Minneapolis / St. Paul has been named by Inman News as one of the 10 best markets in the nation for first time home buyers. The Twin Cities was ranked 8th and was the only market in the mid-west to make the list. The information for the Twin Cites is below. To read the entire article follow the link below:
8. Minneapolis-St. Paul-Bloomington, Minn.-Wis.
|Population estimate (2011):||3,318,486|
|% of total sales to first-time buyers with FHA loans (2011) :||27%|
|Median sales price for new and existing homes (Q1 2012):||$158,000|
|Median sales price drop from peak:||-34.7%|
|Total home sales (2011):||38,762|
|% chg. total sales (2011 vs. 2010):||-10.4%|
|% of area homes sold affordable to median-income families (Q1 2012):||N/A|
|Unemployment rate (March 2012):||6.1%|
First-time homebuyers are “a major force” in the Minneapolis-St. Paul-Bloomington market, according to Aaron Dickinson, a board member of the Minneapolis Area Association of Realtors and a broker associate at Edina Realty in Champlin, Minn.
“Our unemployment rate is far lower than the national average, and unemployment hits the younger generations harder. We therefore are highly likely to have more first-time borrowers with stable jobs and the ability to purchase,” Dickinson said.
The Twin Cities market had the lowest unemployment rate among the 10 markets in March, 6.1 percent. The area is also expected to see the highest job growth among the 10 between fourth-quarter 2011 and fourth-quarter 2012: 3 percent.
The area had the second-highest median family income of the 10 markets in the first quarter, $83,900. That same quarter, nearly 87 percent of homes in the area were affordable to families earning that income.
The area’s median sales price was $158,000 in the first quarter, down a slight 1.3 percent year over year.
The median price peaked in third-quarter 2006 at $242,000. Since then, it’s come down 34.7 percent, just under the decline from peak nationwide.
“We were hit pretty early and pretty hard, but we are bouncing back extremely quickly right now — it has surprised everyone in the industry and the buyers as well,” Dickinson said.
“Last fall and winter seemed to really be an inflection point. Buyer activity was strong all winter, and sellers did not have to drop their prices like they normally do in winter. Our inventory and months’ supply of housing has actually fallen since the start of the year, something that never happens in our market.”
Well-priced homes are attracting multiple bids, and so far this year three-quarters of the offers he’s submitted have been in multiple-offer situations, he said.
“Three, five, 10-plus offers on foreclosures are very common, and (traditional homes) are seeing many multiple offers as well,” Dickinson said.
“The nice thing is that buyer activity has increased at all price points, not just the lower first-time-buyer segment. The whole market is improving.”
Just over a quarter of sales in the Twin Cities metro area were distressed in the fourth quarter, just above the rate at the national level. The area’s foreclosure activity rate was 1 in 205 units in the first quarter, somewhat higher than the foreclosure rate nationwide.
“Many of (my clients) have bought foreclosures, but what I’ve seen a lot in the last six months is such low inventory in the foreclosure market that they migrate over to a traditional sale either before they make an offer or after they have lost out on a house or two in multiple offers,” Dickinson said.
An extremely low rental vacancy rate has pushed rents up in the area just as the cost of buying a home has fallen dramatically, Dickinson said, giving buyers’ homeownership aspirations a higher sense of urgency.
“Lately some of my buyers have suffered a ‘deer in the headlights’ look as they realize prices are rising, inventory is at eight-year lows and (interest) rates have never been cheaper. Their fear of loss is greater than it has been since 2005!” he said.
“I had a client buy a house on its first day on the market this week and locked in 3.375 (percent) rate on a 30-year VA loan — he feels like he won the lottery, and I agree!”
Most of Dickinson’s buyers are first-timers, he said, though he expects that to change as the market improves and traditional sellers jump in.
Nearly all his first-time buyers are either married or in a serious relationship, he said.
“Seems like that life change is the spark that sets off an interest (to) get more space and stop renting,” he said.
Financial adviser David Kerber, 25, is in that camp. He just purchased a two-bedroom, two-bathroom $130,000 townhome in Minneapolis for himself and his girlfriend Veronica and their pet Shih Tzu, Manny.
He had originally decided to buy a home in 2009 after graduating from college to take advantage of the federal homebuyer tax credit, but days away from closing on a condo, he found out there were not enough owner-occupied units in the building for traditional financing.
It “left a bitter taste,” he said, and the tax credit was expiring, so he walked away and decided to rent.
Two years later, he feels like he “got in at a great time” with low home prices and historically low interest rates. He went with an FHA loan because he could afford the low down payment without help from his parents.
“I have a handful of friends who recently bought homes and they did under-the-table deals with their parents to obtain enough for the down payment, and I love that I can make my purchase all on my own,” he said.
First-time buyers with FHA loans accounted for 27 percent of overall sales in the Twin Cities area in 2011; FHA buyers overall made up nearly 35 percent of sales.
According to Alex Stenback, a mortgage banker at Residential Mortgage Group in Minnetonka, Minn., FHA loans get “strong use” in the area, but their market share is declining since the recent increases in the agency’s mortgage insurance premiums.
“Many more first-time buyers are opting for the conventional loan, even if they have to reach a little to get to the minimum down payment requirement of 5 percent versus 3.5 percent for FHA,” Stenback said.
“As far as my practice is concerned, the only first-time buyers who use FHA are those that must, due to cash or credit … constraints.”
He expects there will be fewer first-time buyers using FHA loans this year than in 2011.
“FHA used to be the lowest entry cost, and generally the lowest monthly payment for a given property/price. It is still the lowest entry cost, but the typical FHA loan runs $100 more per month than the ‘equivalent’ (5 percent down) conventional scenario,” Stenback said.
“That’s a pretty big incentive to go for the conventional scenario if it is possible for them.”
The housing downturn has proven to be something of a wake-up call to first-time buyers and repeat buyers alike, according to Stenback.
“The best thing that has come from the real estate and mortgage bust is buyers of all stripes are behaving more conservatively, are doing their homework, and seek to truly understand the process in a meaningful way when choosing a home, or a home loan,” he said.
“Also, I’m not hearing the ‘five-year plan’ — buy this house, sell it in five years and buy another — from buyers … these days.
“Most everybody now gets that success in real estate is mostly a long-term game, and, for the most part, assume zero appreciation for the next 10 years, just to be conservative.”
|Minneapolis-St. Paul-Bloomington, Minn.-Wis.||Metro||U.S.|
|% of total sales to first-time buyers with FHA loans (2011)||27.0%||15.3%|
|% of total sales to overall buyers with FHA loans (2011)||34.9%||20.1%|
|% first-time FHA buyers receiving down payment assistance (2011)||28.8%||27.8%|
|Median sales price for new and existing homes (Q1 2012)||$158,000||$162,000|
|Median sales price % change (Q1 ’11-Q1 ’12)||-1.3%||-1.8%|
|Time median sales price peaked||Q3 2006||Q4 2005|
|Peak median sales price||$242,000||$254,000|
|Median sales price drop from peak||-34.7%||-36.2%|
|Total home sales (2011)||38,762||3.78 million|
|% chg. total sales (2011 vs. 2010)||-10.4%||-6.7%|
|Population estimate (2011)||3.32 million||311.6 million|
|Sales per population (2011)||86||82|
|Median family income (Q1 2012)||$83,900||$65,000|
|% of area homes sold affordable to median-income families (Q1 2012)||86.7%||77.5%|
|% chg. affordability (Q1 2012 vs. Q1 2011)||2.8%||3.9%|
|Unemployment rate (March 2012)||6.1%||8.4%|
|1-yr forecast job growth (Q4 2012 vs. Q4 2011)||3.0%||1.7%|
|% foreclosure sales (Q4 2011)||24.5%||23.7%|
|Foreclosure activity rate (Q1 2012)||1 in 205 units||1 in 230 units|