By Erin Milburn on Wednesday, December 14th, 2016

As Twin Citizens hunker down for winter, home buyers haven’t requested any time off this holiday season. Pending home sales rose 9.0 percent compared to last November and are at their highest level for any November since 2004. Closed sales likely reflect a sense of haste, as buyers closed on a whopping 25.2 percent more homes this November than last year. That represents the largest year-over-year increase in closed sales since February 2012, when closings increased 28.2 percent. Partly due to our lovely November weather, buyer activity this year fell much less from October to November than in past years.

Sellers were decidedly less optimistic about moving. Only 3,743 for-sale properties were listed on the market last month, 1.1 percent fewer than last November. Although home prices have reached their seasonal peak for the year, the median sales price increased 5.8 percent from last year to $232,000—uncharacteristically surpassing the $230,000 median price during September and October of 2016. Inventory levels dropped 22.8 percent to 10,706 active properties, which is nearing a 14-year record low. Additional listings are needed to address the current supply shortage—especially at the entry-level and first-time buyer price brackets.

Competing bids on attractive listings are common in low inventory environments, and homes tend to sell quickly for close to list price. Days on market until sale fell 16.4 percent to 61 days compared to 64 for the year so far. The average percent of original list price received at sale was 96.7 percent, 0.8 percent higher than last year. But the median percent of current list price received is 99.4 percent. Months supply of inventory fell 27.6 percent to 2.1 months—the lowest figure on record for any month since 2003. This indicator measures the balance between supply and demand in the marketplace. Generally, five to six months of supply is considered a balanced market.

“Strong buyer demand is still driving this market in a great big way,” said Judy Shields, Minneapolis Area Association of REALTORS® (MAAR) President. “While it’s not unheard of for pending sales to surpass new listings in a winter month, it is relatively uncommon.”

While single family sales dominate the Twin Cities market by number, townhome sales showed the largest year-over-year sales increase followed by condos. Similarly, though previously-owned properties make up the largest share of sales, newly constructed properties had three times the year-over-year increase. The most active price range over the last 12 months is $190,000 to $250,000 but the largest gain in sales occurred in the $350,000 to $500,000 range.

A healthy Twin Cities labor market has been conducive to housing recovery. The most recent national unemployment rate is 4.6 percent, though it’s 3.1 percent locally. The Minneapolis–St. Paul metropolitan area has the fourth lowest unemployment rate of any major metro area.

The average 30-year fixed mortgage rate has risen to 4.13 percent, still well below a long-term average of about 8.0 percent. Marginally higher rates were widely expected in 2016, but the Federal Reserve hasn’t moved rates since last December. While “Fedspeak” is notoriously ambiguous, Chair Yellen recently gave markets an unusual amount of clarity regarding Fed policy. Expect a quarter or half point increase in the federal funds rate at their December meeting.

“Buyers are feeling the pressure to some degree but still remain sensible,” said Cotty Lowry, MAAR President-Elect. “Despite some interest rate risk and policy uncertainties moving forward, overall 2017 is expected to be another good year for housing.”
From The Skinny Blog.

By David Arbit on Monday, November 7th, 2016

For quite some time, NAR’s reports have shown that homeowners tend to stay in their homes for 5-7 years. Based on the data from NAR’s most recent Profile of Home Buyers and Sellers report, that was true up until 2008. By 2011–just after the seismic shifts that rocked the market–owner tenure rose to 9 years and has been range-bound between 8-10 years since 2010. The current 2016 median tenure stands at 10 years. In summary, owning a home used to be a 5-7 year proposition, but owners now tend to be staying in their homes between 8-10 years.

The fact that sellers are staying in their homes longer since the downturn is partly responsible for our low inventory levels. That said, this is still a median, meaning that half of homeowners spend less than 10 years in their home. At first, a relatively large share of homeowners were underwater and thus couldn’t sell (not the case anymore). But then rising prices, historically low rates and an improving economy caused buyer demand to surge far more quickly than listing activity. That has created a situation where sellers are confident about getting strong offers on their homes quickly, but they’re hesitant about being a buyer in this competitive and under-supplied marketplace. Many are making the decision to stay and possibly remodel their current space rather than competing and possibly making full price offers or better on the most desirable homes.

Don’t expect quick resolution on the inventory shortage. New construction activity isn’t helping to alleviate the shortage because it’s not profitable to build at the entry-level or first-time buyer price point. We’re optimistic about things loosening up a tad come Spring 2017, but it will take time for the market to rebalance and regain its footing.

Although this recovery has sent sales and prices more or less back to peak levels, the hunt for equilibrium continues.
From The Skinny Blog.

By Erin Milburn on Friday, October 14th, 2016

Seller activity increased 5.6 percent since last September, the largest increase all year. Sellers introduced 6,727 new listings to the marketplace. Closed sales increased 5.7 percent while pending purchase activity was flat. That closed sales figure is on par with 2005 levels. Although home prices have reached their seasonal peak for 2016, the median sales price increased 3.6 percent from last September. The midpoint where half the homes sold for more and half the homes sold for less was to $230,000. As has been the case for some time, buyers are greeted with a shrinking number of options. Inventory levels fell 16.1 percent to 13,918 active properties. Inventory constraints haven’t slowed down buyers yet, but additional listings are needed to ease the shortage—especially at entry-level price points.

Multiple bids on attractive listings are common in low inventory environments, and homes tend to sell quickly. Days on market until sale fell 13.8 percent to 56 days. That’s only two days away from the record in 2007. The average percent of original list price received at sale was 97.5 percent, 0.9 percent higher than last year and the highest figure for any September since 2005. Months supply of inventory fell 20.0 percent to 2.8 months—the lowest September figure on record since the beginning of 2003. This indicator measures the balance between supply and demand in the marketplace. Generally, five to six months of supply is considered a balanced market.

“This market doesn’t seem to be slowing down one bit,” said Judy Shields, Minneapolis Area Association of REALTORS® (MAAR) President. “Even though buyers are active, the market can still feel uneven in some ways. Homes in the $200,000 to $300,000 range are seeing the strongest interest.”

Indeed, the strongest sales activity over the last 12 months is in the $190,000 to $250,000 range, followed by the $250,000 to $350,000 range. Although single family sales dominate the Twin Cities market by number, condo and townhome sales witnessed the largest year-over-year sales increase. Similarly, although previously-owned properties make up the largest share of sales, newly constructed properties had a stronger year-over-year gain.

A strong Twin Cities labor market has also helped promote housing recovery. The most recent national unemployment rate is 5.0 percent, though it’s a healthier 3.6 percent locally. The Minneapolis-St. Paul-Bloomington metropolitan area has among the lowest unemployment rate of any major metro area.

Locally, the 30-year fixed mortgage rate stands at 3.49 percent compared to a long-term average of about 8.0 percent. Rates are now at their lowest level in three years. Marginally higher rates were widely expected in 2016, but the Federal Reserve hasn’t moved rates since last December. Barring any economic or political surprises, the Fed will likely raise rates this December.

“Despite some low inventory challenges, this market is on solid footing. In some ways, we’re in a classic chicken or egg dilemma,” said Cotty Lowry, MAAR President-Elect. “Which comes first? More listing activity or more inventory? Today’s sellers are skittish because it’s tough to find their next place. To break this cycle, sellers will need to list in higher numbers and move up the housing chain.”

All information is according to the Minneapolis Area Association of REALTORS® (MAAR) based on data from NorthstarMLS. MAAR is the leading regional advocate and provider of information services and research on the real estate industry for brokers, real estate professionals and the public. MAAR serves the Twin Cities 13-county metro area and western Wisconsin.
From The Skinny Blog.

By Aubray Erhardt on Wednesday, September 14th, 2016

Seller activity increased 2.1 percent since last August, as sellers introduced 7,072 new listings to the marketplace. Buyer activity also rallied. Pending sales rose 7.9 percent while closed sales gained 7.4 percent. To fuel those gains, buyers signed 5,728 new contracts and closed on 6,382 homes. That closed sales figure is on par with 2004 levels. Although the median sales price has reached its seasonal peak for 2016, it increased 5.7 percent since August 2015 to $237,750. Adding to the pressure facing buyers, inventory levels fell 18.8 percent to 13,933 active properties. Inventory constraints haven’t slowed down buyers yet, but additional listings are needed to ease the contentious landscape.

Low inventory has enabled homes to sell in near record time. Average days on market until sale fell 14.1 percent to 55 days. That’s the second fastest market time for any month since the beginning of 2007. The average percent of original list price received at sale was 97.9 percent, the highest figure for any August since 2005. Months supply of inventory fell 24.3 percent to 2.8 months—the lowest August figure on record since the beginning of 2003. Generally, five to six months of supply is considered a balanced market. This indicator measures the balance between supply and demand in the marketplace.

“Absorption rates under 3.0 months suggests things are still pretty tight out there as we transition to autumn,” said Judy Shields, Minneapolis Area Association of REALTORS® (MAAR) President. “But there are still peculiarities across locations and segments. Blaine is not Linden Hills and downtown condos are not suburban single family new construction. It’s important to have all the facts before making a move.”

Despite the fact that both seller and buyer activity increased in August, important asymmetries persist. Over the last three years, buyer activity has steadily marched higher while seller activity has essentially bounced around the 7,000 unit marker, thus straining supply levels.

A strong Twin Cities labor market has also helped promote housing recovery. The most recent national unemployment rate is 4.9 percent, though it’s a healthier 3.5 percent locally. The Minneapolis-St. Paul-Bloomington metropolitan area has the second lowest unemployment rate of any major metro area, trailing only Denver by 0.1 percent.

Locally, the 30-year fixed mortgage rate stands at 3.47 percent compared to a long-term average of about 8.0 percent. Rates are now at their lowest level in three years. Marginally higher rates were widely expected in 2016, but the Federal Reserve hasn’t made a move since last December. Markets currently peg the odds of a September rate hike at around 20.0 percent. Barring any surprising economic data, the Fed will likely raise rates this December.

“In the near term, buyer and seller activity always quiets down around this time of year and that shouldn’t cause concern,” said Cotty Lowry, MAAR President-Elect. “Over the long term, favorable interest rates, rising rents and a strong labor market should be conducive to housing. But we’ll need some additional inventory—particularly in the affordable brackets—in order to keep up with consumer demand.”

From The Skinny Blog.

By Aubray Erhardt on Friday, August 12th, 2016

Seller activity declined 5.5 percent since last July, as sellers introduced 7,522 new listings to the marketplace. Sales activity was slightly below year-ago levels. Closed sales fell 5.8 percent while pending sales—the number of signed purchase agreements—fell 3.1 percent. Buyers signed 5,560 new contracts and closed on 6,030 homes. That closed sales figure is on par with July 2003 levels. The July median sales price retreated slightly since June 2016, but increased 6.6 percent from July 2015 to $239,900. Mostly due to inventory constraints, prospective sellers are concerned about their ability to secure their next property in the current environment. Buyers saw little supply side relief, as inventory levels fell 18.1 percent to 14,457 active properties. The well-known inventory shortages haven’t slowed down buyers much, given June 2016 closed sales at a 12-year high.

Low inventory, however, has helped draw out stronger offers. The average percent of original list price received at sale was 98.4 percent, the highest figure for any July since 2005. Low levels of for-sale housing also means the homes on the market tend to sell quickly. Cumulative days on market until sale fell 15.9 percent to 53 days. That’s the fastest market time for any month since the beginning of 2007. Months supply of inventory fell 23.7 percent to 2.9 months—the lowest July figure on record going back to the beginning of 2003. Generally, five to six months of supply is considered a balanced market.

Our days on market indicator tells us that most homes are selling pretty quickly,” said Judy Shields, Minneapolis Area Association of REALTORS® (MAAR) President. “But that market-wide figure leaves out important differences between various communities, property types and price points. For example, the July market-wide average was 53 days but homes priced above $1 million are spending 174 days on the market.”

Over the last 12 months, properties in the $190,000 to $250,000 range have tended to sell the quickest, at an average of 54 days. As the price point rises, so does the amount of time spent on the market. There is a sweet spot whereby both lower and higher priced homes take longer to sell.

It’s also worth noting that the average market time figure can be skewed by properties that linger on the market. The median days on market was actually 25 for July, reflecting the mid-point where half the homes spent longer than 25 days on the market and half spent less.

“Those selling properties above the $500,000 mark know that patience is a virtue even in our current environment,” said Cotty Lowry, MAAR President-Elect. “The supply-demand balance in that segment is less competitive than the entry-level price points, plus consumers are limiting how much house they buy.”

From The Skinny Blog.

By Aubray Erhardt on Tuesday, July 19th, 2016

The June 2016 median sales price for residential properties has reached a new all-time high, eclipsing the previous June 2006 record of $238,000. This measure of home prices rose 5.3 percent from June 2015 to $242,000. Seller activity rose 0.5 percent since last June to 8,727 new listings. Sales activity was roughly even with last year. Closed sales increased a modest 0.2 percent while pending sales—the number of signed purchase agreements—fell 0.7 percent. Buyers signed 6,175 new contracts and closed on 7,094 homes. That’s the highest volume of closed sales for any month going back to June 2004, a 12-year high. Mostly due to inventory constraints, prospective sellers are concerned about their ability to secure their next property in the current environment. June offered little supply-side relief, as inventory levels fell 18.2 percent to 14,214 active properties. Despite the attempt, consistent inventory shortages haven’t slowed down buyers much, given closed sales at a 12-year high.

Low inventory has helped draw out stronger offers. The average percent of original list price received at sale was 98.7 percent in June, the highest figure for any month since May 2005. Low levels of for-sale housing also means the homes on the market tend to sell quickly. Cumulative days on market until sale fell 16.7 percent to 55 days. That’s the fastest market time for any month since the beginning of 2007. Months supply of inventory fell 23.7 percent to 2.9 months—the lowest June figure on record going back to the beginning of 2003. Generally, five to six months of supply is considered a balanced market. While the metro as a whole is favoring sellers, not all areas, segments or price points necessarily reflect that. Market conditions are encouraging some sellers but not enough to fuel the demand seen in recent months.

“Prices returning to 2006 levels is nothing to fear,” said Judy Shields, Minneapolis Area Association of REALTORS® (MAAR) President. “This market is grounded in good fundamentals: supply and demand, smarter lending standards, job and wage growth, population growth, healthier household finances and rising rents. In the lead-up to 2006, home prices were driven by irrational exuberance and lax lending standards.”

A healthy Twin Cities labor market has also been conducive to our housing recovery. The most recent national unemployment rate is 4.9 percent, though it’s 3.1 percent locally. The Minneapolis-St. Paul-Bloomington metropolitan area has the third lowest unemployment rate of any major metro area. The fact that lower-priced foreclosures and short sales comprise a shrinking share of sales activity also helps with the recovery. Traditional (non-lender-mediated) properties made up 95.0 percent of all closed sales—the highest level in almost 10 years.

For the time being, the risk of higher interest rates seems to have subsided after “Brexit” and in light of other global economic concerns. Locally, the 30-year fixed mortgage rate fell to 3.5 percent compared to a long-term average of about 8.0 percent. Rates are now at their lowest level in three years. Marginally higher rates were widely expected in 2016, but further rate hikes are unlikely for the duration of the year.

“It shouldn’t be all that surprising that we’re back to where we were ten years ago,” said Cotty Lowry, MAAR President-Elect. “The forces behind this recovery are far more sustainable than last time. Clearly the Twin Cities economy is booming, even though buyers are still eager for more listings.”
From The Skinny Blog.

By Aubray Erhardt on Tuesday, June 14th, 2016

Pending home purchase activity exceeded year-ago levels for the 18th consecutive month. Buyers signed 6,809 new purchase agreements, a 9.9 percent gain compared to May 2015. Closed sales, however, rose 5.3 percent to 6,167—the highest May closed sales figure on record. In large part due to low inventory, would-be sellers are concerned about their ability to secure their next property in the current competitive environment. Inventory levels fell 20.6 percent to 13,372 active properties. Because of record demand, weak supply and a more expensive mix of homes selling, the May median sales price rose 5.7 percent to $236,826—second only to June 2006 for the highest monthly median sales price on record.

Since the median percent of current list price received at sale was 100.0 percent, sellers effectively had the same chance of getting offers above their current list price as they did below. Those odds were exactly fifty-fifty—as they were in May 2005. That’s not the case for original list price, however. Cumulative days on market fell 21.1 percent to 60 days. That’s the fastest market time for any month since the beginning of 2007. Months supply of inventory fell 28.9 percent to 2.7 months—the lowest May figure on record going back to the beginning of 2003. Generally, five to six months of supply is considered a balanced market. While the metro as a whole is favoring sellers, not all areas, segments or price points necessarily reflect that. Market conditions are encouraging some sellers but not enough to fuel the demand seen in recent months.

“By a margin of just 26 units, last month’s closed sales reached a new record for May,” said Judy Shields, Minneapolis Area Association of REALTORS® (MAAR) President. “Despite record demand, not every home sells the day it hits the market in multiple offers. Some areas are more susceptible than others. Sellers hoping for short market times should know price strategy is still one of the most important factors in marketing your home.”

Smarter lending practices, job and wage increases, population growth, the ongoing threat of higher interest rates and relentlessly rising rents have all contributed to strong sales activity. A competitive Twin Cities labor market has also contributed to our housing recovery. Traditional (non-lender-mediated) listings made up 93.3 percent of all closed sales—the highest level in almost 10 years.

The most recent national unemployment rate is 4.7 percent, though it’s 3.4 percent locally. The Minneapolis-St. Paul-Bloomington metropolitan area has the fourth lowest unemployment rate of any major metro area. The 30-year fixed mortgage rate continued to hover around 3.6 percent compared to a long-term average of approximately 8.0 percent. Rates took a surprising dive after the Federal Reserve announced the first hike last year. Marginally higher interest rates were widely expected in 2016, though futures contracts currently peg the odds of a June rate hike at 4.0 percent and a July rate hike at 36.0 percent.

“Interest rates and job growth are fueling the demand in our market,” said Cotty Lowry, MAAR President-Elect. “But we have a serious inventory shortage that we know is holding back buyers, meaning there is still pent-up demand that may not have existed in a more balanced market.”
From The Skinny Blog.

By Aubray Erhardt on Tuesday, May 17th, 2016

New Listings showed a second year-over-year decline in 2016 while pending purchase activity rose for the 17th straight month. Buyers signed 6,373 new purchase agreements, a small but important 1.6 percent gain compared to a record-setting April 2015. Due to the well-known supply shortages in our market, would-be sellers are concerned about their ability to secure their next property in the current environment. Inventory levels fell 19.4 percent to 12,849 active properties. Because of record demand, weak supply and a more expensive mix of homes selling, the April median sales price rose 7.7 percent to $231,500. Median list price, by contrast, has already reached and exceeded its previous record, perhaps an indication that the median sales price could do the same this year.

As was the case in March, serious buyers came out swinging in April. In fact, sellers had the same chance of getting offers above their current list price as they did below. Those odds were exactly fifty-fifty—as they were in 2005. That’s not the case for original list price, which indicates that once a home is properly priced, serious buyers are willing to write full-price offers. Unsurprisingly, homes tended to sell in less time, with cumulative days on market declining 14.1 percent to 73 days. That’s the lowest April figure since 2007. Months supply of inventory fell 27.8 percent to 2.6 months—the lowest April figure on record going back to 2003. Generally, five to six months of supply is considered a balanced market. While our region as a whole is favoring sellers, not all areas, segments or price points necessarily reflect that.

“This is an important milestone that speaks to the health of our market,” said Judy Shields, Minneapolis Area Association of REALTORS® (MAAR) President. “Sellers should not interpret this to mean they are guaranteed offers above their list price. Every price range, area and segment is still unique. It’s more important now than ever to properly price your home. This means buyers–particularly those in multiple offers–should be ready to make full price offers on the properties that best fits their needs.”

The last time absorption rates, consumer demand and home prices were where they are today, the median percent of current list price received at sale was also 100.0 percent, so this isn’t entirely unfamiliar territory. There was also significantly more inventory in 2004 and 2005. The marketplace is finally closing the gap from the recession before advancing—sustained by smarter lending policy, job and wage increases, population growth, the risk of higher interest rates and relentlessly rising rents. It’s worth noting that traditional sales tend to fetch a higher ratio of sales price to list price. For the first April since 2007, traditional sales made up over 90.0 percent of overall sales, which boosts the percentage of current list price received.

The national unemployment rate for April was unchanged at 5.0 percent. With a local unemployment rate of 4.0 percent, the Minneapolis-St.Paul-Bloomington metropolitan area was among the top ten large metros with the lowest unemployment rate. The 30-year fixed mortgage rate continued to hover just above 3.6 percent compared to a long-term average of about 8.0 percent. Rates took a surprising dive after the Federal Reserve announced the first hike last year. Marginally higher rates were widely expected in 2016, even though a June rate hike seems unlikely.

“The economy is still strengthening and the market is very competitive,” said Cotty Lowry, MAAR President-Elect. “Serious buyers must be prepared to make strong offers right away or risk not having their offer accepted.”
From The Skinny Blog.

By David Arbit on Wednesday, April 27th, 2016

We don’t often talk about the national housing market, because, well, that isn’t really a thing. You read that right. There is no national housing market! The same way there is no national weather forecast. You don’t grab an umbrella in Miami based on the weather in Seattle, do you? So why would you base a decision to buy or sell real property in Minneapolis on data from Phoenix, Cleveland, Las Vegas and St. Louis? You wouldn’t. Because that would be silly.

So from the standpoint of a family or individual in the midst of a local decision-making process, national data is more or less worthless. Worse, it can actually lead to negative outcomes if a local decision was made based on national figures. Perhaps a Case-Shiller report showed that home prices are rising across their 20-city composite index. But that doesn’t mean prices are rising in every neighborhood or city, or even a particular section of a neighborhood. However, when it comes to bench-marking how we’re doing in Minnesota against other states, national-scale market data can play a marginally useful role.

The folks at Keeping Current Matters (KCM) have taken information from NAR’s Monthly REALTOR® Confidence Survey to generate a heat map showing hot spots and cold spots around the country. The darkest blue represents states where homes sell quickly (30 days and under). The darkest orange represents states where homes tend to sell in over 90 days.

As you can see (and as most agents know), Minnesota homes tend to sell quickly. Our state is in the top quintile, among a group of only five other states. It’s a safe bet that our acute inventory shortage plays a large role in this dynamic, but our extremely competitive labor market, attractive business climate, affordable housing stock, high quality of life, diversity, top-notch schools and our treasured parks and water bodies also play a big role in attracting and keeping people here. That translates into strong demand for housing, which—when combined with very low supply levels—means homes tend to sell pretty quickly.

From The Skinny Blog.