Twin Cities Housing Review November 2018
Minneapolis-St Paul Housing Overview
As we approach years’ end, we see some subtle changes in the Twin Cities Metro housing market. The increase in inventory of homes for sale was10.5 percent over last month giving home buyers something to rejoice. This inventory boost by is by no means enough to bring the market into balance but does bring us closer. For consumers who have been trying to buy a home for several months, it was welcome news.
What’s Up and What’s Down
As we compare November of this year to November 2017, we find new listings up 12.6 percent, closed sales down 0.9 percent, the percentage of list price received down 0.1, and the median sale price of $265,150 up 8.2 percent. Meanwhile, pending sales were down 5.2 percent, inventory levels rose 2.3 percent with months supply up 10.5 percent. Days on the market fell 7.1 percent.
So while inventory is increasing and sales are decreasing, we are seeing more price reductions and fewer deals closing for full price offers. Although housing prices are still higher than last year, they appear to be slowing down. Properties for sale are still spending less time on the market than last year, an indication that demand is still robust, and buyers are scooping up homes quickly.
The Economy Continues to Perform Well
Our local economy remains strong. The unemployment rate for November in the Twin Cities was 2.8 percent, well below the national average of 3.7. Confidence among consumers is holding steady, in spite of rising interest rates and home prices.
Mortgage interest rates hit 4.94 percent, the highest they have been in 7 years according to Freddie Mac. Currently, rates are at about 4.62% for a 30 year fixed rate mortgage. While inventory is increasing and prices are stabilizing, higher interest rates continue to affect housing affordability and are a concern to home buyers.
Pending sales for new home sales were up 8.3 percent for November over last year. The median sales price of new construction showed a moderate increase of 1.4 percent. Inventory of homes in the new construction category was up 13.9 percent.
We have been reporting consistently that a labor shortage has been a significant reason for slowing new construction starts. We didn’t realize how large a concern availability of workers has become. A recent BATC Housing Minnesota survey of 225 housing construction firms found that 88% of them said they had experienced a labor shortage over the last 12 months. Also, 63 percent said the lack of workers had forced them to turn away customers.
According to the BATC article, “The results of this survey confirm that the labor shortage is now contributing to Minnesota’s housing shortage and housing affordability problem,” said David Siegel, executive director of Housing First Minnesota and Project Build Minnesota board member. “We must take action now to alleviate the labor shortage before this issue worsens. Governor Dayton has called on our industry to build 300,000 new homes in the next ten years, and that will be exceptionally difficult if we don’t address this labor shortage.”
Joe’s Crystal Ball
Jobs are still the high note on the economic front. A robust job market imparts confidence in home buyers. The continued shortage of housing combined with the rising cost of buying a home will continue to challenge buyers at the lower prices ranges.
The fed raised the interest rate at the December meeting as expected, but they did mention possibly only raising the rate twice next year instead of the three increases they originally planned for 2019. It’s too early at this point, to project.
The trade war is still a factor to consider vis a vis the economy with some economists predicting we will begin noticing the adverse effects in 2019 unless China and the US can come to a trade agreement over the next couple of months. According to Bloomberg, “recent data underscore concerns that trade will be a drag on American growth next year. U.S. consumers are feeling the least optimistic about the future economy in a year, while small business optimism about economic improvement fell to a two-year low and companies expect smaller profit gains in 2019.”
For now, at least, I stand firm on my prediction for a strong year in Real Estate. I’m optimistic about the rise in inventory and the possibility that interest rate hikes may be slower next year. As long as we see low unemployment numbers here in “the Twins” I'm doing to give the housing market future the thumbs up!
Twin Cities Market data for November 2018 compared to November 2017
- new listings up +12.6%
- pending sales down -5.2%
- closed sales down -3.2%
- days on the market until closing was 48, down -7.1%
- inventory of homes for sale down +2.3%
- month’s supply of inventory up +10.5%
- median sale price up +8.2% to $265,150
- original list price received down -0.1%
- the price range that saw the highest sales gain was the $250,001 to $350,000 up 10.5%
- property segment with the most significant price gain was townhomes up +9.0%
- new construction sales topped existing homes, up +8.3%
- the fastest selling price range was $190,001 to $250,000 at 34 days
Rolling 12 months from December 2017 through November 2018
- new listings down -0.4%
- pending sales down -3.8%
- closed sales down -3.2%
- overall median sales price up +7.8%
As always, thanks for reading.
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