The real estate market continues to be a tale of inventory. The current 2.1 months supply is a new low and 34.4% below last year at this time… and we thought it was low last year! What is holding the market back is a lack of homes available for sale.
New listings are on their holiday slide, actually 1.2% ahead of last year… but pending sales are 12.3% ahead of last year.
Closed sales are also about 12% ahead of last year at 12.1%. Supply isn't keeping up with demand and the number of homes for sale continues to fall as eager buyers snatch up the good properties almost as soon as they hit the market. Average days on market is 12.4% below last year, at 78 days.
Months supply of homes for sale has been hanging low all year and the current 2.1 months is the lowest I find on record. The market is considered balanced between buyers and sellers when there is about a 5-6 month supply. This shortage is keeping prices strong.
But while current prices are moving closer to those in the bubble years before the crash the supply was also high then… 9.3 months supply in 2007 versus 2.1 months now.
In 2007 interest rates were also in the mid 6% range rather than our recent increase to low 4%, which impacts affordability. The Housing Affordability Index* was very low in the bubble years. Of course affordability climbed during the 'fire sale' years when prices crashed and foreclosures dominated the market, but it has been relatively steady the last 3 years as the percentage of foreclosures and short sales has fallen to less than 5% of the market. I would expect the Afforability Index to go down a bit more as interest rates increase, but I tend to agree with national predictions that price appreciation will also moderate, keeping our real estate market healthy.
*The Housing Affordability Index measures housing affordability for the region. An index of 120 means the median household income was 120% of what is necessary to qualify for the median-priced home under prevailing interest rates. A higher number means greater affordability.
With a big buyer pool the real estate market is in a healthy position only held back by a shortage of homes for sale.
The figures and charts above are for the combined 13-county Twin Cities metropolitan area released by the Minneapolis Area Association of Realtors.
Never forget that all real estate is local and what is happening in your neighborhood may be very different from the overall metro area.
Local real estate market reports on 350+ metro area communities
Sharlene Hensrud, RE/MAX Results – Email – Minneapolis – St. Paul Real Estate Market
HomesMSP Team- Sharlene, John, Angela – Minneapolis-St. Paul Realtors
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