Twin Cities Housing Review October 2019
The Fourth Quarter Begins
It seems like last week I was still sporting shorts and flip-flops, yet here we are fully ensconced in fall with winter just around the corner. As we focus on Thanksgiving and gratitude, I am thankful for the strength of the Twin Cities housing market.
The cold months may be the slowest time of the year, but partly in thanks to historically low mortgage rates, housing demand remains strong while home values continue to rise. Buyers should take notice and not let the cold weather stop them from following their dream of homeownership.
The Story of Low Inventory and Strong Demand Continues
If you are looking for a home at the lower price points, you do face competition. There are still not enough homes to satisfy the hunger for homeownership. Although we saw a 3.8 percent increase in new listings compared to October of last year, inventory fell short by 5.8 percent. At the higher-priced end of the market, it is either balanced or leaning in favor of the buyer.
The trend for rising home values began in 2011 and continues. For the month of October, sellers enjoyed a 5.7 percent increase in the median sale price last year at this time. At the same time, homes spent 4.2 percent less time on the market, approximately 46 days. With demand strong, home values rising, and interest rates low, sellers should be encouraged.
We did experience a slight uptick in interest rates last month compared to September, where they were at a three year low. That being said, they are still a phenomenal bargain at one point lower than this time last year. Even though it is unlikely that the Fed will lower the interest rate again this year, Fannie Mae predicts that the mortgage rate will hold steady or possibly go even lower, heading into 2020, with an expected rate decrease early in the year by the Fed.
Let’s Look at the Economy
Economic growth continues along with job creation, which is always good news for the housing market. The Minnesota unemployment rate for October was 2.5 percent, seasonally adjusted to 3.2 percent. Although that number represents a 4 point increase in unemployed over last year, we are still enjoying a vibrant and robust job market.
The China-US trade war is having a negative effect on our economy. However, there is now a temporary “ceasefire” while talks are ongoing. Optimism that we will reach an agreement is overshadowed by the volitivity we have witnessed from the current administration; I am taking a “let’s see how it goes” position
There has been a moderation of spending since the early part of the year as consumers feel some concern about the future of the economy. However, retail sales did show a gain of 0.3 percent, which exceeding expectations. Consumer confidence and spending are fueling the marketplace right now.
New Construction in the Twin Cities Metro
From the October Hot Sheet, John Rask, president of Housing First Minnesota said, “It’s shaping up to be a good year for homebuilding activity. Our housing market is still vastly undersupplied, and the pace of homebuilding this year will help, but more production is needed to make a dent in our supply shortage." Permits issued in the Twin Cities for 2019 are on track to hit a 13 year high. That is exciting news for the local housing market.
In September 472, single-family building permits were issued, representing a 6 percent increase over last September. Multi-family construction also had a robust month with 26 permits pulled. Those permits represent 1009 new units, which is a 21 percent increase over the same time last year.
Unfortunately, we are still not seeing newly constructed homes at the price point we need inventory the most. Also from the October Hot Sheet, “While the slow and steady increase in new home construction is promising, it is not enough,” said David Siegel, executive director of Housing First Minnesota. “We need to be building homes at all price points to truly solve our housing issues in the Twin Cities and unfortunately, delivering units at the most affordable price points is only growing more difficult in our region.”
Deep Dive into the Numbers
From November 2018 to October 2019 in the Twin Cities, pending sales were up 0.1 percent overall. The price range with the most increase in sales was the $500,001 to $1,000,000 range, which was up 15.6 percent.
The median sale price of $279,900 increased 7 percent, with the most significant gain in the condo market up 8.8 percent. Homes in $190,001 to $250,000 price range sold the fastest at 35 days. Homes in the luxury category, selling above $1,000,001 was the slowest moving at 148 market days.
The inventory numbers were down 5.8 percent, with townhomes holding their own above other segments at 4.7 percent. We find the month’s supply of inventory for Condos is 2.3, Townhomes at 1.7, and single-family homes at 2.5 months of supply.
Twin Cities Housing October 2019 vs. October 2018
- new listings up 3.8%
- pending sales up 4.9%
- closed sales up 1.3%
- days on the market until sold down -4.2%
- inventory of homes for sale down -5.8%
- month’s supply of inventory down -8.0%
- median sale price up 5.7% to $280,000
- original list price received up 0.1%
- the price range of $500,001 to $100,000,000 saw the most gains, up 15.6%
- Condos earned the most significant price gains for housing type, up +8.8%
- new construction sales topped existing homes, up 4.7%
- fastest-selling homes were priced from $190,001 to $250,000 (35 days)
Twin Cities Housing Stats from August 2018 to July 2019
- new listings up 0.2%
- pending sales up +0.6%
- closed sales down 0.3%
- overall median sales price up +5.7%
*data source Minneapolis Area Association of Realtors.