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Affordable Housing, Development, Home Prices, Housing, Housing Trends, Industry News, Residential Real Estate

Ten Surprising Facts: State of the Nation’s Housing Report

Since the housing bubble burst in 2008, the market has seen an increase in demand for homes, but home inventories remain stagnant. Further, either from the bank restrictions or consumer caution new home growth has been at record lows for the last 10 years. Whether this is just a trend or due to socio-economic reasons can be debated, but statistics do show Millenials are living with their parents longer and seem to be putting off buying homes due to a different economic situation than previous generations at the same age (US Census).

Further a recent housing report by Joint Center for Housing Studies of Harvard University, posit similar statistics in the market strengthening the argument that Millenials and uncertainty are holding down the housing market.

1. For-sale inventories dropped even lower over the past year.

For the fourth year in a row, the inventory of homes for sale across the US not only failed to recover, but dropped yet again. At the end of 2016 there were an historically low 1.65 million homes for sale nationwide, which at the current sales rate was just 3.6 months of supply – almost half of the 6.0 months level that is considered a balanced market.

2. Fewer homes were built over the last 10 years than any 10-year period in recent history.

Even with the recent recovery in both single-family and multifamily construction, markets nationwide are still feeling the effects of the deep and extended decline in housing construction. Over the past 10 years, just 9 million new housing units were completed and added to the housing stock. This was the lowest 10-year period on records dating back to the 1970s, and far below the 14 and 15 million units averaged over the 1980s and 1990s.

Read more of the Full Article or go straight to the full Housing Report by Joint Center for Housing Studies of Harvard University

 

Affordable Housing, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

University of St. Thomas Real Estate Analysis for April 2017: High Demand and Low Supply Continue to Put Upward Pressure on Sale Prices

Negative Equity – Continued Improvement in 2016 but Still an Issue

The number of homeowners with negative or near negative equity continues to decline but is still high by historical standards. Lack of equity is a reason that many homeowners are not willing or able to put their homes up for sale which is a contributing factor to the very low number of homes for sale in the Twin Cities. As can be seen in the table below about 1 in 5 homeowners in the metro area with a mortgage is in a negative or near negative situation.

% of Home Owners in the Twin Cities with Negative or Near Negative Equity

County Negative Equity* Near Negative Equity**   County Negative Equity* Near Negative Equity**
Hennepin 8.0% 20.4% Scott 6.1% 20.1%
Ramsey 6.6% 18.7% Carver 5.9% 21.3%
Dakota 6.6% 20.5% Chisago 8.5% 22.9%
Washington 6.6% 21.1% St. Croix (WI) 7.9% 23.0%
Anoka 7.0% 23.6% Pierce (WI) 11.3% 27.5%
Twin Cities 7.3% National 10.5%

     Source: Zillow

* Negative Equity – Owes more than the house is worth

** Near Negative Equity – Equity is less than 20% of value

“The problem with near negative equity is that home owners are not actually underwater, but in many cases they do not have enough equity after they sell their home to pay for the costs of buying a new home, including a down payment, commissions and taxes” said Herb Tousley, director of real estate programs at the University of St. Thomas. In 2017, home prices are expected to increase about 5% – 6% in the Twin Cities, which will free many more homeowners from negative equity Rising prices and loan repayments will also continue to improve the equity position for homeowners, but this will be a slow process and we should be prepared for higher than normal negative and near negative equity to be a part the housing market for a long time to come.

 High demand and low supply of homes for sale continue to put upward pressure on sale prices in April. The overall median sale price jumped from $237,300 in March to $246,000 in April. The traditional, non-distressed median sale price is at a new all-time high at $250,000, a 4.2% increase compared to April 2016. On the supply side in April there were 10,969 homes available for sale, 19.9% less than April 2016. Again, the shortage is most acute in the low to moderately priced homes. See the table below.

Homes For Sale vs. Closed Sales –  Where The Action Is

Price Range Number of Homes For Sale % of Total Homes For Sale Number of Closed Sales % of Total Sales Months Supply
0 – $200,000 1992 18.2% 1449 30.7% 1.2
$200,000 – $400,000 4554 41.5% 2484 52.5% 1.9
$400,000 – $600,000 2270 20.7% 563 11.9% 4.2
$600,000 + 2095 19.0% 230 4.9% 8.5
       Total 10969 4726

The number of homes sold in April was 4,726 compared to 4,348 in March and 5,252 in April 2016. That is 10% less than the number of sales recorded in the same period a year ago. We believe that this is a reflection that extreme the low supply of homes for sale is beginning to impact the number of homes sold in April. This this the first time since 2011 that the number of closed sales has declined on a year over year basis. The number of new listings was 7,747, which is 8.3% less than recorded in April 2016. That decrease is a sign that the short supply situation is likely to continue for at least the next several months. We believe that the changes observed in April are the beginning of an indication that the supply and demand sides of the market are becoming slightly less imbalanced.

 The St. Thomas Indexes

Here are the Shenehon Center’s monthly composite index scores for April 2017. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures) started in January 2005. For that month, the center gave each of the three indexes a value of 1,000.

At a level of 1172 the April UST Residential Real Estate Traditional Sale Composite Index is up significantly, registering a 3.1% monthly increase compared to the level of 1137 that was recorded in March.

The UST Residential Real Estate Short Sale Composite Market Health Index was 1045 in April, up 3.1% from the 1014 recorded in March.

The UST Residential Real Estate Foreclosure Composite Index was observed in April at 924 a significant increase over the 901 recorded in March.

For more information, visit the Shenehon Center’s complete report for March 2017 at http://www.stthomas.edu/business/centers/shenehon/research/default.html.The report is also available for free via email from Tousley at hwtousley1@stthomas.edu.

 

Commercial Real Estate, Industry News, Retail Real Estate

Is the U.S. Over-Retailed?

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When and where will we see the impact from the store closures?

Reposted from nreionline – Barbara Byrne Denham, Victor Calanog | May 15, 2017

When looking at the numbers, the story is not as bad as many have reported. The retail vacancy rate for neighborhood and community shopping centers was flat in the first quarter at 9.9 percent, the same as in the first quarter of 2016. Moreover, rent growth was positive, at 0.3 percent for the quarter. The mall vacancy rate only climbed to 7.9 percent from 7.8 percent at the end of 2016 and rent growth was 0.4 percent during the quarter.

So when and where will we see the impact from the store closures?

First, many of the store announcements have yet to translate into actual closings. Thus, we should see more vacancies in the next three or four quarters. Second, a number of other retailers are expanding into retail space, we are seeing quite a bit of this in the properties we survey. Third, many of the stores closing are in less densely populated or more rural areas beyond the 80 primary metros that we track. Indeed, our tertiary market statistics show an aggregate retail vacancy rate increase to 13.5 percent from 13.2 percent at the end of 2016 and no rent growth.

We are seeing consistent results in the employment numbers. That is, only 14 of 82 primary metros tracked by Reis show a year-over-year loss in retail jobs, but 35 tertiary markets show an employment loss as of the first quarter. It should be noted that nearly all of the retail losses at the national level are in “general merchandise” stores that include department stores as well as supercenters. It should also be noted that the U.S. added retail jobs in April, yet the media stayed mum.

 Still, anyone looking at this industry will say the same thing: we are over-retailed. Retail development exploded in the late 1980s through the 1990s. It has subsided in this last cycle as many developers and lenders got burned in the recession. But there are likely still more stores than we need. And with the overwhelming growth in e-commerce we probably need fewer than we currently have in a number of markets. But where to start?

A good way of measuring what markets may be over-retailed is to compare retail employment to population. The table below shows the markets with the highest and lowest ratios of retail employees per 1,000 people and the respective growth in retail rent over the last four years.

As the tables above show, there is a pretty wide gap between the metros that have a high retail employment per population ratio and those that have a low ratio (39 to 66). What’s more significant is the differences in the range of rent growth rates between the top and bottom tables. That is, those with a high ratio had persistently slower rent growth than those with a low ratio. In fact, for the 80 metros tracked by Reis, the correlation coefficient for the four-year retail rent growth and retail employment per 1,000 residents is -22.3 percent. In other words, markets that look to be over-retailed (i.e. with a high retail-employee-to-population ratio) have generally seen lower retail rent growth than those that seem to be relatively under-retailed.

While this correlation coefficient is negative as one would expect, it is still pretty low. This suggests that far more variables are impacting retail rent growth. In fact, the correlation coefficient between population growth and retail rent growth was significantly higher: 42 percent. Thus, population growth drives retail rent growth more than the saturation of the retail industry.

 While the numbers show that the retail industry could in fact be over-saturated, the impact of this saturation on the real estate industry may not be as troublesome as many would presume. Again, other businesses are expanding in formerly empty stores, especially non-traditional tenants such as yoga studios and urgent care medical centers. In sum, while the media may overreact to the next jobs report as doom and gloom for the retail industry, it is important to consider what is likely not being reported in the press, which is that the retail industry is performing better than many would assume.

Barbara Byrne Denham serves as an economist and Victor Calanog as chief economist with Reis, Inc, a provider of commercial real estate data and analytics.

Commercial Real Estate, Development, Economics, Executive Insight Series, Housing, Industry News, Investment Real Estate, Real Estate Programs, Real Estate Trends, Think Outside The Box, Twin Cities Real Estate, Upcoming UST Events

Real Estate Executive Insight Speaker Series Bob Lux – Inside the Mind of A Developer

 

Real Estate Executive Insight Series

Bob Lux – Inside the Mind of A Developer 

Event Details Tuesday, March 28th 2017 5:30 p.m. University of St. Thomas, Minneapolis Campus Schulze Hall, Room 127

A candid conversation with industry leader Bob Lux, Founder Alatus LLC

Quality real estate development requires innovative thinking. Bob Lux, founder of Alatus LLC, has been in the real estate development and investment business for over 30 years. His company’s mission is to provide innovative solutions and high quality projects by wisely using his team’s talents and strengths to achieve the client’s vision and form a better community.   Lux will discuss the challenges, opportunities and trends in developing residential and commercial real estate in the Twin Cities. Lux will also share his views on the condo market and as the largest private owner of parking facilities in Minnesota Bob will outline his expectations for future parking and infrastructure needs in the downtown area.

Agenda 5:30-6 p.m. Networking 6-7 p.m. Presentation by Bob Lux

Register Today
 
Commercial Real Estate, Commercial Real Estate Index, Economics, Industry News, Office Real Estate, Real Estate Trends, Retail Real Estate, Twin Cities Real Estate

Minnesota Commercial Real Estate Outlook Showing Few Changes Following Election, says University of St Thomas Minnesota Commercial Real Estate Survey

The December 2016 University of St. Thomas/Minnesota Commercial Real Estate Survey, taken entirely after the November 8th election, shows few changes in commercial real estate leaders outlook. The biannual survey projects a two-year-ahead outlook for Minnesota’s commercial real estate industry and forecasts potential opportunities and challenges affecting all commercial real estate sectors.

In all 12 surveys the same group of 50 industry leaders have been polled on their expectations for future commercial real estate activity in six categories: rents, occupancy levels, land prices, cost of building materials, rate of return, and equity requirements. Their responses are used to create index scores that can be compared over time. Scores higher than 50 represent a more optimistic view of the market over the next two years; scores less than 50 represent a more pessimistic view.

The panel is expecting to see a continuation of the favorable market conditions for commercial real estate that we have been experiencing for the last two to three years. The results of the November 8th presidential election does not appear to have significantly changed their outlook for the next two years

Observations from 2016 have recorded few major changes in expectations from before the election compared to after the election. “The natural cycle in commercial real estate appears to be running its course somewhat independent of the presidential contest” says Herb Tousley, Director of the Real Estate Programs at the University of St Thomas. “While the forecast for 2017 still looks good, the increase in online shopping, higher interest rates, and the continued redefinition of the office environment will remain major factors in the performance of commercial real estate in 2017.”

Here is a look at the panel’s responses for each of the questions.

Rent Expectations

An outlook that rents will continue to increase at current rates. The index for rental rates has increased from a highly optimistic 60 to a slightly more optimistic 61. This is an indication of an expectation of continued rent growth over the next two years and that the economy will continue to grow and that business conditions will continue improve.

Occupancy Expectations

A moderately positive outlook on expected occupancy levels. The index for occupancy levels increased moderately from 52 to 54. This indicates the panelists continue in their belief that occupancy levels will increase slightly over the next two years. This is a continuation of a trend that began 1 ½ years ago that reflects their expectation that business will continue to expand and will need more space.

Land Price Expectations

Increases in land prices are expected to moderate. The panel’s outlook for land prices reveals an expectation that land prices will increase at a slower rate between now and fall 2018. The land price index has increased (become less pessimistic) for the fourth consecutive survey moving from 40 last spring to 46 this fall.

Building Material Price Expectations

Increases in the price of building materials are expected accelerate.  The index for the price of building supplies took a sharp turn downward, moving from a strongly negative 32 to an even more negative 29. This reflects the panel’s strong belief that rate of increase in building material prices will accelerate over the next two years.

Return on Investment Expectations

Investors return expectations are expected to increase slightly over the next two years. The index for investor’s return expectations has decreased slightly moving from 48 to 46. This slight decline indicates that investors will be looking for higher returns. The consensus among survey respondents indicates that investors will be seeking higher returns due to their expectation of increasing interest rates over the next two years.

Lending Expectations

More equity is expected to be required.  The index for the amount of equity required by lenders decreased significantly, falling from 42 in to 36. This indicates the panel’s strong belief that credit will be available for good projects but lenders will be more risk adverse by increasing their equity requirements in the coming two years.

 More Information

Additional details can be found on the Shenehon Center’s website: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

Affordable Housing, Economics, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

St. Thomas Real Estate Analysis: Super-tight Housing Market Drives Metro Area Median Sale Price to Near Record Levels

High demand and low supply helped drive the median price of a Twin Cities home in

May 2016 to within $1,000 of the record set back in the bubble days of June 2006.

mortgagesIt has taken a full decade, but the median sale price of a home in the Twin Cities in May 2016 almost reached the all-time record high set back in the housing-bubble days of 2006, according to a monthly analysis conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business. Fueled by low supply and brisk demand, the median sale price of a home in the 13-county Twin Cities region reached $237,000 in May. That’s just shy of the highest median price on record, which was $238,000 back in June 2006. While the selling prices are similar, there are many differences in the 2016 market when compared to 2006. Each month the St. Thomas center tracks the median price for three types of sales: non-distressed or traditional; foreclosures; and short sales (when a home is sold for less than the outstanding mortgage balance). In addition, it looks for trends in the market and creates a monthly composite index score by tracking nine data elements for those three types of sales.

Herb Tousley, director of real estate programs at the university, observed that the supply of homes on the market dropped to its current low level in early 2013 and has remained historically low since then. He said possible reasons include difficulty in finding and purchasing a replacement home at a reasonable price; higher standards to qualify for a new mortgage; lackluster wage growth over the last several years; and homebuilders not building as many single-family homes as they used to. Meanwhile, on the demand side, Tousley said low interest rates, an improving economy, and a tight rental market are key reasons why the number of sales has steadily been increasing to near pre-recession levels.

“In spite of all of the new apartments that have been built over the last few years we remain in a very tight rental market,” he said. “The area has been absorbing all of the new units and vacancies continue to remain historically very low. The result of a low vacancy and a tight rental market is high rent growth. In 2015 the average rent in the Twin Cities increased by 5 percent. Repeated large rent increases over the last several years have many renters considering the idea of homeownership as an alternative, creating additional potential homebuyers.”

Comparing 2016 to 2006

The Shenehon Center for Real Estate compared May 2016 housing-market statistics with those of 2006. While the selling prices are very similar, some characteristics are quite different. A few examples: in May 2006 there were 5,079 closed sales and in May 2016 there were 6,234; in May 2006 there was a 6.7-month supply of homes for sale and in May 2016 there was a 2.8-month supply; in May 2006 there were 11,458 new listings and in May 2016 there were 8,676; and in May 2006 there were 30,235 homes for sale and in May 2016 there were 13,501.

10 yrs after- then & now

Another way of looking at the impact of low inventory on sale prices is to create a ratio for the number of homes available for sale divided by the number of homes sold that month. For example, if the ratio was 5, it means there were 5 homes available on the market for each buyer. A lower number indicates a tighter market. There were months back in 2007 to 2010 when the ratio was 10 to 14; it has dropped significantly. Tousley said that for most of the previous 14 months the ratio in the Twin Cities market has been less than 4, and in May 2016 the ratio hit an all-time low of 2.17. “When the ratio gets lower and the market gets tighter, the median sale price increases,” he said.

 

Sales Pressure - May 16

The St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for May 2016. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures), started in January 2005. For that month, the center gave each of the three indexes a value of 1,000.

The May 2016 index score for traditional sales was 1,163, up 3.7 percent from April 2016 and up 8.6 percent from May 2015.

The May 2016 index score for short sales was 980, up 1.6 percent from April 2016 and up 7.7 percent from May 2015.

The May 2016 index score for foreclosures was 859, up 3.2 percent from April 2016 and up 9.4 percent from May 2015.

The May 2016 score was the highest ever for the traditional sale index. “It is the result of a very tight supply situation and continuing high sales activity, indicating the continued health and resurgence of the Twin Cities housing market,” Tousley said. There are far fewer distressed sales now than there were during the height of the Great Recession. In May, the 79 short sales represented 1.3 percent of total sales and the 341 foreclosure sales represented 5.5 percent of total sales. “As the number of distressed sales continue to return to pre-crash levels, the foreclosure index will continue to diminish in importance,” Tousley said.

Index Chart June 2016

Data - May 2016

 

 

 

 

 

 

 

 

The Shenehon Center’s complete online report for May can be found at: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

The report is available free via email from Tousley at hwtousley1@stthomas.edu.

 

 

Commercial Real Estate, Commercial Real Estate Index, Development, Economics, Industrial Real Estate, Industry News, Investment Real Estate, Office Real Estate, Real Estate Trends, Retail Real Estate, Twin Cities Real Estate

Semiannual Survey of the Twin Cities Commercial Real Estate Experts Predicts Continued Favorable Market Conditions

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Leaders in the field of Minnesota commercial real estate expect to see a continuation of the favorable market conditions for commercial real estate that we have been experiencing for the past two to three years.

May 2016 Results

The semi-annual Minnesota Commercial Real Estate Survey conducted in May 2016 has produced some interesting results. Overall, the survey continues to indicate a slightly less than neutral expectation looking ahead two years to spring 2018 for commercial real estate. The composite index was recorded at 46. This is the sixth consecutive survey where the composite index has been in the 46 – 48 range. Index values greater than 50 represent a more optimistic view of the market over the next two years, with values of less than 50 indicating a more pessimistic view. Although the composite index level is similar to previous surveys the pattern of the individual indexes in the current survey is very different.

As was done with all ten of the previous surveys, the same group of 50 commercial real estate industry leaders involved in development, finance, and investment were polled regarding their expectations of near-term, future commercial real estate activity. One thing we have observed in the current survey is there is less variation in the responses and that has caused a more uniform response rate reflecting the panel’s increased certainty in their views. The individual indexes are detailed below:

Rent Expectations

Less optimistic outlook that rents will continue to increase at current rates. Market conditions expected in spring 2018 are best described by the price for space (rental rates) and the supply of space (occupancy levels). The index for rental rates has declined from a highly optimistic 66 to a somewhat less optimistic 60. This is an indication of an expectation of a moderation of rent growth over the next two years. Higher rents help to offset the increased costs of new construction. A slowdown in rent growth puts pressure on expected returns that will be achieved by developers and owners.

Occupancy Expectations

A continued neutral outlook on expected occupancy levels. The index for occupancy levels increased slightly from 50 to 52. Despite the increase, the panelists continue in their expectation that occupancy levels will remain steady at current levels. As new buildings have been completed it takes some time for the market to absorb the new space. Over the last 2 years the occupancy index has been drifting downward towards a neutral expectation concerning the demand for space.

Land Price Expectations

Increases in land prices are expected to moderate. The panel’s outlook for land prices reveals an expectation that land prices will increase at a slower rate between now and spring 2018. The land price index has increased (become less pessimistic) for the third consecutive survey moving from 37 last fall to 40 this fall this spring. The low point for the index was recorded at 31 in the fall 2013 survey. This sentiment while still in pessimistic territory indicates an expectation that land prices will moderate their rate of increase during the next two years. Increasing land prices increase total project costs and are a hindrance to new development, making it more difficult to obtain financing and adequate returns for investors.

Building Material Price Expectations

Increases in the price of building materials are also expected moderate.  The spring 2016 survey reveals that for the fourth consecutive survey our panel continues to become less pessimistic about the rate of increase in price of building materials. The building material index moved from a strongly negative 32 to a somewhat less negative 37, reflecting the panel’s opinion that building material price increases are expected to moderate. Since building materials are a major cost component of any development project any improvement in prices will be favorable for future development.

Return on Investment Expectations

Investors return expectations remain unchanged over the next two years. The index for investor’s return expectations has increased slightly for the third consecutive survey at 48. Although this index value is slightly pessimistic, it is essentially neutral.  The consensus among survey respondents continues to indicate that investors expected returns will not change significantly in the next two years. Investors will continue to seek out quality investments but they are being much more diligent about how they price risk and evaluate return when considering their investment options.

Lending Expectations

More equity is expected to be required.  The index for the amount of equity required by lenders decreased significantly, falling from 51 in to 42. This indicates the panel’s strong belief that credit will be available for good projects but lenders will increase their equity requirements in the coming two years. The good news is that more equity should result in better rates and terms; however, the bad news is that in many cases equity is harder to find and more expensive than debt.

 Summary

To summarize the panel is expecting to see a continuation of the favorable market conditions for commercial real estate that we have been experiencing for the last 2 to 3 years, however there will be some differences as to why this will happen. The panel has moved from a positive to a neutral position on occupancy. With all of the new product coming on line it is expected that given a little time the market will be able to absorb all of the new space but while this happens occupancy rates will be depressed in the short run. Additionally, the panel expects to see continued rent growth, however, that growth will be at a slower rate as new product comes on line and is absorbed. Development efforts will be helped by an expected moderation in the rate of increase in land prices and building materials. The panel is also expecting to see lenders tighten their lending standards somewhat. That results in lower loan amounts and higher equity requirements on development projects. Higher equity requirements makes development more difficult since equity dollars are more expensive and using less debt financing tends to reduce the rate of return on a project. Overall, our panelists see continuing activity at or near present levels in most categories of commercial real estate during the next two years.

May 2016 Commercial Survey

Economics, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

Economy is Good, Interest Rates are Low, but Where are the Homes to Buy?

St. Thomas real estate analysisHomes for Sale Inventory

There are about half as many homes available to buy in the Twin Cities compared to pre-crash days. Things should improve, but slowly.

The chronic shortage of homes available to buy in the 13-county Twin Cities region — especially moderately priced homes — is expected to improve but not overnight, according to a monthly analysis conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business.

How bad is the home shortage?

According to Herb Tousley, director of real estate programs at the university, there were 12,179 homes on the market in March. That compares to 14,983 homes in March of 2015, and compares to the 25,000 to 30,000 homes that typically were on the market back in the pre-crash years of 2005 to 2007. Tousley’s report for March lists three reasons for the current home drought:

 

  • Homeowner’s equity still has not completely recovered from the Great Recession and crash in housing values. Despite three years of steady price increases, some homeowners still owe more than their house is worth.
  • A somewhat greater number of homeowners, meanwhile, have “near negative equity,” which means that while they are not technically underwater, if they sold their home they would not have enough equity to move up to their next home.
  • And then there are some homeowners who know they could easily sell their current home, but are concerned about finding their next home under current market conditions.

The shortage is most acute for lower- to moderately priced homes. In a normally balanced market there typically is a six-month supply of homes. Right now there is less than a two-month supply of homes being sold for less than $200,000 and between $200,000 and $300,000.

Home Shortage

Will this change, and when?

“As median sale prices continue to increase, the equity position for all homeowners will improve,” Tousley said. “That should encourage more homeowners to list their homes for sale, improving the supply situation. “The short-supply situation will take time to correct itself and our expectation is that it will slowly improve through the end of 2016. In the meantime, continued low interest rates and improving economic conditions will keep buyers active in the market,” he said. The Shenehon Center updated its graph that illustrates the historical relationship in the Twin Cities between the number of homes for sale, the number of homes sold and the median sale prices. The chart shows that when the market gets tighter – or in other words when buyers increasingly outnumber sellers – the median sale price of homes increases.

To see the chart, visit the Shenehon Center’s online report for March at: http://www.stthomas.edu/business/centers/shenehon/research/default.html. The entire monthly report also is available free via email from Tousley at hwtousley1@stthomas.edu.

The St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for March 2016. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures), started in January 2005. For that month, the center gave each of the three indexes a value of 1,000.

The March 2016 index score for traditional sales was 1,091, up 1.9 percent from February 2016 and up 4.6 percent from March 2015.

The March 2016 index score for short sales was 973, down 2 percent from February 2016 but up 10 percent from March 2015.

The March 2016 index score for foreclosures was 808, up 2.9 percent from February 2016 and up 5.8 percent from March 2015.

There are far fewer distressed sales now than there were during the height of the Great Recession. In March, the 96 short sales represented 2.5 percent of total sales and the 427 foreclosure sales represented 10.9 percent of total sales.

Read the Entire Report at: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

UST Indexes

Economics, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

St. Thomas Real Estate Analysis: Demand for Moderately Priced Homes in Twin Cities Outstrips Supply

Market ReportThe university found the number of homes on the market reached a 10-year
low at the end of 2015. It’s good for sellers but more challenging for buyers.

The Shenehon Center examines new trends and opportunities in multi-generational housing in the Twin Cities.

The supply of homes available to buy in the 13-county Twin Cities region dropped to a 10-year low in December, according to a monthly analysis conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business. Each month the center tracks the median price for three types of sales: non-distressed or traditional; foreclosures; and short sales (when a home is sold for less than the outstanding mortgage balance). In addition, it looks for trends in the market and creates a monthly composite index score by tracking nine data elements for those three types of sales.

Herb Tousley, director of real estate programs at the university, said there has been a shortage of homes for sale all year, but in December that number dropped to the 10-year low of 10,301. The shortage is especially pronounced for the more moderately priced homes. For example, homes that cost less than $200,000 represented 30 percent of the homes on the market in 2015 but 42 percent of the sales. In that same category there were 1.86 homes available for each one sold. On the other end of the price range, there were 8.85 homes over $600,000 on the market last year for every one that sold.

“The bottom line is that there is way more demand than supply of homes that are priced at less than $400,000,” Tousley said. “The continuing shortage of homes for sale coupled with increased demand for houses in that price range will continue to keep an upward pressure on prices but will likely be a drag on the number of closed sales. “This is great if you are a seller but is much more challenging if you are a buyer,” he said.

Except for the low inventory, December marked the end of a year that has been a continuation of the steady recovery that the Twin Cities housing market has enjoyed for the past three and a half years. The sale price of a non-distressed (traditional sale) home was up 3.7 percent for the year; the price of a short-sale home was up 19.7 percent; and the sale price of foreclosed homes was unchanged. The combined increase for all three categories was 10 percent. Tousley expects the recovery to continue. “In the second half of 2016, increasing sale prices should start to bring out more sellers as homeowners’ equity positions begin to improve,” he said.

Multi-generational households – A rising trend?

According to John Burns Real Estate Consulting, 14 percent of U.S. households (that’s 16.5 million households) now live multi-generationally. The number is expected to increase for three reasons:

• Delaying marriage has increased the number of young adults who live with their parents.
• Surging retirement has increased the number of retirees living with their children.
• Significant immigration from countries where multigenerational living is the norm also has helped boost the numbers.

Tousley said that if the 14 percent number holds true for the Twin Cities, that would mean there are 189,381 multigenerational households in the 13-county region. He noted that according to a Consumer Insights survey of more than 20,000 shoppers for a new home, 44 percent they would like to accommodate their elderly parents in their next home. Also, another 42 percent plan on accommodating in their next home children who are 18 and older.

“Since most of the U.S. housing stock was not built for multigenerational living, this provides a tremendous opportunity for homebuilders,” Tousley said. “This trend is also increasing the number of secondary dwelling units, sometimes called in-law units. “These units can be set aside within a larger single-family home, such as a separate basement or attic apartment; attached to a primary residence, such as an apartment above an attached garage; or smaller separate units built on the same lot as single-family homes. “Over the next decade, look for these trends to change the makeup of the single-family housing stock in the Twin Cities.”

mortgagesThe St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for December 2015. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures), started in January 2005. For that month, the center gave each of the three indexes a value of 1,000.

The December 2015 index score for traditional sales was 1,082, down .8 percent from November but up 5.2 percent for the year.

The December 2015 index score for short sales was 965, up 3.1 percent from November and up 6.4 percent for the year.

The December 2015 index score for foreclosures was 774, down 2.3 percent from November and up 3.3 percent for the year.

 

More information online

The Shenehon Center’s charts and report for December can be found at http://www.stthomas.edu/business/centers/shenehon/research/default.html.

The index is available free via email from Tousley at hwtousley1@stthomas.edu.

Economics, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Multifamily, Real Estate Lending, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

A Brief Summary of the 2015 Twin Cities Housing Market. This Year was a Good Year, What About 2016?

We examine some of the more important questions about the Twin Cities housing market in 2016 and offer some thoughts Houseforsaleabout where the market is headed.

An analysis of Twin Cities real estate data for 2015 through November shows that the housing market is continuing to recover along with the economy; home prices, the number of closed sales, pending sales, new listings, and the percentage of traditional sales (not foreclosures) are all on the upswing.Meanwhile, a historically low number of homes on the market is continues constrain the number closed sales. This has created an imbalance in the market where buyers outnumber sellers and leads to situations involving multiple offers and homes selling above asking price.

Will 2016 bring more of the same? In this month’s Residential Real Estate Report Herb Tousley, director of real estate programs at the university will examine some of the more important questions about expectations for 2016. These questions are;

  • What will happen with median home sale prices in 2016? How long will it take for them to approach pre-crash levels? Look for an increase of 6% – 8% in the median sale price of homes sold in the Twin Cities. **
  • What will happen to the number of homes sold during the year? Look for an increase of 4% – 6% in the number of closed sales in 2016. **
  • What will happen with the number of homes available for sale in 2016? We are expecting an increase in the inventory of homes for sale of 1% – 3% compared to the previous year’s levels. **
  • Will interest rates and mortgage rates continue to rise in 2016 and if so, what effect will it have on the housing market? In 2016 look for rates to drift from just under 4% to slightly over 4% by the end of the year. **
  • What will happen with new housing starts in 2016? Will home builders break out of the doldrums next year?   In 2016 I am expecting an increase in the number of permits issued of about 10%. **
  • What will happen with apartment development and rent levels? Will the market continue to be able to absorb the expected number of units in the pipeline?   Our expectation is that next year will be another good year for apartment developers with an additional 3,800 – 4,000 market rate units being added to the existing stock. We also we expect that the strong local economy and continued employment growth will sustain continued rent growth of 2% – 2.5% in 2016. **

 **For a more detailed explanation of the above answers you can download the complete November Residential Real Estate Report at: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

Real-Estate-Supply-and-Demand-300x259The Residential Real Estate Report is a monthly analysis of the 13-county metro area prepared by the Shenehon Center for Real Estate at St. Thomas’ Opus College of Business. Each month the center tracks nine housing-market data elements, including the median price for three types of sales: nondistressed (traditional-type sales), foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance). More details about the market, including an analysis of distressed-property sales during the winter months, can be found on the Shenehon Center’s website: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

Research for the monthly reports is conducted by Tousley. The index is available free via email from Tousley at hwtousley1@stthomas.edu.