Category Archives: The Skinny

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 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.

By Aubray Erhardt on Wednesday, January 20th, 2016

At a press conference today, REALTOR® associations reported that the Twin Cities Metropolitan Area had the best year in terms of the number of closed sales since 2005. Closed sales finished 2015 13.7% better than 2014, boasting 56,390 compared to 49,604 in 2014.

The median sales price in 2015 was $220,000, a 7.0% increase from $205,600 in 2014. This is on top of gains in recent years of +14.4% in 2013 and 11.9% in 2012. The median sales price of single family homes was up 5.6% and townhouse-condos were up 3.8% over the prior year, continuing multi-year positive trends. Distressed sales were a mere 10.6% of all closed sales in 2015. This represents a one-year change in sales of foreclosures and short sales of -26.7%.

“Last year (2015) really showcased the durability of our economic and housing recovery, despite a few obstacles. As sales hit a 10-year high, the Twin Citizens are just as committed to homeownership as ever. Attractive rates, rising rents, job growth, wage increases and the lowest unemployment rate of any major metro area will continue to be positive factors for real estate,” said Judy Shields, President of the Minneapolis Area Association of REALTORS®

Months’ supply of inventory ended the year at an unprecedented low of 2.1 months. This metric indicates how long it would take to sell-off all existing inventory if no new inventory was added and is generally considered balanced, favoring neither buyer nor seller, at 5.0 months. While this metric indicates a sellers’ market that may leave some buyers with fewer options, it also has some market watchers asking themselves whether we’ve seen the supply bottom. While inventory is certainly a metric to watch it’s probably best measured and compared throughout the selling season and not at year end.

“Since inventory conditions vary across the metro and market conditions change quickly, would-be sellers are encouraged to contact their REALTORS® for an updated market analysis. Your home might be worth more than you think,” said Bob Clark, President of the Saint Paul Area Association of REALTORS®.

Days on market continued to shrink, ending 2015 at just 76 days on the market – a 10-year record low.

Percent of original list price, a metric that demonstrates a relationship of the original list price compared to the final sales price remains strong at 96.6% overall and across market segments. For example, this means if a home was originally listed at $100,000 its final sales price was $96,600.

Single family homes and townhouse-condo segments were at 96.6% of original list. Previously owned was at 96.4%. New construction topped out a 99.6% of original list. This indicates sellers have regained their pricing power and are accepting near-full price offers on their listings.

“We know that well maintained, appropriately priced homes with amenities are selling fairly quickly but moreover the data shows that as well,” said Clark.
From The Skinny Blog.

By David Arbit on Monday, December 14th, 2015

By David Arbit, Director of Research & Economics

Abstract: There is no question we are in a rising interest rate environment. The Fed may begin to normalize rates starting in December 2015. Inflation has been low, jobs numbers have been strong, wage growth is accelerating, unemployment has fallen dramatically and the U.S. is one of the few bright spots in today’s global economy. The process of rate normalization will be slow and incremental—the Fed is well aware that raising rates too quickly could threaten the recovery. It’s important to remember that there are many factors affecting consumer-facing rates other than Fed policy. Moreover, rising wages and an improving labor market could offset some of the declining affordability brought on by marginally higher rates and rising home prices. Keeping rates this low for too long poses its own set of risks. It’s tempting to be blinded by the recent past, but many consumers were lining up to get mortgages at 17.0% or higher only a few decades ago. Ultimately, higher interest rates are unlikely to derail the recovery and could even deliver some positive outcomes.

Precisely six years and six months after the official end of the Great Recession, the Federal Reserve (Fed) finally seems poised to normalize what have been the lowest interest rates in 50 years. Rates have remained low in an effort to help spur borrowing and growth for businesses and consumers, and they’ve mostly accomplished that goal without the rampant inflation feared by some hawks. That said, leaving rates this low for too long poses its own set of risks. There is a somewhat delicate balancing act.

What exactly does the Fed do? By law, the Fed has a dual mandate: maximum employment and price stability in the form of mild inflation. Excluding a bit of volatility here and there (mostly food and energy), there has been a good deal of progress on both fronts. As the Fed signals that they’re confident enough in the economy’s ability to withstand higher rates, most consumers should feel good about that assessment. Consumers—particularly prospective home buyers—should also understand that mortgage rates are expected to remain below average for years to come. In other words, some will undoubtedly rush to close on a property so they can brag about a sub-4.0% interest rate at backyard barbecues but the reality is that mortgage rates will remain attractive for some time.

Just what has been the trend with mortgage rates? As the trendline above indicates, mortgage rates have been declining for the last 35 years. They hit a high of 18.5% in 1981 and a 50-year low of 3.3% in 2012, compared to a long-term average of about 8.0%. Many consumers benefited from 30-year mortgage rates below 4.0% between 2012 and 2015. This spurred a lot of refinancing activity in addition to first-time and move-up home buyer purchase activity.

In fact, sales in the 13-county Twin Cities metro area reached a 10-year high in June 2015, no doubt partly triggered by low rates. But what will be the impact of higher (or more normal) rates on our economic recovery, the housing market, savings yields and the stock market? Higher rates aren’t all bad. It means savers will be rewarded more, which will be a positive factor for down payments and consumer financial stability. The economic recovery is accelerating as we’re seeing strong jobs numbers, finally stronger wage growth and consistent GDP growth. Higher rates are unlikely to derail the recovery.

The stock market has begun to price in higher interest rates, but stocks have been quite popular since other investment vehicles aren’t yielding much return due to the rate environment. That could be an area of concern. But the fundamentals remain compelling. Corporate profits near all-time highs, corporate taxes near all-time lows, record valuations driving unprecedented merger and acquisition activity—higher than even the debt-fueled M&A boom before the recession—all suggest the U.S. corporate sector and economy in general will remain an island of stability in a global sea of potential risks.

On the housing side, refinancing activity will likely slow, but there is enough organic and pent-up demand out there to support ongoing housing recovery. Many families chose to stay put and weather the downturn. Some adult children who doubled up with mom and dad will forge their own new households. Many renters frustrated by rising rents will enter homeownership to gain equity and better control their housing costs. Price growth should remain positive but the pace has already slowed and returned to historic norms (+4.0% to +7.0% year-over-year). In 2013, the median sales price increased 14.4% compared to 2012. For 2014, that figure was 7.1%, and for 2015YTD it is 7.0%.

So what happens next? The Fed has limited yet effective tools available at its disposable to implement monetary policy. Through open market operations, the discount rate and reserve requirements, it is able to alter the federal funds rate. This is the key rate at which financial institutions (banks, credit unions) actively trade balances held at the Fed with each other. This usually happens overnight and impacts a variety of financial vehicles, including mortgage rates.

However, a shift in the federal funds rate does not correspond to an equivalent change in the consumer-facing 30-year mortgage rate. The chart above showcases this. Note that large increases in the federal funds rate only correspond to minor and sometimes leading or lagging changes in the mortgage rate. There does seem to be a relationship, but it’s neither as strong nor as direct as many assume.

For example, when the federal funds rate increased from 1.0% to 5.2% between 2004 and 2006, mortgage rates only increased from 5.5% to around 6.5%. In other words, a 420.0% increase in the federal funds rate was only accompanied by a roughly 18.0% increase in rates. That was an unusually large jump in the federal funds rate aimed at slowing an overheating housing market. None of this happens in a vacuum. Many other factors impact mortgage rates, including but not limited to current inflation, future inflation expectations, treasury market dynamics, equity and bond market dynamics, debt levels, the velocity of money, wage pressure, GDP growth, the general economic climate and other forces.

So exactly what does the future hold? Crystal balls are tough to come by these days, but Freddie Mac and others have put out a forecast for mortgage rates through the end of 2016.

Most economists expect 30-year mortgage rates to reach 4.5% or 4.6% by the end of 2016, compared to just under 4.0% at the end of 2015. That’s a manageable increase and is still well below the long-term average of just over 8.0%. To put that in perspective, the total payment on a $200,000 loan at 4.0% vs. 4.5% amounts to a monthly difference of about $50. While that’s certainly noticeable, most households can stomach it—particularly with additional wage growth and stronger labor force participation.

In the face of declining affordability brought on by rising prices and higher rates, the key will be whether wage growth can neutralize or at least partly offset that effect. Furthermore, in today’s low inventory environment, the other trend to watch will be whether prices continue to rise at a sufficient level to motivate hesitant sellers to list without rising so fast so as to alienate buyers. The most budget-sensitive consumers might make an attempt to get deals done sooner than later, but for most consumers, the difference isn’t enough to drastically change behavior.

Ultimately, the future is unwritten. But given the data coming out of the economy, labor and housing markets and the fact that the dream of homeownership is alive and well, we feel pretty confident that the U.S. economy in general and housing in particular will remain a bright spot.
From The Skinny Blog.

By Aubray Erhardt on Friday, December 11th, 2015

With warmer than usual temperatures, impressive job and wage growth and still attractive interest rates, strong home purchase demand continued into November. Pending sales rose 18.1 percent to 3,497 signed contracts; new listings increased 11.5 percent to 3,785 homes. That’s the largest year-over-year increase since June of this year for pending sales, and the largest gain since March for new listings. Inventory levels fell 18.5 percent to 12,984 active units. Persistently low levels of for-sale properties can be a challenge for some buyers. Prices continued to rise as the median sales price gained 7.3 percent to arrive at $219,900. The median list price rose 4.6 percent to $229,995, while the price per square foot rose 6.1 percent to $127.

Due to the low supply and high demand environment, the percent of original list price received at sale was up 1.2 percent to 95.8 percent. Sellers also accepted offers in less time than last November. Days on market declined 7.6 percent to 73 days. Months supply of inventory fell 25.6 percent to 3.2 months—the lowest level on record in almost 12 years. Generally, five to six months of supply is considered balanced. While the metro as a whole is favoring sellers, not all areas, segments or price points reflect that.

“Buyers have truly been out in force this year,” said Mike Hoffman, Minneapolis Area Association of REALTORS® (MAAR) President. “While we’re encouraged by modest increases in seller activity, it’s simply not enough to meet the demand brought on by attractive rates, rising rents and an accelerating labor market. The nice weather has certainly helped.”

Region-wide indicators offer useful insights, but it’s important to dive into individual areas and segments. The percentage of sales that were foreclosure or short sale fell to 11.0 percent as traditional sales rose 21.4 percent. Single-family sales had the strongest gain of any property type, followed by townhomes and condos, respectively. Previously-owned sales increased at nearly twice the rate of new construction. Sales activity in the lowest price range ($150,000 and below) declined 19.3 percent while activity in all other price ranges is rising (homes priced at $400,000 and above had a 15.9 percent sales increase). Though it’s not yet the case for the region, home prices across several local markets including St. Louis Park, Edina and Southwest Minneapolis have reached record highs.

The November jobs numbers beat expectations and were accompanied by upward revisions to September and October. Wages are growing at their fastest pace in six years—an encouraging sign that should offset declining affordability brought on by rising prices and interest rates and facilitate larger down payments. The latest Bureau of Labor Statistics figures also show the Minneapolis-St. Paul-Bloomington metropolitan area had the lowest unemployment rate of any major metro area at 3.1 percent compared to 5.0 percent nationally. Mortgage rates are still around 4.0 percent compared to a long-term average of about 8.0 percent. A rate hike at the Federal Reserve is widely expected in December, though changes in mortgage rates will be slow and incremental and shouldn’t disrupt the recovery.

“With all but one month of 2015 in the books, we’re really starting to see how the year will stack up,” said Judy Shields, MAAR President-Elect. “Since consumer demand for housing has fully recovered, the seller component is still the missing puzzle piece.”
From The Skinny Blog.

By Erin Milburn on Tuesday, November 17th, 2015

October pending sales rose 3.3 percent to 4,331 contracts. New listings decreased 2.6 percent to 5,798 as fewer sellers listed their properties for sale. It should come as no surprise that inventory levels fell 16.7 percent to 14,911 active units—extending a long-standing supply crunch that is frustrating some buyers but helping sellers yield multiple offers. As one might expect, prices thus continued to rise with the median sales price increasing 4.9 percent compared to last October. That is wholly in line with long-term year-over-year appreciation before factoring for inflation. The median list price rose 4.4 percent to $240,000, while the average price per square foot rose 3.2 percent to $127.

With tight supply and strong demand, sellers accepted a larger share of their original list price as offers were more competitive. The percent of original list price received at sale was up 1.1 percent to 96.2 percent. Homes tended to sell in less time. Days on market declined 2.8 percent to 70 days. Both of these trends are consistent with a sellers market. Further evidence that it’s a good time to sell came by way of months supply of inventory, which fell 25.6 percent to 3.2 months of supply. Generally, five to six months of supply is considered balanced. While the metro as a whole is favoring sellers, not all areas, segments and price points reflect that.

“Sellers are still a bit hesitant,” said Mike Hoffman, Minneapolis Area Association of REALTORS® (MAAR) President. “That said, factors such as low interest rates, rising rents, prices still below their peak and accelerating job and wage growth also paint a compelling picture for buyers.”

Other market measures show ongoing improvements as well. The percentage of all sales that were foreclosure or short sale has shrunk to less than 10.0 percent. Sales activity in the lower price ranges ($150,000 and below) is declining while activity in all other price ranges is rising. At the high end of the market, year-to-date sales activity in the $1,000,000 and up range has reached all-time record highs. Though it’s not yet the case for the entire region, home prices across several local markets including St. Louis Park, Edina and Southwest Minneapolis have also reached record highs.

The broader economy has been favorable to market recovery. The October jobs report not only beat expectations but it also showed the strongest wage growth in six years—a critical factor that will offset declining affordability and help with down payments. Unemployment has been cut in half from its peak and consumer confidence is rising. October Bureau of Labor Statistics figures show the Minneapolis-St. Paul-Bloomington metropolitan area had the lowest unemployment rate of any major metro at 3.1 percent compared to 5.0 percent nationally. Mortgage rates are still around 4.0 percent compared to a long-term average of over 7.0 percent. A rate hike at the Federal Reserve is expected in December, though changes in mortgage rates will be slow and incremental.

“As we near the end of 2015, it’s clear that home buyers were motivated and eager to make their move,” said Judy Shields, MAAR President-Elect. “Moving forward, we’ll be watching the affordability environment, inventory levels and new construction as we adapt to changing consumer preferences and a changing interest rate climate.”
From The Skinny Blog.