The 2016 Twin Cities Real Estate Market – Hot or Not?
In case you haven’t heard, 2015 was a great year for real estate, and with home sales reaching a 10 year high, many industry leaders say the housing market has fully recovered. Now that we are several weeks into the New Year with the spring housing market hovering around the corner waiting to pounce on the Twin Cities, let’s take a look at January’s statistics and make some projections for what is ahead.
January Was Cold But the Twin Cities Housing Market Wasn't
The January real estate market in Minneapolis-St. Paul was strong with enthusiastic buyer activity, brisk sales, and rising home values setting the trend. Pending sales rose 3.5 percent, the median sale price rose 10.3 percent to $215,000, and the median list price climbed 6.1 percent to $259,900, a record high. However on the seller side we saw a less inspiring performance with the number of new listings declining 7.2 percent from last year which brought inventory levels down 22 percent and the lowest they have been since 2003.
Home Buyers in Minneapolis-St. Paul Aren't Messing Around
Buyers were serious and proved it by making offers close to asking prices. This translated into the percent of original list price at 95. With sellers giving this activity a “high five” cumulative days on the market fell to 85, down 15.8 percent, considered a lively pace for the month of January. Given the energy in the market and the decline in new listings, current inventory levels are at 2.1 months’ supply. Five or six months are considered a balanced market, making our current situation in the Twin Cities one that continues to favor the seller.
What Does 2016 Look Like for Twin Cities Real Estate?
So how will rising values, higher listing prices, higher interest rates and a low inventory play out in the real estate market this year? Even without a crystal ball, I can say that demand for housing will continue to be high as buyers see this as perhaps the last year to get a good deal on the purchase of a home. First time millennial home buyers continue to aspire to the dream of home ownership. Folks who have been burdened with foreclosures from 2009 will have them falling off their credit report and they will be entering the market. Baby boomers who have been waiting for home values to increase may see this as the year to make their move. Ditto for current home owners desiring a change in their current living situation.
Here in the Twin Cities a low unemployment rate, an active job market, rising incomes, and consumer confidence are inspiring more young first-time buyers to make their move. Data from the Bureau of Statistics show the Minneapolis-St. Paul metro had the second-lowest unemployment rate of any major metropolitan area at 3.1 percent compared to 4.9 nationally. Coupled with those factors we have high rents and a shortage of rental housing which continues to put pressure on their spiral upward. Banks continuing to ease up on credit requirements, and mortgage rates below 4.0 percent are still historically low, although expected to be marginally higher towards years end.
Minneapolis-St. Paul Housing Construction Will Increase
New construction starts were up 11.8 percent in the Minneapolis metro in the 4th quarter of 2015 with 2.2 percent increase in new home construction over the year. Housing starts in 2016 are expected to grow 4 or 5 percent, according to Metrostudy. How much this will relief pressure on the housing demand is questionable with just 16% of new homes expected to list for under $250,000. The rising cost of land and construction are causing a continued widening of the gap between existing homes to newly built to a range of $125K to $225K causing a lock out of most first time home buyers.
How Does Minneapolis-St. Paul Compare Nationally
A recently conducted national survey on real estate market trends for 2016 finds Minneapolis moving into the top 20 emerging real estate markets. It also shows the Minneapolis metro area as the highest-rated market in the Midwest and now ranked 18th in the nation. Minneapolis ranks 2nd in the Midwest for a positive market outlook. On a scale of 1 to 5, with 1 representing a weak market, 2 representing a declining market, 3 representing an average market, 4 representing an improving market, and 5 representing a strong market, Minneapolis scored a 3.94%, well within the improving market range. What does all this mean? The Minneapolis-St. Paul Real Estate market is hot!
If you are thinking of selling your home, given market conditions which are heavily leaning in favor of sellers, now would be an excellent time to do it and move up to a larger one, or downsize to a smaller one, or just move into a more convenient neighborhood or town where you always wanted to live. Buyers writing really good offers, higher home values, and shorter days on the market all point to a winning situation for today’s home seller.
Twin Cities Real Estate Market 2016 – Hot!
All indicators for the 2016 Real Estate market are positive and point to a great year for both buyers and sellers. Home values will continue to rise, interest rates will remain low at least in the first part of the year, credit will be easier to obtain, employment will be strong, and rents will remain high. This indicates a strong potential for overall demand to lift housing sales to the highest level since 2007. It’s going to be a great year!
Are you planning to buy or sell a home in 2016? I know making predictions is a tricky business. However, one thing I can predict for sure and that you can count on, is that my team and I are standing by and ready to make your buying or selling experience as seamless and stress-free as possible.