Inventory in the 13-county Minneapolis-St. Paul metropolitan area is up 9.0 percent compared to last year at this time to 18,227 homes. New listings were up 9.8 percent to 8,015, while pending sales declined 3.4 percent to 5,145. Closed sales were down 9.9 percent compared to last July, settling in at 5,198 units.
We’re seeing a transition from rapid recovery in an inventory-constrained market to a stable market consistent with population, income and job growth. At 4.4 months’ supply of inventory, the absorption rate suggests a market in balance, though still technically favoring sellers. The mix of sales continued to skew away from distressed properties and toward traditional homes that sell at higher price points. Thus, the median sales price increased 3.4 percent to $215,000. That’s the highest July median sales price since 2007.
Despite rising home prices and a recovering economy, interest rates continue to remain near all-time lows. To the surprise of many, mortgage rates are actually lower than they were at this time last year. That’s helped elongate a historic period of record high affordability. The affordability index was almost flat, down just 1.1 percent to 179—meaning the median household income was 179 percent of what is necessary to qualify for the median-priced home under prevailing interest rates. A higher number indicates greater affordability. Although the affordability index is below its peak, it remains well above its long-term average.
“The relative affordability of homes in the Twin Cities has kept homeownership within reach for many families,” said Emily Green, President of the Minneapolis Area Association of REALTORS® (MAAR). “Rising rents and low vacancy rates have made buying more appealing. Expanding inventory means more families can take advantage of it.”
Like affordability, housing supply, demand and price points all varied by market segment. While new listings rose 9.8 percent overall, traditional new listings rocketed 21.6 percent higher while foreclosure and short sale new listings fell 42.2 percent and 45.4 percent, respectively. Similarly, overall pending sales were down 3.4 percent, but traditional pending sales rose 7.4 percent while foreclosure and short sale pendings fell 35.8 percent and 53.1 percent.
With higher inventory levels, consumers now have the largest pool of homes to choose from since June 2012. Notably, a growing share of that inventory falls into the more desirable traditional segment—about 88.0 percent. Overall inventory increased 9.0 percent but traditional inventory led the way, up 25.5 percent and counteracting significant declines in both distressed segments.
The Twin Cities have now had 29 straight months of year-over-year median price gains. Foreclosures and short sales made up only 9.4 percent of all new listings and only 12.5 percent of all closed sales. Those are the lowest figures since May 2007 and September 2007, respectively.
“We’re encouraged by the uptick in economic activity in the second quarter,” said Mike Hoffman, MAAR President-Elect. “Additional wage growth and hiring will uphold the continued interest in homeownership.”