Condo supply going up!

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There has been talk in the media lately that after years of housing supply shortage, it is now a buyer’s market for downtown condos and townhouses. Downtown surely feels this shift more than other parts of the metro because condos dominate the market there, but it reflects a metro-wide shift as people started longing for more space inside and out as the coronavirus shutdown took hold.

I have always felt that months supply of inventory gives the best sense of the market because it shows the relationship between the number of properties for sale and the rate at which they are selling. The 1.5 month supply of all metro homes for sale at the end of October was 40% below last year and means everything would be sold out in 1.5 months if buyers kept buying at the same rate and no new homes came on the market. The market is considered balanced between buyers and sellers when there is a 5-6 month supply…. which we haven’t had since 2011.

This indicates a strong seller’s market, and it is not uncommon for sellers to receive offers the first day on the market! When broken down by property type, however, there is a huge difference.

Townhome months supply of homes for sale dropped 33.3% compared to last year and months supply of houses for sale dropped 48.1%. In sharp contrast, the months supply of condos INCREASED 58.3% compared to last October, now at a 3.8 month supply.

You may hear talk of a buyer’s market for condos. While this may feel true, especially for condos in downtown Minneapolis where condos dominate the market, a 3.8 month supply is still a seller’s market at this point in time… but the trend is heading towards a buyer’s market for condos, which we could reach by the end of the year.

You can see in the chart of 12-month change in months supply of homes for sale below that houses, townhouses and condos were all pretty close at the beginning of the year, almost tied in March, then condos took off with months supply increasing since then. It moderated a bit in October, will be interesting to see what the rest of the year brings.

Looking at the actual number of properties for sale in the charts below, you can easily see that the number of houses has dropped significantly compared to last year. Likewise, the number of townhouses for sale is also lower than last year.

When you look at condos, however, you can see the dramatic rise this year in number of condos for sale. While the year started with fewer condos than the same months last year, the number of condos for sale has been higher than last year since June. This means more choices and less competition for condo buyers.