Recent New Construction Activity by Price Point

By David Arbit on Friday, June 23rd, 2017

As the shortage of residential property listings persists, many observers are rightly examining recent new construction trends. We’d like to get in on that.
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Using exclusively NorthstarMLS data, this analysis only looks at listings with a “year built” field of 2016 or later. However, the closed sales count only uses 2017YTD activity and inventory is always the most recent monthly snapshot, further limiting the pool of records and keeping the analysis as up-to-date as possible while still allowing for a reasonable sample size of records.

As of the end of May 2017, 25.3% of all active listings that were built in or after 2016 were listed between $400,000 and $500,000. 24.9% of all actives were listed between $300,000 and $400,000. In other words, about half of all recently-built active listings were priced between $300,000 and $500,000. About 33% were priced above $500,000; while the remaining 17% were listed under $300,000.

There are a few noteworthy trends here. There seem to be several threshold effects. First, active listing market share declines dramatically above $500,000 for relatively recent construction and then flattens out somewhat. The next notable decline comes above the $1.3M mark. That may reflect the tear-down activity happening around the metro–particularly within the urban cores and inner-ring suburbs. Even though most of the demand for new construction is well under $1M (more on that below), this could reflect the higher land, tear-down and (re)development costs associated with infill construction. There is also a significant decline above $2.5M, which could reflect a mix of risk aversion from developers and a fairly limited buyer pool.
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Transitioning over to the demand side, the $300,000 to $400,000 bracket witnessed the largest share of newly-built home sales. Next up was the $400,000 to $500,000 range, followed by the $200,000 to $300,000 range. Once again, activity drops off above $500,000 and again over $600,000.

Interestingly, and in contrast to active listing share, the $800,000 to $1,000,000 range enjoyed more sales than the $700,000 to $800,000 range. Sales between $1,300,000 and $1,600,000 represented less than half the market share of those between $1,000,000 and $1,300,000. In other words, the “$1,000,000 plus crowd” may be willing to enter the low seven-figures but maybe not yet much beyond that.

The $800,000 to $1,000,000 range also captures listings that sellers and builders initially listed at $1,049,000 or $1,099,000 and had a price adjustment or an offer accepted under the $1,000,000 threshold. Even though a home may have been listed above the $1,000,000 mark, it may have sold for less.
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That got us thinking: wouldn’t it be cool to look at the ratio of active versus sold market share by price point? Of course it would! So that’s what we did.

Unsurprisingly, for the most part, active market share tends to outweigh sold market share as you climb the price ladder. In other words, the higher the price point, the more likely you are to have more supply relative to demand. That’s why absorption rates and market times increase in the higher brackets. It’s also why the ratio of sold price to list price tends to be slightly lower. There simply isn’t the same market pressure or imbalance between supply and demand in the luxury brackets as there is in the affordable brackets.

As indicated, that theory is mostly supported by this analysis, with a few exceptions. First, the market share of active listings between $2,000,000 and $2,500,000 is about 5 times that of the sold market share in that range (0.54% versus 0.11%). Even though it’s a small sliver of both active and sold market share, it’s that ratio or relationship between the two shares that we’re after. Even the $3,000,000 and up range has a ratio of about 4.5.

Second, and perhaps surprisingly, the ratio of active to sold market share in the $2,500,000 to $3,000,000 range was only about 1.7, lower than all other ranges above $700,000 except $800,000 to $1,000,000. That means the active market share in that range is only about 60-70 percent higher than the sold market share in that range, which seems downright balanced compared to 4 to 5 times greater active versus sold market share in other upper brackets.

Third, and as expected, it’s difficult for builders to be profitable under the $300,000 price point, given rising construction costs, limited lot availability, the labor shortage and new impact fees. Also as expected, budget-conscious consumers facing limited inventory options are having to go farther out where newer construction is more common. The fact that sold market share is outpacing active market share in all ranges up to $400,000 speaks to the strong demand but insufficient building activity in these affordable and in-demand price points.

You see? Data can be educational AND fun! Infosparks and the many market reports on our website can help you impress your next client and increase your referrals and repeat business. Please use the data for good and never for evil!
From The Skinny Blog.

Inventory Low, Market Times Quick, Buyer and Seller Activity Steady

By David Arbit on Thursday, June 15th, 2017

Compared to May 2016, new listings in the Twin Cities inched up 0.7 percent while closed sales fell 1.1 percent. Given that there were 17.3 percent fewer homes on the market compared to last May, it’s clear that buyers remain motivated. Declining foreclosure and short sale activity can contribute to market-wide declines. For example, traditional new listings rose 2.5 percent while traditional closed sales rose 2.1 percent. Those shopping for homes have 11,615 properties from which to choose in the metro area, the highest figure so far this year but the lowest May inventory reading since 2003.

Prices continued to rise. The median sales price rose 5.5 percent from last year to $250,000. Nominal home prices have now risen for the last 63 consecutive months. Multiple offers on updated, turn-key properties are common in low inventory environments. Properties also tend to sell quickly and for close to or above list price. Homes went under contract 15.0 percent faster than last May. Half the homes on the market sold in less than 20 days. The average percent of original list price received at sale was 99.5 percent, 0.9 percent higher than last year. Similarly, the median percent of original list price received at sale was 100.0 percent, meaning half the sales closed for over list price. The metro area has just 2.3 months of housing supply—the lowest May reading since 2003. Generally, five to six months of supply is considered a balanced market where neither buyers nor sellers have a clear advantage.

“Not only does the traditional market now account for over 96.0 percent of sales,” said Cotty Lowry, Minneapolis Area Association of REALTORS® (MAAR) President, “but traditional new listings and sales continue to rise, despite the shortage of homes on the market.”
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A thriving and diverse local economy has been conducive to housing recovery, as job growth is key to new household formations. The most recent national unemployment rate is 4.3 percent, though it’s 3.3 percent locally. The Minneapolis–St. Paul region has a resilient economy with a global reach, a talented workforce, top notch schools 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 about 8.0 percent. Excluding any surprising data or events, the Federal Reserve is likely to increase their target federal funds rate at least once more this year. Wage and inventory growth are key to offsetting affordability declines brought on by higher rates and rising prices.

“It’s tempting to treat this market as one entity,” said Kath Hammerseng, MAAR President-Elect. “However, that won’t provide an accurate and detailed picture of what’s really happening. Different areas, market segments and price points all behave quite differently.”
From The Skinny Blog.

IMPRESSIVE BUYER ACTIVITY, CONSIDERING THE DRAMATIC LISTING SHORTAGE

By Erin Milburn on Friday, May 12th, 2017

Compared to April 2016, new listings in the Twin Cities declined 8.3 percent while pending sales decreased 8.5 percent. Given that there were about 20.0 percent fewer homes for sale, a modest decrease in signed purchase agreements compared to last year reflects a shortage of listings and not necessarily declining demand. Days on market is still down and the number of showings per listing rose compared to last April. Buyers are still eager to purchase a home, but supply side constraints are weighing on sales activity. Those shopping for homes have 10,916 properties from which to choose in the metro area, the lowest April reading since 2003.

Low supply and high demand environments tend to drive prices higher. The median sales price rose 6.3 percent from last April to $245,500. Multiple offers on updated, turn-key properties are common in low inventory environments. Properties also tend to sell quickly and for close to or above list price. Average days on market until sale fell 20.5 percent to 58 days compared to 73 in April 2016. It’s worth noting that the median days on market for April was a brisk 21 days—a 10-year record pace. The average percent of original list price received at sale was 99.2 percent, 1.2 percent higher than last year. Similarly, the median percent of original list price received at sale was 100.0 percent, meaning half the sales closed for less than full list price while the other half closed for over list price. The Twin Cities has only 2.2 months of housing supply—the lowest April reading since 2003. Generally, five to six months of supply is considered a balanced market where neither buyers nor sellers have a clear advantage.

“Any agent or house hunter can confirm that buyers are in no way disappearing,” said Cotty Lowry, Minneapolis Area Association of REALTORS® (MAAR) President. “But we are seeing signs that the shortage of listings is starting to hold back our demand indicators such as pending [sales] and closed sales. Despite fewer listings, we still saw more showings per listing.”

A healthy and diverse local economy has been conducive to housing recovery. The most recent national unemployment rate is 4.4 percent, though it’s 3.8 percent locally. The Minneapolis–St. Paul region has a resilient economy with a global reach, a talented workforce, top notch schools 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 4.0 percent lately, still well below a long-term average of about 8.0 percent. Excluding any surprising data or events, the Federal Reserve is likely to increase their target federal funds rate at least once more this year. Wage and inventory growth are key to offsetting affordability declines brought on by higher rates.

“The shortage of supply in our market is showing up in several ways beyond price gains, quick markets times and multiple offers,” said Kath Hammerseng, MAAR President-Elect. “Additional inventory is key to sustaining our housing recovery and is critical to maintaining a healthy and accessible marketplace.”

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.

Trading places? Seller activity up; signed purchase agreements down

By David Arbit on Monday, April 17th, 2017

Seller activity rose 1.3 percent compared to March 2016. The number of signed purchase agreements declined 3.0 percent, though the number of closed sales rose 8.3 percent. Housing demand has outpaced supply, thus continuing the trend of falling active listings. In March, inventory levels fell about 20.0 percent compared to 2016 levels. Those shopping for homes have 10,213 properties from which to choose in the metro area. Given that figure stands near a 15-year low and demand has reached an 11-year high, affordably-priced homes that are listed often fetch full-price offers or better in record time.

These market conditions tend to drive prices higher. The median sales price increased 7.0 percent from last March to $237,500. Multiple offers on attractive, turn-key properties in the most desirable neighborhoods and school districts are common in low inventory environments. Properties also tend to sell quickly and for close to or above list price. Average days on market until sale fell 14.1 percent to 73 days compared to 85 in March 2016. It’s worth noting that the median days on market for March was a brisk 34 days. The average percent of original list price received at sale was 98.1 percent, 1.3 percent higher than last March. Similarly, the median percent of last list price received at sale was 100.0 percent. The Twin Cities has only 2.0 months of housing supply—the lowest March reading since 2003. Generally, five to six months of supply is considered a balanced market where neither buyers nor sellers have a clear advantage.MAAR-March-2017-Stats-News-Release-702x489

“Buyers were still very active during the first quarter,” said Cotty Lowry, Minneapolis Area Association of REALTORS® (MAAR) President. “This is encouraging as households adjust to marginally higher borrowing costs, though it’s likely a lack of listings that’s suppressing even stronger gains.”

A thriving local economy has been conducive to housing recovery. The most recent national unemployment rate is 4.5 percent, though it’s 4.2 percent locally. The Minneapolis–St. Paul region has a diversified and resilient economy with a talented workforce 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 4.1 percent lately, still well below a long-term average of about 8.0 percent. Barring any unforeseen events, the Federal Reserve is likely to increase their target federal funds rate at least once more this year. Wage and inventory growth are key to offsetting affordability declines brought on by higher rates.

“We’re still seeking a healthier balance in the marketplace that enables all participants to achieve their goals,” said Kath Hammerseng, MAAR President-Elect. “It’s essential to bring additional options to buyers, particularly in the more affordable price brackets.”

From The Skinny Blog.

Dear sellers, now is your time to shine!

By David Arbit on Monday, March 20th, 2017

With the number of homes available for sale at a 14-year low, the well-priced homes that are on the market are often getting full-price offers or better in record time. Active listings continue to drop, they’re currently down 25.3 percent compared to last February. Those shopping for homes have 8,820 options from which to choose. But not enough sellers are taking advantage of the opportunity to have their listing truly stand out. New listings declined 7.5 percent to 5,418, while buyers signed just slightly more contracts this February compared to last. Pending sales increased 0.5 percent from February 2016. The fact that contract signing hasn’t slowed down despite the supply constraints is testimony to the determination of Twin Cities home buyers. Closed sales, on the other hand, fell 18 units shy of last year’s levels.MAAR-February-2017-Stats-News-Release-702x490

The median sales price increased 7.6 percent from last February to $223,000. Competing bids in the form of multiple offers on attractive properties in the most desirable neighborhoods are common in low inventory environments. Properties also tend to sell quickly and for close to or above list price. Average days on market until sale fell 14.6 percent to 82 days compared to 96 in February 2016. The average percent of original list price received at sale was 96.5 percent, 1.4 percent higher than last February. Given the strong demand and weak supply, our market has only 1.8 months of supply—the second lowest figure on record for any month since January 2003. This indicator measures the balance between supply and demand. Generally, five to six months of supply is considered a balanced market.

“So far 2017 is off to a healthy start, but we need more sellers in order to sustain this recovery,” said Cotty Lowry, Minneapolis Area Association of REALTORS® (MAAR) President. “Diminishing gains on the demand side could already reflect the dramatic supply shortages that today’s home buyers are experiencing. It’s critical to aim for balance—where neither buyers nor sellers have a clear advantage.”

A thriving local economy has been conducive to housing recovery. The most recent national unemployment rate is 4.7 percent, though it’s 3.6 percent locally. The Minneapolis–St. Paul metropolitan area has one of the lowest unemployment rates of any major metro area. Private job growth has also exceeded expectations lately.

The average 30-year fixed mortgage rate stands at 4.17 percent, still well below a long-term average of roughly 8.0 percent. Many observers are expecting the Federal Reserve to increase their target federal funds rate at the March meeting. Barring any unforeseen events or economic data surprises, the Fed is likely to make at least one more rate adjustment in 2017. Job, wage and inventory growth are key to offsetting affordability declines brought on by higher rates.

“The momentum in the market continues to favor sellers and higher prices—though not in every area nor at every price point,” said Kath Hammerseng, MAAR President-Elect. “As we move into the spring market, more buyers will compete for limited inventory, making this environment quite attractive for sellers.”
From The Skinny Blog.

The Great Mean Reversion

By David Arbit on Tuesday, February 28th, 2017
4-pct-annual-growth-702x479© MAAR 2017 | All rights reserved.

We have all heard the saying “everything eventually reverts to the mean.” No? Fair enough. There’s a saying that goes “everything eventually reverts to the mean.” It’s a way of expressing that, over a sufficient time period, a data set can only remain above or below its long-term trend for so long, but eventually should come back in line with historical averages or growth rates. Applied to our industry, home prices could only stay above trend for so long. Alas, the gravitational pull of market forces is a powerful and unrelenting wonder (with mostly measurable and rational underpinnings).

Take, for example, the graphic above which plots reported average home prices alongside 4.0 percent steady annual growth per year. Both trendlines start at the same point–the reported averages sales price in 1990. After the early 1990s ran slightly below trend, 1997-2008 way above trend, 2009-2013 well below trend and 2014-2016 slightly above trend, we are right back in line with where the 4.0 percent growth trend is. This is why some economists use a pendulum analogy when discussing market forces. Markets tend to over-swing “balance” or “equilibrium.” With so much momentum, they tend to move from one extreme to another, without stopping in the middle. We tend to lurch from buyer’s markets to seller’s markets to buyer’s markets and now back to a seller’s market.

Huh. Funny how that works. All the fuss, all the lost equity, all the subsequent appreciation, all those foreclosures, all the boom-bust cycles, all those debates about over or under-regulated wall street banks and mortgage markets and whether housing can go higher still and if incomes can keep up. And for what?

Home prices ended up more or less where they belong. We’ve reverted right back to our historical growth trend. The market is back where it should be had housing appreciated at a steady 4.0 percent per year.

It’s not just housing, commodity and capital markets that gravitate back to their long-term trajectories. Sea turtles, sockeye salmon and other members of the animal kingdom also understand the instinctual pull of home. No matter how far they roam, they travel vast distances to return to their original habitat–the environment that gives them a sense of familiarity and balance.

From The Skinny Blog.

Housing on a Healthy, Balanced Diet, but Hungry for New Supply

By David Arbit on Thursday, February 16th, 2017

Right around the time when second-hand shops receive an influx of donated exercise equipment, we get our first glimpse of the year at our local housing market. Overall, it was a healthy and balanced start to the new year. New listings rose 3.1 percent to 4,304—the second strongest gain in nearly a year. Pending sales increased 4.3 percent compared to last January. Given the rush to lock in interest rates and close deals before the end of 2016, closed sales lagged slightly.

When it comes to inventory, the market is still feeling deprived. There were only 8,212 for-sale properties last month, 25.4 percent fewer than last January. That officially marks a 14-year record low for inventory. The median sales price increased 4.7 percent from last year to $225,000. Additional supply is a missing piece of this recovery and is critically needed. Competing bids on the most attractive properties are common in low inventory environments, and homes tend to sell quickly for close to or above list price. Average days on market until sale fell 7.1 percent to 79 days compared to 85 in January 2016. The average percent of original list price received at sale was 95.9 percent, 0.9 percent higher than last January. But the median days on market fell to 53 days and the median percent of current list price received increased to 98.9 percent. Given strong demand of late, the marketplace has only 1.6 months of supply—the lowest figure on record for any month since January 2003. This indicator measures the balance between supply and demand. Generally, five to six months of supply is considered a balanced market.

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“Both buyers and sellers were feeling confident compared to January 2016,” said Cotty Lowry, Minneapolis Area Association of REALTORS® (MAAR) President. “It is obviously still early in the year, but that increase in new listings was the second strongest gain in about a year. If that is sustained, we should be able to achieve the balancing act of steady price gains while maintaining our affordability.”

Though 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, new construction properties had a much larger year-over-year sales 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 thriving local economy has been conducive to housing recovery. The most recent national unemployment rate is 4.7 percent, though it’s 3.6 percent locally. The Minneapolis–St. Paul metropolitan area has one of the lowest unemployment rates of any major metro area.

The average 30-year fixed mortgage rate stands at 4.17 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 waited until December. Expect about two minor increases in the federal funds rate in 2017—barring any unforeseen events. Job, wage and inventory growth are key to offsetting any declining affordability brought on by higher rates.

“The trick will be increasing supply enough to keep price growth at a moderate pace,” said Kath Hammerseng, MAAR President-Elect. “That will allow households to better absorb rising borrowing costs. Overall 2017 is expected to be another good year for housing.”

From The Skinny Blog.

2016 Annual Wrap-Up: Home Prices Reach Record High and Home Sales Reach 11-year High

By Erin Milburn on Tuesday, January 17th, 2017

The big story of 2016 was twofold: the median sales price reached an all-time high; while closed sales reached an 11-year high. Closed sales nearly broke their all-time record, but fell 0.3 percent short of their all-time 2004 high. Seller activity declined 1.1 percent. Near-record sales activity combined with flat-to-weaker seller activity created a supply shortage. Active housing supply levels fell to a 14-year low. This shortage has created a competitive environment where multiple offers have become more common. Sellers are receiving strong offers in record time, but this fast-paced market can frustrate some consumers. Days on market fell to a 10-year low. Absorption rates fell to 1.6 months of supply at year-end, a record low. Foreclosure activity fell for a fifth straight year and is back below 2007 levels. Although single-family homes made up about 75.0 percent of all sales, both townhomes and condos showed a stronger increase in sales. Similarly, previously-owned homes made up about 93.0 percent of sales but new construction showed a much stronger increase.

2016 by the Numbers

Sellers listed 76,531 properties on the market, a 1.1 percent decrease from 2015
Buyers closed on 59,988 homes, a 6.2 percent increase from 2015 and the highest figure since 2005
Inventory levels for December fell 26.3 percent to 8,197 units compared to 11,125 in 2015—a 14-year low
Months Supply of Inventory was down 30.4 percent to 1.6 months, also a 14-year low
The Median Sales Price rose 5.5 percent to $232,000, which is an all-time record high
Cumulative Days on Market declined 15.8 percent to 64 days, on average (median of 33)—a 10-year record low
Changes in sales activity varied dramatically by market segment

  • Single-family sales rose 5.1 percent; condo sales rose 9.5 percent; townhome sales rose 9.9 percent
  • Traditional sales rose 10.0 percent; foreclosure sales fell 25.0 percent; short sales fell 31.1 percent
  • Previously-owned sales rose 5.7 percent; new construction sales rose 14.9 percent

Poignant Quotables

“The most important achievement of 2016 was erasing the losses in prices and equity caused by the downturn. As sales surpassed their 10-year high, Twin Citizens demonstrated that they are just as committed to homeownership as ever. There are some manageable challenges, but a favorable affordability picture, attractive rates, job growth and wage growth will continue to sustain a healthy real estate market,” said Cotty Lowry, President of the Minneapolis Area Association of REALTORS®.

“We reached some key milestones last year, and hope to continue with this momentum in 2017. It is a great time for those considering listing their home, as buyers are looking for more options. With median sales price at an all-time high, now is a great time to find out the current value of your home,” said Tina Angell, President of the St. Paul Area Association of REALTORS®.
From The Skinny Blog.

Eager buyers, tepid sellers and an imminent December rate hike

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.”

Nov2016_PR_Image-702x493While 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.

Strong Demand, Rising Prices, but Weak Supply Heading into Winter

By Erin Milburn on Monday, November 14th, 2016

Pending home sales rose 1.6 percent compared to last year and reached their highest level for any October since 2004. Sellers listed 5,249 for-sale properties on the market, 9.5 percent fewer than last October. Closed sales increased 0.8 percent to 4,791. That closed sales figure is between 2004 and 2005 levels. Although home prices have reached their seasonal peak for 2016, the median sales price increased 6.5 percent from last year to $230,000. Buyers are still frustrated by a lack of options. Inventory levels fell 19.0 percent to 12,625 active properties. Additional listings are needed to ease the current supply shortage—especially at the entry-level and first-time buyer 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 14.3 percent to 60 days. The average percent of original list price received at sale was 96.9 percent, 0.8 percent higher than last year. But the median percent of current list price received is 99.6 percent, the highest level since 2005. Months supply of inventory fell 24.2 percent to 2.5 months—the lowest October 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. Less than that indicates a seller’s market.

NewListings-PR_2016-10

“Demand is still soaring while listing activity has weakened,” said Judy Shields, Minneapolis Area Association of REALTORS® (MAAR) President. “Partly because of that, we expect prices to remain firm through the winter months barring any unforeseen events.”

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, while previously-owned properties make up the largest share of sales, newly constructed properties had a stronger year-over-year gain.

A healthy Twin Cities labor market has been conducive to housing recovery. The most recent national unemployment rate is 4.9 percent, though it’s a healthier 3.3 percent locally. The Minneapolis-St. Paul-Bloomington metropolitan area has the fourth lowest unemployment rate of any major metro area.

Locally, the 30-year fixed mortgage rate stands at 3.55 percent compared to a long-term average of about 8.0 percent. Rates are still near their lowest levels in three years. Marginally higher rates were widely expected in 2016, but the Federal Reserve hasn’t moved rates since last December. Even though the Fed was widely expected to raise rates this December, market volatility could change that.

“Buyers are still very much motivated by the current environment, it’s weak seller activity that is holding this market back,” said Cotty Lowry, MAAR President-Elect. “As this recovery moves into its sixth year, it’s critical to remember that markets and economies are never ‘due’ for a decline the way the Cubs were ‘due’ for a World Series win. There is usually a reason.”
From The Skinny Blog.