According to the University of St. Thomas Residential Real Estate Index:
2012 – The Year In Perspective
History will note that 2012 was the year that the housing market finally bottomed out and began to recover. The median price low point for all types of sales in the Minneapolis / St. Paul market was recorded in February. Since that time the median prices recorded in 2012 have exceeded the 2011 levels every month.
The median sale price for the overall market peaked in June of 2006 at 238,000 and the low point was recorded in February 2012 at $138,250. The median sale price of a traditional home peaked in June of 2006 at $239,900 and recorded its lowest point in February 2012 at $180,000.
Beginning in February median prices for traditional homes increased steadily until they peaked in August 2012 at $219,700; and as was previously noted, finished the year at $208,000.
The number of closed sales in 2012 exceeded the number recorded in 2011 every month. 2012 will also be noted as a year when the inventory of homes for sale declined to unprecedented low levels. The fact that many homeowners were underwater or had little equity in their homes along with feelings of general economic uncertainty kept many homeowners who would normally be sellers on the sidelines.
2013 – Where Do We Go From Here?
What do these events mean for 2013? Interest rates are expected to remain at current extremely low levels during 2013. Low interest rates, a shortage of homes for sale, and generally improving economic conditions will continue put upward pressure on median sale prices through the spring and summer.
The median sale price of all types of homes should continue to show healthy year over year increases for the first half of the year. As home prices continue to increase, homeowner’s equity positions will continue to improve and more homes will be put on the market, increasing the supply of available homes. As the supply of homes increases and the shortage abates, the market should become more balanced.
Once this happens prices will continue to increase, although at a slower rate. Look for annualized increases in median price of 2% to 3% in the second half of 2013. The number of foreclosures and distressed sales will continue to moderate in 2013. The percentage of distressed sales should fall into the 25% to 35% range in comparison with the 35% to 55% range that was observed in 2012.
The shortage of homes for sale coupled with an increase in the rate of household formation that comes with an improving economy will continue to create opportunities for home builders. New construction of both multi-family and single family homes should continue to increase throughout the year with 2013 bringing much needed relief to home builders and the construction industry.
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