August Twin Cities Housing Market Episode – Another Rerun!
August Twin Cities Housing Market Episode – Another Rerun!
Most of us want to see a new episode of The Twin Cities Housing Saga but I am afraid August is another rerun. Over the course of the last 3 years the dominant theme of the housing story in Minneapolis-St. Paul is an ever-shrinking inventory and rising prices. Sellers have been in their glory days while buyers, facing a highly competitive marketplace, have struggled to close a deal month after month with a couple of variations. We’ll talk about these later in this post. Like most of the country, here in the Twin Cities metro inventories continue to shrink while prices continue to move upward. As long as the economy continues to grow and add jobs and interest rates remain low there is no reason to believe this market situation is going to change course anytime soon.
A deeper dive into the numbers for August of this year versus last year reveals new listings increased 7% while the inventory of homes available for sale fell 16.7% from 15,137 in 2016 to 12,206 this year. The month's supply of inventory remained at 2.5. but compared to last year, it dropped 16.7%. Lucky buyers in the metro successfully purchased 6513 homes but they were not quite as fortunate as buyers in August of last year when 6,606 home sales closed. Additionally, this year buyers paid 6.8% more when you compare median sales prices in the Twin Cities last August.
A Closer Look at Supply in the Minneapolis-St. Paul Housing Market
Remember at the beginning of this post I said buyers have struggled with this market that has sellers doing happy dances with a couple of variations? Here they are. When we break out the numbers on the inventory of homes for sale by market price segments, the two top tiers tell a different story. At the $500,001 to $1,000,000 price range, we see a 6 months inventory of homes which indicates a market that is balanced between buyers and sellers. When we view the supply of homes at $1,000,001 and above the market strongly favors buyers with inventory levels just over a year.
So what does this change in market balance mean to you as a buyer or a seller or both? It means if you own a home that is in one of the price brackets between these top two and are looking to trade up, you will sell in a market that is favorable to you as the seller, and then purchase a new home in a market that is favorable to you as a buyer. The best of both worlds. Not to mention you can take advantage of interest rates that are still historically low before they go up any higher.
While the number of building permits has increased and new construction is on the rise, it will take some time to release any pressure on the demand at the lower price brackets. For anyone buying below $200,000, you can see by the chart that the market is extremely competitive. Unfortunately, another factor is that we need new housing at the traditional first-time buyer level, and that is not what is being built these days in the Twin Cities. August new construction inventory was up 2% over same time last year, not anywhere near where we need it to be to help balance the housing market.
Looking at the last 12 months from September 2016 to August 2017, pending sales were up 3%, with the largest gain in sales in the $1,000,001 and above segment, which increased 26.3%. Overall, the median sale price saw an increase of 5.5$ at $240,000. The price segment that sold the quickest, 44 days, was the $190,001 to $250,000. The condo market saw the largest price gains, increasing 6.4% to $157,000.
Twin Cities Metro Housing Quick Stats
- With inventory levels at all-time lows, this market continues to be extremely competitive for buyers, especially first-timers hoping to buy a home below $250,000
- The top two market price groups are a deviate from this scenario with a balanced market at the $500,001 to $1,000,000 price range and a market that favors the buyer at $1,000,001 and above
- Home values are expected to continue the upward trend
- Inventory levels are expected to continue their downward trend
Twin Cities Metro Inventory Snapshot
- new listings up 0.7%
- inventory of homes for sale down -16.7%
- month's supply of inventory down -16.7%
- months supply of inventory currently at 2.5
- new construction inventory up 21%
Want a hint about how September stats are going to shake out? Same old story different month would be my best guess! Here is the snapshot of the week ending September 16th.
- new Listings down -5.7% to 1,618
- pending Sales down -7.1% at 1,244
- inventory down 16.5%
As we move into the second best time to list your home, fall, keep in mind that interest rates are still at historical lows at 4% for buyers with strong credit. However, most financial analysts agree that the Fed will be raising interest rates at least one more time before the year ends, most likely in December. Also keep in mind that the Fed has begun to engage in an unprecedented bond sale, which already pushed mortgage interest rates up this month even though the Fed didn’t raise the rate when they met in September. If you are still on the fence about listing your home for sale, perhaps now is the time. As a buyer who didn’t secure a deal this summer don’t wait until spring. Now is a great time to still take advantage of low-interest rates keeping in mind that there are good properties out there.
The data used in this report was for the entire Twin Cities Metro. Stats for the individual cities within the region may tell a different story. If you are interested in looking deeper the reports are available to the public from the Minneapolis Association of Realtors website.
As always, thanks for reading my post.
Other posts you might enjoy: Three Things You Should Not Do When Buying a Home, Sell Your Twin Cities Home Now
*Market data source Minneapolis Area Association of Realtors.