Though not quite as often as the most expensive areas, we are also occasionally asked which cities are the most affordable (least expensive). Below are tables showing the 25 lowest priced markets in the region. The top two tables rank all areas, regardless of market size. The bottom two tables only show areas with a certain volume of sales. The left table uses only June 2015 sales, while the table to the right uses 2015 YTD data (through June). The measure used is still median sales price.

Even more data to the people!

From The Skinny Blog.

We are often asked “Which cities have the highest home prices?” Whether it’s a member, the media or the general public inquiring, it’s a fairly common question. Wonder no more! Below are tables showing the top 25 highest priced markets in the region. The top two tables rank all areas, regardless of market size. The bottom two tables only show areas with a certain volume of sales. The left table uses just June 2015 sales, while the table to the right uses 2015 YTD data. Of course, the measure used is median sales price.

Data to the people!

From The Skinny Blog.

The changing popularity of various home financing tools tells a unique story and shows how the government and private sector mortgage market shares have evolved through the housing crisis and subsequent recovery.

Following the ebbs and flows of the housing market itself, the mortgage finance marketplace has also transformed over the last decade. First, some scene setting. Each trendline above represents the percentage of closed sales in the Twin Cities 13-County MSA that utilized a particular form of mortgage financing, by month. No seasonal adjustments have been performed; the data is raw and comes directly from NorthstarMLS.

Between 2005 and mid-2007, conventional loans made up about 80.0 percent of all mortgages. With conventional mortgage liquidity—shall we say—plentiful, the government only represented about 5.0 percent of loans. As the economy and housing market began to unravel in 2007, the mortgage spigot was drying up. As such, the FHA started to take up that slack and became a dominant player in the mortgage marketplace. By the time of the first-time home buyer tax credit in late-2009, FHA loans comprised a whopping 45.0 percent of sales while conventional loans made up about 35.0 percent of sales. The remaining 20.0 percent include all-cash deals and other loan products.

Though its overall effectiveness remains somewhat debatable, that tax credit signaled a turning point—at least in the mortgage market. At that moment in late-2009, conventional loan market share began to recover and FHA market share started to shrink. Fast forward to present day and conventional loans now make up 60.0 percent of the market while FHA loans make up just 20.0 percent. Earlier in 2015, FHA loans made up about 15.0 percent of closed sales, which is consistent with 2004 levels. Most recognize this as a positive, as the private sector has once again assumed the majority of the risk associated with residential mortgage lending.

All-cash sales can also be illuminating, shining light in some of the more interesting nooks and crannies. Though not all cash sales reflect investor activity, it’s one of the better indications of investors in the market and can be used as a proxy.

Between 2004 and 2008, cash deals made up about 5.0 percent of all closed sales. By February 2011, about 28.0 percent of Twin Cities homes were purchased with cash—a record high. Note the dashed orange trendline. This was at the same time as distressed (foreclosure and short sale) market share was at its highest. Traditional sales volume had fallen dramatically and investors were picking up foreclosures for $0.30 – $0.70 cents on the dollar.

Of the consumers that could, even they were understandably nervous to make large purchases such as a home. Nowadays, about 12.0 percent of sales are done in cash, the lowest share in seven years, or since the middle of 2008. That reflects a mixture of fewer foreclosures and short sales, rising prices, a rising stock market attracting more capital and low inventory levels frustrating traditional buyers and investors alike.

The market numbers are well and good, but sometimes following the money can tell a unique story. The modes of financing behind the market can signal changes in investor behavior, consumer confidence, bank lending patterns and how those forces interplay with one another.
From The Skinny Blog.

The Twin Cities metropolitan housing market reached key milestones in June. Both pending purchase demand and closed unit sales officially reached 10-year highs. The last time demand was this strong was June 2005. The number of signed purchase agreements rose 19.2 percent to 6,266. Closed sales increased 22.0 percent to 6,928. Seller activity showed more modest gains compared to last year. New listings rose 4.6 percent to 8,678 during the month, which is a multi-year high. It’s the highest number of new listings for any month since April 2010. Excluding March and April of 2010, new listings were at their highest level for any month since June 2008. Despite that, the number of available properties fell 9.4 percent to 16,597 homes.

“Buyers have been extraordinarily active this spring and summer,” said Mike Hoffman, Minneapolis Area Association of REALTORS® (MAAR) President. “With both pending and closed sales activity officially reaching 10-year highs, consumers— particularly first-time buyers—understand that the timing is right. Therefore, sellers are also getting strong offers quickly.”

Given all this demand, the June 2015 median sales price climbed 4.7 percent to $229,900. That puts home prices within about 3.5 percent of the June 2006 record high of $238,000. However, the typical price per square foot, now at $128, is about 18.5 percent below its June 2006 record high.

The market landscape continues to favor sellers, even though it is still a historically attractive time to purchase real property. Because of the ongoing imbalance between supply and demand, the number of days a listing spends on the market fell 5.7 percent to 66 days. Sellers are accepting 97.8 percent of their original list price and 99.6 percent of their last list price. The Twin Cities metropolitan area currently has 3.6 months’ supply of inventory, which still signals a seller’s market. That figure dropped 18.2 percent from June 2014. This measure is essentially a ratio of supply and demand and indicates how long it would take to completely clear the market of all inventory assuming no new homes enter the marketplace.

According to the Federal Reserve, interest rates could still rise slowly later this year if the economy continues to perform well as it has been. Mortgage rates continue to hover on either side of 4.0 percent, compared with a long-term average of over 7.0 percent. The most recent data from the Bureau of Labor Statistics shows the Minneapolis-St. Paul-Bloomington metropolitan area has the third lowest unemployment rate of any major metro. That puts our region behind only sister cities Austin, TX and Salt Lake City, UT. Minnesota and the Twin Cities specifically are uniquely well positioned to compete in today’s global economy.

“With positive momentum in housing and the economy, agents across the region are helping buyers and sellers achieve their real estate goals,” said Judy Shields, MAAR President-Elect. “Since most sellers are also buyers, those sitting on the fence may not want to wait to make their move.”
From The Skinny Blog.

After nearly 10 years, home prices are within 6.3 percent of their record high seen in June 2006. We have been here before, but we are in a different environment these days. The labor market has benefited from the longest stretch of private job growth on record, the stock market is at all-time highs, corporate balance sheets have seldom looked this good, we have a more regulated lending environment, consumers are deleveraged, our population has grown and consumers are more cautious this time around.

As we near (errr return to) “peak” pricing, there are several important items to bear in mind. First, this is not a brand new high in some foreign land, it is a return to where the market was 10 years ago but with better fundamentals (see above). Second—and as the chart suggests—if you assume that prices had followed their long term trend of increasing at 5.0 percent per year (nominal, not adjusted for inflation) as they have, we are still not back to where we would be assuming that rate of increase over the last 20 years. Third, this market is not fueled by irrational, unjustified speculation and exuberance—a leading cause of bubble-itus. Rather, it is fueled by low interest rates, rising rents, job growth, a diverse and robust local economy and slowly rising incomes.

Those who remember paying $0.05 for a cup of coffee or a candy bar like to remind us: prices will rise. It is inevitable. To expect home prices not to follow that trend is unrealistic. Once home prices began recovering, it was only a matter of time before they surpass their previous peak. Given all the improvements we have seen in the market and economy, it is no surprise we are back to where we were. But this time, under much better circumstances.
From The Skinny Blog.

MEDIAN HOME PRICE JUST SHY OF RECORD HIGH AMIDST STRONGEST DEMAND IN A DECADE

With the sole exception of inventory, every market metric showed continued improvement during May. The number of signed purchase agreements in the 13-county Twin Cities increased 19.5 percent to 6,228. That marks the highest May pending sales count since 2005. Sellers, however, were only slightly more active than last year. New listings rose 0.3 percent to 8,590 for the month. Excluding April 2015, that’s the highest number of new listings for any month since the home buyer tax credit period of April 2010. Homes also sold in less time and sellers yielded a higher share of their list price.

The May 2015 median sales price of all MLS home sales increased 6.7 percent to $224,000. That’s within 3.6 percent of the May 2006 level and 6.3 percent of the record high seen in June 2006. Price per square foot offers a different perspective, as it accounts for the increasing square footage of homes selling. The average price buyers paid per square foot rose 3.5 percent to $128.

“Though it’s not the only important measure by a long shot, many factors have enabled prices to once again approach these levels,” said Mike Hoffman, Minneapolis Area Association of REALTORS® (MAAR) President. “It’s taken nearly 10 years just to get this close to break-even and this time the fundamentals are better, our population has grown and industry professionals and consumers are more cautious.”

Persistent rent hikes, low mortgage rates, solid job growth and some noticeable wage growth are all encouraging consumers to seriously consider homeownership. But sellers and builders have been reluctant to list and build at the same levels they did when demand was this high 10 years ago. That has kept us in a seller’s market for some time. The number of days a listing spends on the market also reflects this. Those selling their homes are waiting a median of 35 days before accepting an offer at a median of 99.5 percent of their current list price. May months supply of inventory fell 12.2 percent to 3.6 months. Markets with between five and six months of supply are considered balanced.

Over the last 12 months, buyer activity increased the most in the townhome segment, where properties are also selling the fastest. Condominium prices increased the most of any property type over the same period. New construction pending sales for May increased at about half the rate of previously-owned properties. The number of homes on the market in May fell for all property and construction types.

The finance environment remains attractive. Mortgage rates are hovering around 4.0 percent, compared with a long-term average of 7.0 percent. The Twin Cities housing affordability index increased 2.7 percent since May 2014. An educated and literate workforce combined with a healthy and diverse economy helps Minnesota compete for top talent and businesses on an international scale.

“Many brokerages are seeing record volume even as prices move toward 2006 levels,” said Judy Shields, MAAR President-Elect. “Buyers in a variety of segments in our wonderful region are eager to make homeownership a reality. Prospective sellers should take note—they’re likely to receive top dollar for their property.”
From The Skinny Blog.

“The trend is your friend.”

We don’t know who said it, or when. But we believe the spirit of that statement is to ignore the micro fluctuations in the data and focus on the overall, macro-level pattern. Let the trend speak to you. Ignore the noise in between. The noise is only there to confuse you. Actually, the noise is really there because buyer activity ebbs and flows with the freeze and thaw cycle as well as with the school year. Though it’s tempting to follow the seasonal peaks and valleys, it’s plain to see that prices and sales always decline between summer and fall, and then subside again between fall and winter. It’s as predictable as potholes in the Minnesota spring. As such, it’s less meaningful to compare June to October and far more meaningful to compare October of this year to October of last year. Because of this high degree of seasonality in our market, comparisons across all of our reporting environments utilize a year-over-year benchmark.

From The Skinny Blog.

The number of signed purchase agreements in the 13-county Twin Cities region reached a 10-year high for the month of April. The figure came up just shy of reaching a 10-year record high for any month. Buyers wrote 6,329 offers to purchase homes, a 26.0 percent increase from last April and the most for any month since June 2005. New listings also rose as sellers continued to regain confidence. The number of new listings increased 10.7 percent to 8,613 during the month. That’s the highest number of new listings for any month since the home buyer tax credit period of April 2010.

The median sales price sustained its upward trajectory, increasing 10.0 percent to $215,600. The median home price has now seen 38 months of year-over-year increases. Price per square foot—which accounts for the rising square footage of homes selling—rose a more modest 3.0 percent to $124. Months supply of inventory fell 5.6 percent to 3.4 months, and still points to an overall seller’s market. Days on market decreased for the first time this year. Those selling their homes are waiting an average of 85 days before accepting an offer.

“Overall, buyers are truly out in force this spring,” said Mike Hoffman, President of the Minneapolis Area Association of REALTORS® (MAAR). “Climbing rents, consistent job growth and finally some beginning signs of wage growth are all encouraging Twin Citizens to invest in homeownership.”

As a result of the strong demand, inventory shortages in the most popular price ranges and neighborhoods can still be challenging for many buyers. Over the last 12 months, inventory levels fell 1.1 percent in the $100,000 to $249,999 range but rose 22.2 percent in the $250,000 to $499,000 range. The number of active listings for homes priced above $500,000 rose 21.4 percent.

Among the different property types, inventory levels fell 4.6 percent for condos and 0.9 percent for townhomes, but rose 10.0 percent for single-family properties. The number of homes on the market rose 6.2 percent over the past 12 months for previously owned homes, but the figure increased 19.3 percent for new construction homes.

The finance environment remains favorable. Mortgage rates are approximately 3.9 percent, compared with a long-term average of 7.0 percent. The Twin Cities housing affordability index actually increased since this time last year.
A diverse and growing regional economy has served the Twin Cities housing market well throughout the years. According to the Bureau of Labor Statistics, the Twin Cities has the fifth lowest unemployment rates of any major metropolitan area in the nation at 4.0 percent. Forbes ranked Minnesota as one of the top 10 best states for business, seventh in economic climate and second in quality of life.

“The numbers combined with the sense of urgency really paint a clear picture,” said Judy Shields, MAAR President-Elect. “Buyers are quite motivated, hoping to get in before rates rise, though both buyers and sellers stand to benefit from the current market environment.” From The Skinny Blog.