The November statistics for the Twin Cities real estate market recently came out and there were few surprises. One can’t say the same regarding the US presidential election! The election results and how it will affect the real estate market will be interesting to observe. At this point it is too early to draw any conclusions, but the lack of a market reaction is notable. Pending and closed sales were both up compared to 2015, while new listings lagged slightly. As a whole, the residential real estate market remains strong.
One notable aspect was a slight, quarter point, increase in mortgage interest rates. This rise has been anticipated since the last increase, nearly 12 months ago. The timing is interesting, as it would be hard to imagine the Federal Reserve increasing rates if they thought the economy was in jeopardy. To the contrary, this rate hike alludes to an optimistic economic forecast for the United States. In addition, Janet Yellen, the Fed Chair hinted at the potential for 3 more rate increases in 2017. This will most certainly be based on how the US economy is performing as the year progresses.
Locally, the Months Supply of Homes for sale has declined to new lows; currently there are just over 2 months supply, a 27.6% drop from last year at this same time! This metric will not improve until the “spring market” takes hold which is several months away. In short, if you are looking to buy a home your options are extremely limited.
The three items I will be watching closely in 2017 are the policies brought by the new administration in Washington DC, mortgage rates and supply of homes for sale. In general, I am very optimistic about the coming year. It should be interesting.
Happy Holidays and thanks for reading!