November Market Insights | Edina Realty
The last several years in the Twin Cities real estate market have been a boon for homeowners who were ready to sell their homes. Low inventory and high demand from buyers led to ultra-fast sales and rising prices.
With interest rates rising and wages not keeping up with home prices, some hopeful homebuyers are bowing out of the market. Slowing demand and an increase in newly-added listings is beginning to ease the competition among buyers and is leading to a gradual shift toward a more balanced market.
Key insights from October 2018 (compared to Oct. 2017)*
- New listings: 5,503 | +9%
- Median sales price: $265,000 | +9%
- Pending sales: 4,749 | -2%
- Days on market: 48 | -8%
- Inventory: 11,981 | -2%
- Months’ supply: 2.4 | No change
If the economy is good, why are home sales down?
The economy is strong and unemployment is at lows not seen since 1999, but home sales are down. So what’s the deal? Shouldn’t a strong economy equal a hot housing market? Not necessarily.
For the last several years, we’ve been saying much of the same thing: Low inventory and high demand are pushing up sale prices, especially for the entry-level segment. But at what point do prices get too high for buyers to afford?
According to a recent article from the New York Times, from 2011 to 2017, wages in the Twin Cities rose 22 percent while home prices rose 46 percent. Factor in rising mortgage interest rates and tighter lending practices and some buyers will begin to be priced out of the market.
As demand softens, prices (which are still rising) will see their increases start to decelerate and moderate. Today’s sellers may need to re-adjust their pricing expectations and strategies as the market may not bear the prices their neighbors received last spring.
Not surprisingly, price and interest rate increases affect budget-conscious buyers more strongly. The drop in demand (as indicated by pending sales) has come almost solely from the entry-level market segment, where price increases have been the strongest.
Pending sales by price point
- <$300K: -7%
- $300K-$500K: +13%
- >$500K: +9%
Median sales price by price point
- <$300K: +6%
- $300K-$500K: -1%
- >$500K: +2%
So while home sales are down for the market as a whole, some segments are seeing stronger demand and sales. The move-up and luxury markets continue to be less competitive for buyers with much more inventory.
Economic check up
- Minneapolis-St. Paul area unemployment rate: 2.2% (2.8% for the whole state)
- Average rates for 30-year conforming mortgage: 5.0%
- New construction starts for single-family housing were steady with last October.
The long and the short of it
- Most experts expect the market to continue to moderate over the coming months and even years.
- Not all segments of the market are down in sales activity.
- Sellers may want to begin to re-think their pricing strategies to account for lower demand.
Let’s get started
Do you trust a computer algorithm to see the true value of your home? To get a human’s knowledge of what your home could sell for, you need a home value estimate from a professional Realtor. Reach out to be connected with a market expert in your area.
Looking for more information about selling? Download the Ultimate Guide to Selling Your Home for tips and ideas from local professionals.
If buying a home is on your radar, check out our Go-To Guide for Buying a Home. It’s free and full of answers to your home buying questions.
*Data courtesy NorthstarMLS for the 13-County Twin Cities metro area for October 2018
Where you live
Edina Realty serves locations all across Minnesota and western Wisconsin. Here’s a look at the market indicators where you live. All percent changes are year-over-year.
Alexandria Area
- New listings: 100 | -6%
- Avg. sales price: $257,575 | +17%
- Pending sales:94 | -2%
- Days on market:76 | -10%
- Inventory: 445 | -12%
- Months’ supply: 4.5 | -10%
Brainerd area
- New listings: 412 | +3%
- Avg. sales price: $217,050 | -2%
- Closed sales: 476 | +4%
- Days on market: 69 | -14%
- Inventory: 1,872| -17%
- Months’ supply: 4.7 | -16%
Duluth area
- New listings: 361 | +14%
- Avg. sales price: $192,851 | +8%
- Closed sales: 347 | +24%
- Days on market: 57 | -7%
- Inventory: 1,570 | +22%
- Months’ supply: 5.7 | +12%
Southeast Minnesota area
- New listings: 533 | +9%
- Avg. sales price: $223,293 | +11%
- Closed sales: 526 | +1%
- Days on market: 61 | +7%
- Inventory: 1,477 | +3%
- Months’ supply: 3 | +7%
St. Cloud area
- New listings: 173 | +12%
- Avg. sales price: $191,226 | +2%
- Pending sales: 122 | -15%
- Days on market: 42 | -26%
- Inventory: 453 | -19%
- Months’ supply: 2.9 | -22%
Northwestern Wisconsin area
- New listings: 800 | +8%
- Avg. sales price: $181,886 | +13%
- Closed sales: 721 | +15%
- Days on market: 163 |-19%
- Inventory: 6,625 | -9%
- Months’ supply: 10.6 | -11%
