems.
  • Interior: They will also examine the house's interior (walls, ceilings, floors, windows, etc.), looking for signs of damage or structural issues.
  • Tests: Some include tests for mold, radon, termites, asbestos, lead paint, and other contaminants.
  • Appliances: Checks the built-in and stand-alone appliances for functionality.

A home inspection in South Dakota costs between $250 and $625, depending on the property's size, age, and condition. The price will be higher if additional tests are needed.

The Process

Since the home inspection is a crucial part of the buyer's due diligence, they usually pay for it. The process looks like the following:

  • Choose a reputable, local home inspection company.
  • Schedule a home inspection at the right time, according to the contract.
  • Show up on time and attend the inspection; ask questions as necessary. It takes between two and four hours to complete.
  • Review the inspection report and decide where to go from there.

The top five home inspection companies in South Dakota are:

After the Inspection

Along with giving buyers peace of mind, the inspection can reveal serious issues within the property that could be costly to fix. Once the inspector submits the report of their findings, the buyer can use that information to do any of the following:

  • Try to save some money by negotiating a better price.
  • Ask the seller to make all the necessary repairs before closing.
  • They can back out of the sale and walk away without losing money.
  • Ask for a home warranty.
  • Request a lower down payment.

Inspection Top Cities

City Inspection Cost Local Issues Local Rules Local Home Types
Home Inspection in Sioux Falls An inspection for a 3,000 square foot home costs roughly $400. Roof, plumbing, electrical, HVAC, and foundations. No local rules. Single-family, multi-family homes, condos, and townhouses.
Home Inspection in Rapid City $200-$500 with an average price of $343. Roof leaks and broken shingles, poor drainage, electrical issues, and water damage. Inspectors must be licensed by the South Dakota Real Estate Commission. Single-family, condos, and multi-family dwellings.
Home Inspection in Aberdeen $250-$400 based on the size of the home and complexity of the inspection. Roof, electrical, plumbing, foundation, and HVAC. Inspectors must be licensed by the South Dakota Real Estate Commission. Single-family homes, condos, townhouses, duplexes, and triplexes.
Home Inspection in Brookings $300-$500 based on the size and features of the home. Roof leaks, plumbing problems, faulty wiring, and mold. No local rules. Single-family homes, townhouses, condos, and apartments.
Home Inspection in Mitchell $300-$500 based on the home's size, features, and any specialized tests needed. Roof, plumbing, foundation, and HVAC. Inspectors must be licensed by the South Dakota Real Estate Commission. Single-family, townhouses, duplexes, and land.

A Homebuyer's Guide to South Dakota

South Dakota offers a unique blend of rural charm, vibrant cities, and outdoor adventure, making it an attractive destination for homebuyers seeking a laid-back midwestern lifestyle. With its low cost of living, strong job market, and no state income tax, South Dakota presents numerous advantages for those considering purchasing a home.

However, like any real estate market, South Dakota has its challenges. Inventory shortages, and rising demand, particularly in and around Sioux Falls and Rapid City, can make finding the right home competitive. Additionally, the state's harsh weather conditions and rural living challenges may require careful consideration for prospective homebuyers.

Despite these factors, home buying in South Dakota remains desirable. The state offers a high quality of life and affordable housing options. By conducting thorough research, understanding local market trends, and working with a knowledgeable real estate agent, homebuyers can navigate the South Dakota housing market and find the perfect place to call home.

Instant Access to South Dakota Property Records

Home Buying Guide

Instant Access to South Dakota Property Records

  • Owner(s)
  • Deed Records
  • Loans & Liens
  • Values
  • Taxes
  • Building Permits
  • Purchase History
  • Property Details
  • And More!

Instant Access to South Dakota Property Records

  • Owner(s)
  • Deed Records
  • Loans & Liens
  • Values
  • Taxes
  • Building Permits
  • Purchase History
  • Property Details
  • And More!

Instant Access to South Dakota Property Records

Home Buying Guide

South Dakota Property Resources