The September Residential Index report from the Shenehon Center for Real Estate came out last week. Mr. Tousley, director of the Shenehon Center, was not surprised by the continuation of the supply glut, but in this latest report, he pointed out that the housing market is now being driven by the Millennial generation and Generation Z. Some key takeaways,
- Over half of home sales this year have been to people 36 years old or younger
- Home price appreciation continues to outpace income growth
- Inventory remains significantly below demand
- Price and inventory are affecting the “typical” renter
As seen in Minneapolis, many major cities are being pressed by a combination of decreased household sizes, sociocultural trends for “more” space, and an influx of people coming to live in the cities not seen since the 1940’s. The report states, Millenials and Generation Z’ers while interested in buying homes, accounting for over 50 percent of home sales in the region this year, are delaying the buy due to their ability to accrue a down payment, and potentially, they are waiting for more career certainty.
This is leading them to sustain as renters for longer periods, putting pressure for rental units and pricing as well. Even with record building numbers, it is not expected to end the supply issue soon with recorded vacancy at just 4.8 percent. These pressures on price, as reported, could lead to greater affordability gaps for both renters and home buyers alike.
Nevertheless, the Twin Cities’ home market is expected to remain in demand for home ownership. The national rate for home ownership in the United States is hovering around 64 percent, and currently, the Twin Cities is slightly above at 66 percent. For the next 5 years, Mr. Tousley expects the Twin Cities to continue to be a place for home owners.
Read the full report here
The University of St Thomas Residential Real Estate Index has been developed by the Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business to correct the overstatement of housing price decline reported by the S&P Case-Shiller Price Index for the Minneapolis–St. Paul metropolitan area. Rather than a single index or price representative of all homes, the UST Residential Real Estate Index includes the price of homes in three sub-markets: traditional sales, short sales and foreclosure sales as well as a nine variable composite index for measuring market health for each category based on a three-month moving average.