With the majority of 2017 in the books, the Twin Cities housing market is likely to cap off another mostly positive year. Sales and prices both increased while interest rates remained attractive. More homes sold in less time and for closer to asking price. The economy remained supportive to housing by way of low unemployment and moderate job and wage growth. The biggest challenge facing the market hasn’t changed over the last several years; a persistent lack of inventory continues to frustrate buyers.

The table highlights November monthly activity as well as 2017 YTD activity with year-over-year change. New listings are down 2.1 percent for the year so far and closed sales are up 0.3 percent. Prices are likely to end the year around $245,500, up about 6.5 percent compared to 2016. At a brisk 56 days, market times are down 13.8 percent for the year, indicating sellers are accepting offers more quickly. And lastly, the number of active listings on the market is down 24.1 percent to just over 9,000 homes for sale. With months supply at just 1.8 months, absorption rates are at their lowest level in at least 15 years and indicates a sellers’ market.

Generally, five to six months of supply is considered a balanced market where neither buyers nor sellers have an edge. Given near-record demand and suppressed supply, prices scurried higher. The end of 2017 will mark the sixth consecutive year of rising home prices. Home prices are above their prior peak from 2006, as are median household incomes in the metro area.

“Sellers are generally enjoying and also encouraged by rising prices,” said Cotty Lowry, Minneapolis Area Association of REALTORS® (MAAR) President. “It speaks to the health of our region and confirms that recovery continues. But the shortage has forced many to delay listing, since most sellers are also buyers. And some buyers—mostly in the affordable price ranges—are finding it challenging to lock down the next place to call home.”

The economy and political environment also affect housing. The national unemployment rate is 4.1 percent, though it’s 2.3 percent locally—the lowest unemployment rate of any major metro area. A diverse economy supports housing, as job and wage growth are key to new household formations. The Minneapolis–St. Paul region has a resilient economy with a global reach, a talented workforce, top-notch schools, exposure to the growing technology and healthcare fields and a quality of life that’s enabled one of the highest homeownership rates in the country.

The average 30-year fixed mortgage rate declined from 4.3 percent to 3.9 percent recently, still well below its long-term average of around 8.0 percent. A third rate hike was announced this month. Additional inventory is still needed in order to offset declining affordability brought on by higher prices and interest rates.

“The year is poised to end on a mostly positive note,” said Kath Hammerseng, MAAR President-Elect. “Aside from inventory constraints and a thorny tax bill, construction activity, seller confidence and interest rates will be key indicators to watch in 2018.”
From The Skinny Blog.

Minneapolis, Minnesota (November 15, 2017) – The Twin Cities housing market is holding steady after both sales and prices reached record highs this year. In October, new listings were up 3.1 percent compared to last October but are on-track for a 2.0 percent decline for the year. Pending sales rose 3.9 percent for the month but will likely be flat compared to all of 2016. Closed sales eked out a 0.3 percent October gain but are also likely to be flat for the year. The number of homes for sale decreased 18.0 percent to 11,221. Absorption rates contracted as well.

Given strong demand and low supply, prices held their ground and marched higher. The median sales price rose 6.1 percent from last October to $244,000. This price metric will likely show a 6.5 percent annual increase. Home prices have now risen for the last 68 consecutive months or over 5.5 years. At 52 days on average compared to 61 last October, homes went under contract 14.8 percent faster. Sellers who list their properties are averaging 97.7 percent of their original list price, 0.8 percent higher than October 2016. The metro area has just 2.2 months of housing supply. Generally, five to six months of supply is considered a balanced market where neither buyers nor sellers have a clear advantage.

“We’re still very much on-track with last year’s sales levels,” said Cotty Lowry, Minneapolis Area Association of REALTORS® (MAAR) President. “At this point in the year, we begin to look toward annual numbers that are less susceptible to weather and other variables. With only two months to go, we are running just about 70 sales shy of last year’s levels. That’s quite impressive given our dramatic supply shortage.”

Headline figures can often mask important details and specifics of which buyers and seller should be aware. For example, year-to-date, closed sales only fell for homes under $250,000. Sales activity increased for homes priced between $250,000 and $500,000, $500,000 and $1,000,000 and for properties over $1,000,000. Market times and the ratio of sales price to list price both improved for each of the above four price ranges. Traditional market activity continues to eclipse distressed activity.

The economy and political climate affect housing. The national unemployment rate is 4.1 percent, though it’s 2.9 percent locally—the third lowest unemployment rate of any major metro area. A thriving and diverse economy has been conducive to housing recovery, as job and wage growth are key to new household formations and housing demand. The Minneapolis–St. Paul region has a resilient economy with a global reach, a talented workforce, top-notch schools, exposure to the growing technology and healthcare fields, and a quality of life that’s enabled one of the highest homeownership rates in the country.

The average 30-year fixed mortgage rate has declined from 4.3 percent to 3.9 percent recently, still well below its long-term average of around 8.0 percent. One additional rate hike may be in the cards this year, but the Fed is focused on unwinding its large portfolio. Additional inventory is still needed in order to offset declining affordability brought on by higher prices and interest rates.

“Keep a close eye on some of the tax reform proposals meandering through Congress,” said Kath Hammerseng, MAAR President-Elect. “Unfortunately, some of the key proposals directly harm the middle class and disincentivize homeownership while adding trillions to the debt.”
From The Skinny Blog.