The Twin Cities Housing Review December 2019
Even as we advance into the new year, we have one piece of unfinished business to conclude in 2019 before closing the books. The Twin Cities housing market numbers are out for December, and here is the story they told.
It’s a tale that is long in the tooth by now about a market that is struggling to find balance. Limited inventory at lower price points makes the real estate market in the Twin Cities a seller’s dream. Even in the face of strong demand and insufficient inventory, millennial buyers are achieving the dream of buying their first home.
While new listings for December saw a gain of 3.9%, overall inventory levels were down 19.6% compared to December of 2018. The townhouse segment, down 12%, lost the least inventory, while single-family homes were down 20.8% and condos lost 14.2 percent. The month’s supply of inventory for December was dipped 21.2% overall. In the Twin Cities metro, we saw 1.6 months of supply for single-family homes (down 20%), 1.1 months for townhomes (down 8.3%), and 1.5 months of condos (down 11.8%).
Closed sales in the Twin Cities were up 13% in December, and pending sales were up 8.2% when compared to the same time from the previous year. The category with the most significant gain in sales was single-family homes, with the most robust sales falling in $500,001 to $1,000,000 pricing tier, up 17.2%
Fueled in part by limits on inventory, home values continue to gain traction. The 12-month rolling median sales price of a home in the Twin Cities for December was $280,000, up 5.7%. The property category with the most gain was condos at $187,000 up 8.4%, followed by townhomes at $222,000 up 7%, and single-family homes at $304,000 up 6.5%. When compared to December of 2018, homes sold faster at price ranges above $350,000 and slower at price points below $250,000 resulting in homes selling faster by 1.8% at 34 days on the market until sale.
Here is where it gets interesting. No one predicted interest rates would fall to a level we have not seen since 2016. In December, they were ¾ of a point lower than the year before. The lower interest rates offset higher home prices, giving a boost to affordability. The expectation is that rates will decline even further as we head deeper into the year.
Let’s Look at the Economy
Economic growth, job, and wage growth and low-interest rates continue to support a healthy housing market The Minnesota unemployment rate for December 2019 was 3.5 percent, seasonally adjusted to 3.3 percent and for the Twin Cities metro 2.8 percent. Although talk of a recession in 2020 has tapered off, we should keep in mind that this economic upturn is in its tenth year and there are signs it is slowing.
New Construction in the Twin Cities Metro
According to the Keystone report, in December 451 building permits were issued for 1,140 units. New construction rose in 2019 by 4% with total units up 20%. The expectation is for the trend to continue into 2020. However, the amount of newly constructed homes is not meeting the demand, especially at the entry-level price points. John Rask, president of Housing First Minnesota, said, “The market demand is definitely there for new housing, yet the housing industry is facing multiple headwinds, including a labor shortage, lot shortage, and a tough regulatory environment, that is holding back the construction of new homes.”
Predictions for 2020
The economy is still enjoying the most prolonged period of expansion on record and the housing market continues to benefit from the strength of the economy. Also, with low-interest rates and wage growth, the outlook for 2020 is optimistic. Based on data from Freddie Mac, sales of homes nationally are expected to reach 6.1 million this year. The combination of low-interest rates and moderating prices should increase affordability allowing more young buyers to become homeowners. I’ll drink to that!
Twin Cities Housing December 2019 vs. December 2018
- new listings up 3.%
- pending sales up 8.2%
- closed sales up 13%
- days on the market until sold down -1.8%
- inventory of homes for sale down -19.6%
- month’s supply of inventory down -21.1%
- median sale price up 8.2% to $279,000
- original list price received up 0.5%
- the price range of $500,001 to $100,000,000 saw the most gains, up 17.2%
- Condos earned the most significant price gains for housing type, up +8.4%
- new construction sales topped existing homes, up 7.5%
- fastest-selling homes were priced from $190,001 to $250,000 (34 days)
Twin Cities Housing Stats from November 2018 to December 2019
- new listings up +0.2%
- pending sales up +1.4%
- closed sales up +0.8%
- overall median sales price up +5.7%
*data source Minneapolis Area Association of Realtors.
As always, thanks for reading.
You know where to find me – Joe