This past year has been interesting for residential real estate in the Twin Cities area. Certain aspects of the market were consistent with prior years while there were a few new factors to consider. Overall, the real estate market remained strong and sales were robust.
Like the previous six years, we began the year with an extremely low inventory of homes for sale. The 11,381 listings on the market in January was the lowest figure in recent history. The lack of choices has been perplexing for buyers. Unfortunately, the number of active listing decreased as the year progressed. Currently, there are roughly 10,500 active listing on the Multiple Listing Service, a new low. To put this in perspective, in the Spring of 2008 there were nearly 34,000 active listings on the market.
The result of the diminishing number of listings has been mostly positive for sellers. There were many instances of multiple offers
which tend to drive sales prices higher. This helped instigate an overall increase in the median sale price in the Twin Cities ($265,000). Of note is the fragmentation of the market as the current cycle advances. The two primary determining factors are price and location. For example, homes listed below $250,000 are selling rapidly and close to, if not over, list price. Meanwhile, homes priced over $1 million are spending more time on the market and usually selling below list price. In general, homes listed closer to the core of Minneapolis/St. Paul are selling more quickly than homes in the more distant suburbs. We expect this trend to continue.
An aspect that has captured headlines recently is the slowdown in sales. Closed and pending sales are down roughly -4% compared to 2017. I do not think this is something to be concerned about as we need to consider the larger picture. We are experiencing a market deceleration, not a contraction; there is a big difference between the two! Closed sales are down 3.2% compared to 2017, almost equal to 2016 and yet they are still far greater than sales numbers between 2006 – 2015. The Twin Cities is fortunate to have diverse and robust industries. We are somewhat insulated from big market swings because of this and enjoy the lowest unemployment rate of any other major US metro area.
An aspect that began to impact the real estate market this year is the steady increase in mortgage interest rates. After years of historically low interest rates, we have experienced four rate increases in 2018; the most recent came on December 19th, 2018. These increases haven’t stifled sales but have decreased the amount a buyer can borrow. This has frustrated buyers who were unable to secure a home during the time of lowest rates, but rates continue to be far below long-term averages. The Federal Reserve indicated that it will proceed with caution regarding interest rate increases this year. That being said, if the US economy continues its current trajectory, it is anticipated that interest rates will continue to steadily increase
In summation, the Twin Cities real estate market had another active year. While the sales numbers were down when compared to 2017, it was a very good year for overall sales. Listings are still in short supply but moving toward a more balanced market. The median sales price in the Twin Cities increased to the highest value in history. The Twin Cities real estate market continues to evolve, and we will track it closely in order to keep you informed. We look forward to another active year in 2019.
If you have questions about the upcoming spring market or would like more information about your home’s value, please reach out. Fazendin Realtors is available to help you fulfill all of your real estate needs, both regionally and nationally.
Andy Fazendin – Owner/Broker