The 2014 Minnesota housing market experienced some serious stagnation. However, along with the stagnation, this market also saw consistent signs of growth and a slow (but steady) improvement. As of the time this article being published, most market analysts (as well as many sellers) expressed a feeling of confidence in their housing market. The market backed up these optimistic views through an increase in the number of properties on sale: in September 2014, 7.2 percent more homes were placed on sale in the market than during the same month a year before. The market also experienced fewer foreclosures and short sales. These facts serve as yet another sign of price normalization and a return to much more calm conditions than past Minnesota housing markets. Since the number of foreclosed traditional homes slowly dwindled for several months now, logic tells us that the inventory for this segment must now sit at lower rates than in the recent past few years. In September 2013, the number of foreclosed housing units for sale dropped by 18 percent over the course of that year.
These improved conditions of the 2014 Minnesota housing market also brought about a much needed relief to buyers as well. In 2012 and 2013, buyers felt hard-pressed to find single-family housing units to their liking. They would drive out from one property to the next and struggle to find anything that met their demands. At the time, demand far exceeded supply, which drove prices to the ceiling over short spans of time. In these 2012-2013 markets, single homes routinely garnered multiple purchase offers. This practice changed in more recent times. September 2014 marked the 31st consecutive month of sales price increases in Minnesota. However, the median sales price only grew by 5.1 percent on the year that month. Housing affordability remains relatively stable in the state despite the fact that most market experts expect these increases to continue.
The macroeconomic factors that actively influenced the 2014 Minnesota housing market thus far include the following:
- Lower interest rates on mortgage loans compared to the 2013 Minnesota housing market. Not many economists and market analysts expected this turn around. Interest rates for mortgages actually stagnated to new, low levels in 2014. This factor made the market appear much more affordable and attractive to consumers.
- Rampant debt and stagnant income levels for first-time buyers. Student debt remains as much of an issue in the state of Minnesota as it does throughout most other U.S. states. Though the market remains relatively stable, first time home buyers are still experiencing hardship in scraping together the money they would need to have access to a mortgage.
- Relatively low unemployment levels. Meanwhile, the comparatively low numbers of unemployed individuals in Minnesota drove up market confidence. As recent data revealed, the Twin City area experienced some of the lowest rates of unemployment among all the metropolitan areas in the United States. This rate currently stands at only 3.8 percent. Low rates of unemployment obviously boost sellers’ confidence in the market’s return to normalcy.
Interestingly enough, the Star Tribune indicates that the Minnesota housing market remains one of the most affordable throughout the entire country. This is being caused by home prices in the state remaining low while wages are high. The 20 to 34 year-old demographic caused this positive scenario. Coincidentally, this same demographic represents the largest population of new residents in the Twin City metropolitan area. However, millennials, as the press has endearingly referred to them, are not rushing to purchase homes. As such, activity on the first home segment dwindled in most markets throughout the country. Minnesota is not an exception to this rule. Although the stock market has reached new highs, Millennials still aren’t rushing out to purchase their first home simply because of all of the tough economic times they’ve experienced up until now. With uncertainties regarding their jobs and copious amounts debt to their name, this generation is bidding its time in the 2014 Minnesota housing market. Unfortunately for the rest of us, this generation will probably be instrumental in helping the Minnesota housing market return to pre-recession levels.
Here are the key figures for activity in the Twin City’s 2014 housing market:
- An above-average affordability index. According to the Minneapolis Area Association of Realtors, the affordability of median priced homes in the Twin Cities area remained flat throughout most of the year. The area only experienced a very slight drop from August 2013 levels (down 1.1 percent to 176 percent). This index still remains below the peak value recorded in 2012. However, it sits higher than the current historical average.
- A larger inventory of available housing and more activity than before on the traditional residential segment of the market. The same source cited above explains that 90.6 percent of all trading activity took place in the segment of new listings. The source also cites 89.4 percent of all the closed sales and 88 percent of the housing stock is also in that segment. The current situation remains at its best levels since the middle of 2010 and April 2007, in this respect.
- The number of days a property remains for sale on the market dropped by 2.9 percent in the Minneapolis-St. Paul metro area. The percentage represents a decrease down to 68 days on average.
- The median listing price increased by 6.9 percent. That percentage figure represents an increase to $235,000. The price per square foot for sale increased by 5.3 percent (or $126).
Several other positive signs popped up in terms of housing market activity. These signs can be seen in both the Twin City area as well as throughout the entire state of Minnesota. As the year draws close to its end, we feel interested in seeing how the state’s housing market behaves during a time of the year that many regard as the slow part. Real estate experts currently encourage sellers to go out on the market and actively sell. Statistics indicate that these potential homeowners usually represent the most serious buyer set on purchasing a home. Concurrently, experts expect that the 2014 Minnesota housing market conditions during the final three months of the year will likely encourage buyers since the competition over the existing inventory should drop off considerably.