October Twin Cities Housing Market Review
October Twin Cities Housing Market
As we approach the end of the year, it appears that the Twin Cities housing market story for 2017 is pretty much repeating the theme of strong and persistent demand for housing with an ever-shrinking supply of homes to buy below $500,000. We shouldn’t be surprised at the continuation of this trend when we look at interest rates and our local economy.
The 30-year mortgage interest rate dipped from 4.3% to 3.9%, an amazing bargain when you consider the long-term average rate is 8%. While nationally the unemployment rate is 4.1, in our own Minneapolis-St. Paul Metro it is 2.9, the third lowest metro unemployment rate in the country. Our thriving economy is diverse and vibrant, our workforce talented, our schools first-rate and with a robust arts community and 4-season recreation options makes our quality of life second to none. It’s no wonder we have one of the highest homeownership scores in the nation.
As we take a closer look at the statistics for October this year versus last year, we find new listings increased 3.1% although inventory of homes available fell a whopping 18%. This puts the month's supply of inventory at 2.2 which is 18.5% lower than last year. An undeterred 4994 buyers closed on a home last month, up 0.3% and pending sales were also up 3.9% from same time last year. Homes sold faster for more money, selling on an average of 52 days compared to 61 while the median sale price rose by 6.1% to $244,000.
Minneapolis-St. Paul Housing Market Year to Date
With the end of the year looming we would be remiss not to look at the numbers over the last twelve months. These stats will pretty much hold true as we enter 2017 into historical data. Year to date new listings dipped 1.9% and closed sales fell by 0.2% so we can see that although the squeeze on inventory levels are beginning to affect sales, it is not by a large percentage. Although pending sales are up 0.1%, it is important to note here that when we look at those numbers broken out by price range, we see the pending sales declined overall in homes valued at $190,000 and below, while those priced above $190,000 saw pending sales increase significantly as the home price got higher. We will talk about this again later. We also see that median home prices continue to gain traction as they rose 6.5% to $246,000 at the same time they spent 13.8% less time on the market.
Let’s Take a Look at the Twin Cities New Construction Picture
With extremely short supplies of inventory at the lower price categories especially, we need to look to new construction to fill the gap. To date, it has not been even close to meeting demand, especially for starter homes with most new construction happening in the higher priced single family home category. However, things are looking up for new homes. According to BATC, Twin Cities new construction for 2017 is at a 10 year high. In the October report put out by the Keystone Report for First Housing Minnesota, 474 (1,117 permitted units) permits for new construction were issued for the Twin Cities metro area compared to 464 (864 permitted units) in October of last year. When we look at the year to date comparison of this year to last we find that this year new permit activity increased by 15% with 5,110 permits issued compared to 4,443 in 2016. So although we are making progress, most area homebuilders cite a labor shortage as the most serious obstacle to new construction in the metro.
When we look closer at the statistics for new construction comparing October this year to last, we see new listings increase by 5.4% and pending sales were up by 20.8%. With the median sale price up 1.3% at $392, 790. The inventory of new homes rose 5.4% with the month’s supply falling by 12.3% to 5.7 months. Although this indicates a balanced market, values of new homes continue to rise even though days on the market increased by almost 39%. Given the increase in pending sales and median sale price, new homes are being scooped up quickly by eager buyers.
Twin Cities Metro Housing Market Snapshot
- new listings up +3.1%
- inventory of homes for sale down -18%
- the month's supply of inventory currently at 2.2
- median sales price up +6.1%
- new construction inventory up +5.4%
Quick look at what’s up and what’ down for week ending November 11th
- New Listings down -7.6% to 924
- Pending Sales up -7.1% to 976
- Inventory down 18.5% t0 10, 871
What to Watch
As we move closer to closing out another year of unprecedented demand, we should keep an eye on a couple of upcoming events of extreme importance to housing.
- The Federal Reserve – 3 things
- The December 12th meeting and a possible, long promised interest rate hike.
- The reduction of the $4.2 trillion in United States Treasury debt and mortgage-backed securities
- The change in leadership of the Federal Reserve on February 3, 2018. Jerome Powell has been appointed new chairman so it is yet to be determined how that might affect policy decisions going forward.
- The Republican Tax Bill - 2 things
- The mortgage interest deduction, if capped at $500,000 will have a negative impact on the housing market especially on both the east and west coasts where property values are higher and in Metro areas like our own Twin Cities.
- The property tax deduction. If that is eliminated, it will make home ownership more difficult for many existing and potential middle-class homeowners, and especially harm affordability for first-time buyers trying to grab their piece of the American dream.
So that is what we have for now. We are watching all the ups, downs and eccentricities of the market to be ready and able to answer any questions you might want to ask. If you are a buyer remember you can still score a good deal out there and secure an interest rate as low as 3.875%. If you are a homeowner that needs or wants to sell now remember the real estate market is open 12 months of the year and there are qualified eager buyers out there. Sometimes there is no better time than the present.