As we begin the New Year it is an excellent time to look back at 2014 and make a few predictions for the year ahead. 2014 can be summarized as the year the Twin Cities real estate market “normalized”. That’s right, we are not back to normal because we are still recovering from the recession, but many of the fundamentals of a normal market returned in 2014. All indications are that 2015 will be another positive year for residential real estate.
Here are relevant stats from 2014:
• Listings were up 2.3 percent from 2013 and at the highest levels since 2010
• There were almost 50,000 closings, the 2nd highest number since 2005
• Inventory (number of homes for sale) is a little complicated: While we experienced the lowest inventory levels in 12 years last month with 11,822 active listings, during the critical spring market we had a surge of new listings. For example, in May 2014 there were 13.4 percent more listing than May of 2013
• Months’ supply of listing was similar to 2013, hovering around 3 months
• The median sales price was $205,739, a 7.2 percent increase over 2013
• Lender-mediated properties (short sales and foreclosures) made up 16.5 percent of closings, down from 26.3 percent in 2013 and 39.7 percent in 2012
I am more confident than ever that the residential real estate market in the Twin Cities is in a good place. The market continues to recover in a sustainable way. I feel this way for a number of reasons; employment, interest rates and consumer confidence.
Currently the Twin Cities has the lowest unemployment rate in the country for a large metropolitan area, hovering between 3%-4%. Employment is fundamental to home ownership and this statistic bodes well for the future.
Interest rates remain historically low at around 4 percent for a 30-year fixed mortgage. This should continue to be a motivating factor for buyers and sellers. Interest rates are nearly impossible to accurately predict, but all indications are that they will remain low throughout 2015.
Consumer confidence is high. This is difficult to quantify with a statistic, but it is tied to factors that are positive such as employment, wages, gas prices and the local and national economy. Simply stated, from 2008-2012 consumers had fear in what the future held. I think that has changed significantly. People are more willing to make large purchases, like a home, when they feel confident in the future.
There you have it. We are very happy with 2014 and bullish about 2015. That said; stay tuned as this year develops, it’s sure to hold a few surprises.
Best to you in 2015!