The latest numbers for Twin Cities residential real estate show a stable market with some ongoing signs of transition. Prices are still rising, supply is still tight, and demand has recovered even while market times have lengthened. Even though more buyers are closing on homes, the urgency has subsided somewhat. Days on market rose 2.4 percent from last September, marking the fifth year-over-year increase in the last seven months. Market times remain swift despite modest increases. Sales rose 3.4 percent and the median sales price increased 6.6 percent to $279,250. Pending sales—a measure of signed contracts and future demand—rose 2.9 percent. Both pending and closed sales are down slightly for the year so far, but that may change. New listings were up 2.5 percent, helping some buyers take advantage of historically low rates. Sellers have been accepting a slightly lower share of their list price compared to the year prior for seven of the last eight months—with September bucking that trend. This, along with other indicators, suggests the market is rebalancing in a way that could benefit buyers.

The number of active listings for sale is up over the last 12 months and for most of 2019. Even so, the market remains tight—particularly for first-time buyers and downsizers competing in the under $300,000 segment where multiple offers and homes selling for over list price remain commonplace. Despite the demand, builders struggle to replenish inventory in that undersupplied segment due to high land and material costs combined with a significant labor shortage and tricky regulations. The shortage of affordable homes has led to an increase in remodeling as people are staying in their homes longer. It’s challenging to find comparable home at a similar payment in the desired location. With just 2.5 months of supply, the Twin Cities is still significantly undersupplied.

September 2019 by the Numbers (compared to a year ago)

• Sellers listed 7,041 properties on the market, a 2.5 percent increase from last September
• Buyers closed on 5,358 homes, a 3.4 percent increase
• Inventory levels decreased 5.6 percent from last September to 12,478 units
• Months Supply of Inventory was down 7.4 percent to 5 months
• The Median Sales Price rose 6.6 percent to $279,250
• Cumulative Days on Market rose 2.4 percent to 43 days, on average (median of 22)
• Changes in Sales activity varied by market segment

• • Single family sales rose 5.5 percent; condo sales increased 1.4 percent; townhome sales fell 0.5 percent
  • Traditional sales increased 4.8 percent; foreclosure sales dropped 21.1 percent; short sales fell 55.6 percent
  • Previously owned sales were up 4.4 percent; new construction sales climbed 2.6 percent

Quotables

“Attractive interest rates have unleashed some of the pent-up demand from earlier this year,” said Todd Urbanski, President of Minneapolis Area REALTORS®. “But each price point, product type and area is unique.”

“Buyers are still very much motivated despite some challenges,” said Linda Rogers, President-Elect of Minneapolis Area REALTORS®. “It really shows the resilience of our region and the value of homeownership.”
From The Skinny Blog.

August 19, 2019

The current economic expansion recently became the longest on record, but it’s showing its age. Concerns around slowing growth have spiked amidst new economic data and gyrations in equity markets, but it’s also created opportunities for home buyers. The upside is that mortgage rates have fallen yet again as investors flock to the safety of longer-term U.S. government bonds, thereby driving down the 10-year treasury yield and the 30-year mortgage rates that follow it. That means markets expect monetary easing and lower interest rates to spur growth in the short-term. The risk of recession has grown, but the economy is still buzzing along at a decent pace. Buying a home is an emotional decision, and buyers sometimes pull back at any whiff of turbulence out of fear of hardship.

Twin Cities home buyers and sellers, however, did not pull back in July. Sales rose 4.5 percent and sellers even listed almost 2.0 percent more product than last July. Despite lower interest rates and modest inventory gains as tailwinds, the persistent shortage of homes on the market and affordability headwinds remain. Price increases and wage gains are more aligned now than in the past, but investors are still competing with millennial first-time buyers in the already competitive under $300,000 segment. Conversely, there’s some evidence of a slow-down in the luxury segment. Metrics to watch aside from sales and prices include market times, the ratio of sold to list price and months of supply. These three indicators could be hinting at potential market shifts ahead. That said, home price declines are unlikely until absorption rates rise above 6 months. We’re currently at 2.4 months.

July 2019 by the Numbers (compared to a year ago)

• Sellers listed 7,827 properties on the market, a 1.8 percent increase from last July
• Buyers closed on 6,628 homes, a 4.5 percent increase
• Inventory levels decreased 4.4 percent from last July to 11,961 units
• Months Supply of Inventory was down 4.0 percent to4 months
• The Median Sales Price rose 5.9 percent to $283,700, a record high for July
• Cumulative Days on Market remained stable at 38 days, on average (median of 18)
• Changes in Sales activity varied by market segment

• • Single family sales rallied 6.0 percent; condo sales increased 2.2 percent; townhome sales rose 0.8 percent
  • Traditional sales increased 5.6 percent; foreclosure sales dropped 17.6 percent; short sales fell 37.5 percent
  • Previously owned sales were up 5.6 percent; new construction sales rose 4.5 percent

Quotables

“There are lots of headlines out there vying for our attention,” said Todd Urbanski, President of Minneapolis Area REALTORS®. “The bottom line is that the best time to buy a home is when you’re ready. Over 70.0 percent of Minnesotans have made that choice, the vast majority of whom have seen their values increase.”

“No one thought mortgage rates would touch 3.6 percent again,” said Linda Rogers, President-Elect of Minneapolis Area REALTORS®. “Buyers who felt squeezed by a monthly mortgage payment should take another look and consider this a fleeting gift.”
From The Skinny Blog.

July 18, 2019

In the face of mixed signals, assessing market health can be a challenge. The economy remains healthy, mortgage rates are outrageously low and yet sales aren’t rising. That’s in part because we simply haven’t built enough homes to keep pace with the demand. Despite attractive mortgage rates, the supply of available homes is so tight that sales are struggling to keep pace. Rising home prices typically incentivize more sellers to list. But with nowhere to go because of the shortage, listing activity is down. New construction has been hampered by rising land, labor and material prices as well as regulation, forcing builders to create new supply in the high-end luxury market often at the expense of more affordable entry-level product. But the demand from millennials (and some baby boomers) is concentrated in the affordable price points, creating multiple-offers and frustrated buyers.

But it’s that tight inventory that’s still driving prices higher. Sales prices reached a new all-time high of $290,000 in June—likely our high for the year. New listings stumbled 3.1 percent while pending sales were down 2.9 percent. Days on market remained flat compared to June 2018 while the ratio of sold to list price fell for a fifth consecutive month. In some ways, the market is improving for buyers, even though sellers are still enjoying strong pricing power, favorable negotiating leverage and quick market times. For the last nine months, buyers have seen more active listings for sale than the year prior. We still have a tale of two markets: strong demand, weak supply and price growth in the affordable brackets compared to a slight oversupply, slow market times and weaker pricing in the upper brackets.

June 2019 by the Numbers (compared to a year ago)

• Sellers listed 8,473 properties on the market, a 3.1 percent decrease from last June
• Buyers closed on 6,604 homes, an 8.2 percent decline
• Inventory levels decreased 1.3 percent from last June to 12,063 units
• Months Supply of Inventory was flat at5 months
• The Median Sales Price rose 7.2 percent to $290,000, a record high for any month
• Cumulative Days on Market remained stable at 40 days, on average (median of 16)
• Changes in Sales activity varied by market segment
  • Single family sales fell 7.5 percent; condo sales fell 13.3 percent; townhome sales decreased 6.1 percent
  • Traditional sales declined 6.8 percent; foreclosure sales dropped 46.4 percent; short sales fell 48.1 percent
  • Previously owned sales were down 8.1 percent; new construction sales rose 2.0 percent

Quotables

“The market is quiet right now, not every month shows significant change. Inventory is low, buyer demand is still evident and interest rates are phenomenal,” said Todd Urbanski, President of Minneapolis Area REALTORS®. “The untold story is the increase in net worth for homeowners. Rising prices mean rising equity. It can be a challenge to find a home, but homeownership is the best avenue to wealth-building.”

“The idea of the ‘housing market’ as a singular entity can be misleading,” said Linda Rogers, President-Elect of Minneapolis Area REALTORS®. “Cities, neighborhoods and different segments can often show tremendous variation.”
From The Skinny Blog.