Ready, set, go! The Twin Cities residential real estate market is off and running in the 2017. So far it looks a lot like the previous years, which is mostly good, but not all good. Let’s start with the good.
First off, listings were up 3.1% compared to January 2016. Hopefully this is an indication of what’s to come because the most challenging aspect of the market will be listing inventory. More on that later. Pending sales increased 4.3% over last year’s number, signifying that there is still a huge demand from buyers. The third positive metric is the median sales price, which increased 4.7% over January 2016.
As mentioned above, the biggest challenge this year will once again be shortage of new listings (listing inventory). I have written about the challenges of listing inventory for years now because it has been significant. Once again, we are starting the year with a lower number of listing than the previous year. This has been the case 7 out of the last 9 years and this year we have descended to new inventory lows. Currently there are roughly 8200 homes for sale, compared to 11,000 twelve months ago, that is a 25.4% decrease. In addition, because demand has increased while supply has decreased the month’s supply is even worse. In a balanced market, there is 5-6 months’ inventory of homes for sale. Last year in January there were 2.3 months, this year there is 1.6 months, that is a 30.4% decline! As you can see, things have gone from bad to worse for listing supply.
In a nutshell, the market is poised to have another great year for residential real estate sales in the Twin Cities. New listings, pending sales and median sales price are all up over January 2016. An increase in listings has happened and that should continue, but I am worried that the demand will outpace the supply. The result of this dynamic is a hyper-competitive market for many buyers.
Lastly, I need to point out that the statistics I am referencing are general for the entire Twin Cities region and all price ranges. Market dynamics can differ greatly from city to city and even block to block. As one of my colleagues said to me earlier today “it’s a strong market for sellers, but there are holes all over the place”. Meaning there are still weaker areas when it comes to supply and demand.
I hope you found this insightful. Off we go in 2017!