After experiencing a torrid pace of sales from March through June, the market slowed slightly in July. That being said, aside from minor nuances, the residential real estate market has had the same dynamics over the past five years.
In general, entry-level housing has remained in high demand with a low supply of listings. This has led to a hyper-competitive environment in that segment which has resulted in shorter market times, multiple offer situations and increasing sale prices. This is a very good thing for sellers of such properties and a frustrating situation for buyers. While the entry level segment of the market has grabbed headlines, there are other segments in the market that are not so robust.
There are many segments in the Twin Cities markets and these are defined primarily by price, location and year built. Because of this, the market is segmented like a mosaic, not like a map with clearly defined lines. For an example, let’s look at the metric Months Supply of Listings. This statistic is a measurement of how many months it would take for all current listings to be sold if current demand remains the same and no news listings entered the market. I like this stat because it considers both the raw number of available listings along with current buyer demand. For all price ranges, the Months Supply is 2.4 months. This is also the number you will see cited in the local news. That is a short amount of time; 5-6 months is the historical average, and makes one think this entire market is on fire! A closer look tells a different story, one of a more fragmented market:
Months Supply of listings:
Price Range Months Supply
All prices 2.4 months
$0 – $250,000 1.5 months
$250,000 – $500,000 2.6 months
$500,000 – $1,000,000 6.2 months
$1,000,000+ 13.5 months
What this table illustrates to me is that it’s a seller’s market for listings under $500,000, it is a balanced market for homes between $500,000 and $1,000,000 and a buyer’s market for homes priced over one million.
Whether you are buying or selling, this should be considered when developing your strategy. For example, if you are selling a home priced under $200,000 it may be worth the risk of an aggressive list price knowing that the demand is massive and supply is limited. In such situations, buyers may be willing to pay slightly more than they feel the home is worth. On the other hand, if you plan to sell a home over $1 million you should be careful with listing it too high because you may have no showings. In addition, higher priced sellers may hope for a quick sale, but should not expect one.
The Twin Cities real estate market is increasingly complex and nuanced. Buyers and sellers need to be informed beyond what is written in the local papers. While there are many resources online, none can replace the knowledge and resources that your realtor can provide to you.