With prices high and inventory low, Minnesota’s housing market is solidly on the rebound.
“Home sales are at their highest level in three years, according to new national figures released on Thursday,” reported CBS Minnesota (“Realtors Expect a Bountiful Spring for Real Estate”) on March 21, 2013. “In Minnesota, the big story remains the lack of homes on the market, with inventory down more than 15 percent from last year.”
Minnesota’s home prices are up more than 14 above last year’s prices, with the median sales price in February at $142,000 compared to $125,000 for the same period the previous year.
Zillow, a real estate data and valuation firm, reports that Minneapolis residents should expect home prices to remain flat or rise only slightly through the first six months of 2013.
Minnesota Association of Realtors CEO Chris Galler told CBS Minnesota that he expects prospective home sellers who have been waiting for the market to improve will “now enter the marketplace and move on with their lives.”
Not that 2012 was a bad year for real estate in Minneapolis and St. Paul, in particular. KSTP reported in January (“Twin Cities Real Estate Market Goes Up; 2013 Promising”) that “the average home sale price went up 10 percent in 2012 in the Twin Cities, according to real estate expert, Herb Tousley, of the University of St. Thomas. Tousley says home inventory has also gone down from 20-thousand to just 14-thousand available homes on the market in 2012.
“Tousley says low interest rates and fewer homes on the market will continue to drive up prices in the Twin Cities real estate market. Tousley says that makes 2013 a very good year for sellers. Tousley also says the percentage of foreclosure, or short sales, has fallen to less than 40-percent in 2012. At the peak of the recession in 2009 and 2010, Tousley says, distressed home sales accounted for 55 to 60-percent of all home sales.”
According to MetroDepth.com (“Minneapolis Real Estate Market Stable into 2013,” Aug. 17, 2012), Minneapolis boasts one of the most stable metropolitan real estate markets in the U.S.
The article cites a number of factors bearing out its claim, including the following: “Between May 2011 and May 2012, home prices in the Minneapolis metro area have risen by 4.7 percent. This is according to the latest figures reported by Case-Shiller/S&P. Annual numbers like this are a better indicator of true market health, as compared to monthly data. But even the monthly numbers are good. Between April and May of this year, home prices in Minneapolis rose by 3.1 percent.
“The Minneapolis real estate market is also getting a boost from inventory reduction. And it certainly doesn’t hurt that mortgage rates are still hovering below 4 percent. On August 16, Freddie Mac reported that the average rate for a 30-year fixed mortgage was 3.62 percent. These low rates will continue to fuel housing demand, going forward.
“As a result of these and other factors, homes in Minneapolis are selling fairly quickly. This is good news for homeowners who need to sell.”
Meanwhile, the article cites the Minnesota Homeownership Center as indicating foreclosures in the Minneapolis metro area dropped by 15 percent during the first six months of 2012.
In a follow-up article published on Feb. 19, 2013 (“St. Paul, Minneapolis Real Estate Markets Charge into 2013”), MetroDepth.com reported both Minneapolis and St. Paul had cleared the worst of the housing crises and had entered full recovery mode.
The article reads in part, “according to the Minneapolis Area Association of Realtors (MAAR), home sales in the Twin Cities area rose 16.9 percent in 2012. At the same time, housing inventory has dropped sharply. So it should come as no surprise that home prices are rising as well. According to MAAR, real estate prices in the St. Paul-Minneapolis area have risen by nearly 12 percent over the last year or so. … This report mirrors trends shown in other economic reports as well. For instance, the latest release of the Case-Shiller home price index showed an 11 percent year-over-year price gain for the Minneapolis real estate market. This gain was measured from November 2011 to November 2012.”
The Twin Cities’ housing inventories dipped significantly through 2012, with Minneapolis listings declining by 28 percent and St. Paul’s listings following suit.
The Pioneer Press reported in March (“Housing recharges in Twin Cities”) that the Twin Cities’ median February home price was $205,000, up 14.2 percent from the same month the previous year.
The article read in part, “the low-inventory trend also is creating opportunities for home builders. There were 360 building permits issued for single-family homes in the 13-county metro area in January, which is an 80 percent increase compared with the 200 permits issued in January 2012.
“Minnesota employment data released last week showed residential construction may be off to a bit of a slow start here, likely because of winter’s grasp on the region. But the larger trend is increased construction: Applications for building permits rose nationally to 946,000 in February, the highest level since June 2008.
“Another study … from the U.S. Commerce Department showed the Midwest was the only region of the country that saw sales climb in February — from January — with a 13.7 percent increase. Nationally, the median price of a new home sold in February was $246,800, up 2.9 percent from a year ago.”
As for other factors influencing Minnesota’s real estate market, job growth continues to be impressive statewide. According to MetroDepth.com, “even at the deepest depths of the recession, the Twin Cities fared better than the nation as a whole. Consider the latest numbers. In December 2012, the unemployment rate for the St. Paul-Minneapolis metro area was 5.1 percent. That was down from a peak of 8.5 percent unemployment in 2009, and much lower than the most recent national average (7.8 percent). Job growth supports housing by bringing more buyers into the market. When supply drops and demand rises, prices go up.”
Finally, mortgage rates should continue to create housing demand through 2013. Freddie Mac recently announced the average rate for a 30-year fixed-rate mortgage was 3.53 percent.