Twin Cities Housing Review May 2019
Minneapolis-St. Paul Realtor Gives Housing Market Overview
As we look at the middle month of the spring housing market, we observe a trend towards a more balanced and sustainable real estate landscape. With the Fed holding steady on interest rates and even suggesting it may lower them, the concerns over rising costs of mortgages are behind us.
Although not growing as rapidly as in previous years, the economy is holding steady, and stocks are performing well. These factors create an atmosphere of consumer confidence in the economy, and the real estate market responds well to these conditions.
Although the inventory of homes is rising in the higher pricing tiers, supply remains constrained in the lower first-time buyer levels. The current situation is great for sellers, but it is still no bed of roses trying to break into the market and buy a home for buyers. It’s not surprising that we see fewer sales at this end of the market.
The MN Real Estate Market Ups and Downs
Comparing May of last year to the current year, new listings are up 2.4 percent. We’ll take it! The Median sales price gained 5.2 percent. At the same time, closed sales ticked up 3 percent, pending sales sunk 1.8 percent. Homes spent less time on the market, down 4.3 percent. We also see a decline of 0.2 in the percentage of sale price received, although it is still sitting at 100 percent, which gives sellers little reason to complain.
A Closer Look at the Housing Stats
We see the most significant gain in sales at the $350,001 to $500,000 price range, an 11.3 percent increase compared to May 2018. The most substantial price gains were in the condo segment, with a median price of $180,000, an 11.1 percent increase over last year. The quickest selling price range was $150,001 to $190,000 at 34 days. As you might guess, properties over $1,000,001 were the slowest moving of the pricing tiers at 172 days.
As we mentioned earlier, the supply of homes is up 0.5 percent, but we still are experiencing a shortage of lower-priced housing. Low inventory is a condition that doesn’t appear to be changing any time soon — the market segment with the most gain in single-family homes with a 0.7 percent gain in inventory. Townhome inventory is down 0.7, and condos are also down 1.8 percent.
The Twin Cities Economy
Consumers continue to feel confident about the economy. Although unemployment rates have ticked higher when compared to May of last year, up to four percent for the state of Minnesota from 2.5 to 2.9, the number is below the national average of 3.5 percent. Mortgage interest rates remain a great bargain, fluctuating from 3.875 to 4.125 over the last few weeks.
New Construction in the Twin Cities
The new home segment of the market has been up 4.2 percent over the past 12 month period. We also see the median sale price increase 0.7, days on the market up 1.1, and percentage of sale price down slightly by 0.2 percent over the last year. When we compare May 2019 to May of last year, inventory is up 9.5 percent, making us smile and bringing the monthly supply up 5.4 percent at 5.9 months.
While single-family new construction has fallen flat, a couple of major multi-unit projects in the Twin Cities brought the number of new units to be constructed to 1306 for May, far outpacing last year. However, 637 single-family permits represent a 3 percent dropoff from May 2018.
The decrease in single-family construction is partly due to the affordability factor. “The housing market is extremely undersupplied at the lower price points, and we cannot build at a price to relieve that pressure, which is keeping many homebuyers on the sidelines.” – said John Rask, president of Housing First Minnesota.
Hopefully, a solution will surface in the coming months. According to David Siegel, executive director of Housing First Minnesota, “We are hopeful that with the recent passing of the Legislative Commission on Housing Affordability we will be able to tackle some of the issues that are driving up the cost of housing in Minnesota.” He went on to say, “With approval from Gov. Walz, the multiyear commission will analyze issues relating to housing affordability and ultimately recommend housing policies that balance safety, durability, and affordability.”
Joe’s Twin Cities Housing Market Crystal Ball
My feelings about the 2019 housing market continue to be positive. However, when we talk about the market today, it’s important to note that we are significant differences between the lower price tiers and upper tiers.
Buyers looking for homes under $350,001 are still challenging to purchase a home given the limited inventory. On the other hand, at the $350,001 to $500,000 price range, inventory levels are approaching a balance, and above that, tier buyers have the advantage.
Last but not least, although not written in stone, a word that the Fed will likely cut the interest rate either this month or in September is good news for buyers. Reduced mortgage rates will soften the effect of higher prices and probably inspire buyers to close a deal on a home before the end of the year.
Twin Cities Housing May 2019 compared to May 2018
- new listings up +2.4%
- pending sales down -1.8%
- closed sales up +3.0%
- days on the market until closing down -4.3%
- inventory of homes for sale up +0.5%
- month’s supply of inventory flat
- median sale price up +5.2% to $285,000
- original list price received down -0.2%
- the $350,001 to $500,000 price range saw the most gains, up +11.3%
- Condos earned the most significant price gains for housing type, up +11.1%
- new construction sales topped existing homes, up +4.2%
- fastest-selling homes were priced from $150,001 to $190,000 (34 days)
Twin Cities Housing Stats from June 2018 to May 2019
- new listings up +2.7%
- pending sales down -1.8%
- closed sales down -1.7%
- overall median sales price up +6.5%
*data source Minneapolis Area Association of Realtors.