The Twin Cities Housing Market December 2017 Review
December Housing Inventory Took a Nosedive as Home Values Soared
The relentless story of happy sellers and frustrated buyers continues. This was especially true in December. Inventory levels plummeted 27.5% over last December and month’s supply dipped to 31.6%. With the ever-shrinking availability of homes to purchase under $500K, the dream of homeownership remains elusive for many first time buyers.
Although mortgage interest rates remained steady at about 4% in the last half of the year, the high demand coupled with low inventory situation caused median sales prices to rise higher. This forced some buyers to adjust their expectations of how much house they could afford.
While year-end market conditions were a nemesis for buyers, sellers had a lot of reasons to celebrate. Homes spent less time on the market with full price offers the norm. Bidding wars on very desirable homes brought in offers above ask price.
What was up and what was down in December this year vs. last year? Inventory, sales and days on market decreased with the median sale price increasing 10%.
Market-wide Inventory and Sales Statistics
- new listings down -4.9%
- pending sales down -2.0%
- closed sale down -3.2%
- days on the market until sale was 61, down -15.3%
- inventory of homes for sale down -27.5%
- month’s supply of inventory down -31.6%
- median sale price up 10.0% to $248,500
- percent of original list price received up 1.1%
When we look at the data from January 2016 through December 2016, we see that even though inventories of homes continued to shrink month after month, sales still increased.
- new listings down -2.2%
- pending sales up 5.0%
- closed sales up 0.2%
- overall median sales price up 7.0%
- price range with the largest gain was the $1,000,001 price range, up 30.6%
- the townhouse segment showed highest price gains up 7.8%
- the quickest selling price range was 190,001 to $250,000
December – A Boom Month for New Construction
In December for the Twin Cities metro, we saw an increase of 36% more building permits pulled over the same time last year. According to Housing First Minnesota, 6113 permits were pulled for the entire of 2017 which will translate to 13,346 new homes.
Compared to 2016, that is a 14% increase in permits and a 36% increase in new homes. This is the most activity we have seen in new construction in the Minneapolis-St. Paul greater metro since 2005. In a Star Tribune article Bob Michels, a Twin Cities builder and president of Housing First Minnesota was quoted, “Everyone was flat-out busy. It felt like the good old days.”
While these numbers are certainly encouraging, we are still seeing most of the new construction falling in the pricing tiers above $350,000 which doesn’t alleviate the pressure on inventory for the majority of first-time buyers. The median sales price for a newly built home in December was $394,900 compared to $239,900 for previously constructed homes you can see if we have a way to go before new homes can stabilize the shortage at the lower price ranges.
The Moving Parts We're Watching
As we continue in the new year, we will certainly be watching all the factors that will affect housing and keep you posted in our monthly reviews. Here are some of the things we will be tracking.
- Although we can still expect this to be a seller’s market, buyers that have been indecisive about selling may see this as the absolute best year to move forward, sell their home and buy another.
- It doesn’t look like the new tax laws will have a negative effect on our markets although it is still too early to tell how they will respond until we head further into the new year.
- We will be paying close attention to moves at The Federal Reserve in regards to interest rates and the sale of mortgage-backed securities. Also, Janet Yellen will be replaced by Jerome Powell on February 3rd. He is expected to continue with the same basic policies. We'll keep you posted.
As we close the door on another outstanding year for real estate in the Twin Cities I look ahead to 2018 with great optimism. Perhaps you feel the same and plan to sell or buy a home. If so, now is the perfect time to start that journey. If you have any questions, call or text. It’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. If you are interested in looking deeper the reports are available to the public on the Minneapolis Association of Realtors website.