November in the Twin Cities Cold While Housing Market Hot
November Twin Cities Hot Housing Market
The end of the year fast approaches and we are almost there. The theme of the story for 2017 has been one of a strong sellers’ market and relentless buyer demand, especially in the first-time home-buyers price range. It has remained constant through 11 months despite rising interest rates, political turbulence, and a tax overhaul whose effects on the housing market are still uncertain.
Even though the 30-year mortgage interest rate just surged to a five-month high for the last week of December at 3.99%, it is still lower than last year at the same time and a historic bargain. The Minneapolis-St. Paul's business community continues to thrive economically and with the third-lowest unemployment rate in the nation, an abundance of jobs consumer confidence remains high and continues to support a strong housing market.
Delving deeper into the numbers for November of this year vs. November 2016, find new listings 6.7% lower, inventories 24.1% lower with a month's supply of inventory at 1.8. Still, buyers persisted and closed on 4595 homes this year for an increase of 3.8%, and pending sales, not to be outdone are up 4% more than November 2016. Listed homes spent less time on the market and closed for higher prices as well sitting at 56 days with a median sale price that rose by 6.5% to $245,000.
Minneapolis-St. Paul Housing Market Year to Date
Since the end of the year is staring us in the face we would be remiss not to look at the year-to-date figures as well. These numbers should hold pretty steady as we close the books in 2017. When we look at the data winners and losers, inventory levels keep losing ground, and homes for sale spend less time on the market while the other market statistics continue to rack up gains.
- new listings dipped 2.1%
- days on market fell 13.6%
- closed sales rose 0.3%
- pending sales inched up 0.2%
- median sales price jumped up 6.5% to $245,000
Let’s Take a Look at the Twin Cities New Construction Picture
One of the reasons the inventory of homes for sale has been in such short supply is new construction has not been able to keep up. However, the good year-end news from the Builders Association of the Twin Cities (BATC) new construction for 2017 is at a 10 year high and we are looking at much more positive numbers coming out of November than last month. November single-family building permits surged to 586, a 30% increase over last year while multi-family permitted units increased a whopping 102%!
In the November Keystone Report for First Housing Minnesota, 611 permits were granted for the new construction of 1892 units overall. While these numbers are certainly encouraging, we still will face a housing shortage at the entry-level price range heading into the coming year. We are missing an important piece of the housing market puzzle. David Siegel, executive director of First Housing Minnesota summed it up when he said, “A decade ago, 72 percent of the homes built in the Twin Cities were below $325,000. Today it is 38 percent. Much of this can be attributed to high land costs and regulatory pressures.”
Twin Cities Metro Housing Market Snapshot
- new listings down -6.7%
- inventory of homes for sale down -24.1%
- the month's supply of inventory is currently at 1.8
- median sales price up +6.5%
- new construction inventory up +30%
A quick look at what’s up and what's down for the week ending December 16th
- New Listings up 9% at 641
- Pending Sales down -1.3% at 752
- Inventory down -23.9% at 8,499
The Moving Parts We're Watching
We are closing out the books soon on another year of relentless demand for housing with shortages of supply creating a market that favors sellers in a very big way below the $500,000 price point. As we head into the new year we still expect a seller’s market to still be the predominant theme but we will keep an eye on a couple of circumstances that are destined to have an effect on certain segments of the housing market.
The Federal Reserve
- Increases to the prime lending rate with the intention of heading off inflation.
- United States Treasury debt and mortgage-backed securities being sold to the tune of 4.2 trillion
- Leadership change from Janet Yellen to Jerome Powell on 2/3/2018The mortgage interest deduction was capped at $750,00.
The Republican Tax Overhaul
- Mortgage interest deduction capped at $750,000
- The property and state income tax deduction capped at $10,000.
- The elimination of the home equity loan deduction
That’s the November Twin Cities Housing Market story. More to come on 2018 predictions for housing and the end of year wrap-up. Looking at the start of the year, I’m expecting it to open strong so if you are thinking of buying or selling a home, this winter may be a perfect time. If you have any questions, call or text. That’s what I’m here for.
*Market data source Minneapolis Area Association of Realtors.
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.