Browsing Tag

UST real estate

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

Twin Cities Sets Records for Median Sale Price and Number of Homes Sold

Are we seeing another bubble in the Twin Cities housingMarket Report

market? Not this time, says St. Thomas’ monthly analysis  

With median sale prices hitting a record high in June, is the Twin Cities housing market experiencing the kind of bubble we saw back in June 2006? According to a monthly analysis conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business, the short answer is no. The median sale price of homes sold in the 13-county Twin Cities region reached $242,000 in June. That tops the previous high-water mark of $238,000 set in June 2006. On top of that, the 7,110 homes sold in June was another record high.

Each month the St. Thomas center tracks the median price for three types of sales: nondistressed 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 the reasons for the current run up in housing prices are much different than the conditions that led to the run up in values in the mid-2000s followed by the subsequent crash. “Before 2008, lending standards were very lax,” he said. “Little to no down payments were required since everyone believed that home prices would always keep going up. There were many low-documentation or ‘no-doc’ loans that were made to people who were not qualified, resulting in high numbers of foreclosures and short sales. “Additionally, overbuilding, speculation, and excessive flipping of homes were major contributors to the housing market crises of 2008. “Today, mortgages are only being made to qualified buyers, home flipping has returned to normal levels, and overbuilding is not a problem. The current run up in home prices can be attributed to market fundamentals. There is a shortage of homes for sale and a historically high level of demand fueled by low interest rates and an improving economy. “One concern is the affordability issue; that occurs when home prices rise faster than family income. When this occurs over an extended period of time it becomes more difficult for families to afford to purchase a home due to higher required down payments and higher monthly payments,” Tousley said.

It has taken 10 years for the median sale price of a Twin Cities home to recover to its previous peak level. Where do we go from here?

Number of sales: In 2015 there were just over 56,000 homes sold in the Twin Cities. Tousley predicts that the second half of 2016 should continue to see a high sales volume. Look for a total of about 58,000 homes sold in 2016.

 Median sale price: In most years, the peak median sale price occurs in June. Maybe not this year. With the low number of homes for sale and continued low interest rates, Tousley feels that median sales prices should be at or above record levels in July and possibly August before tapering off in September. At the end of the year, look for an annual increase in the median sale price of 5 percent to 6 percent, with the median sale price settling in the low $230,000 range.

One reason for the higher median selling price recently is because the percentage of distressed sales – foreclosures and short sales – has finally returned to pre-crash levels. In June, only 5 percent of home sales were distressed. Before 2007, the level of distressed sales was in the 3 percent to five percent range. But during the recession, and especially from 2008 to 2013, the level of distressed sales was in the 40 percent to 60 percent range. Since the median price of distressed homes is considerably lower than nondistressed homes, when there are fewer distressed homes sold the overall median selling price goes up.

In addition to robust home sales, the Twin Cities is seeing more remodeling and more new homes being built. In 2015, the Twin Cities saw the construction of 4,680 new single-family homes. So far this year single-family “starts” are up about 15 percent. “Look for a 2016 year-end total of 5,300 to 5,500,” Tousley said. That would make 2016 the best year for new-home construction since before the recession.

Meanwhile, the Leading Indicator of Remodeling Activity, calculated by the Harvard Joint Center for Housing Studies, estimates that this year the growth in home improvement and repair spending will reach 8 percent, well above the average of 4.9 percent. Tousley said there are two main reasons for the increase.

First, because of the shortage of homes for sale, many potential homeowners are opting to stay where they are and enlarge or remodel their existing homes.

Second, rising home prices and the current “seller’s market” is encouraging some homeowners to upgrade or remodel their home in anticipation of listing it for sale.

“In either case,” Tousley said, “it is good news for remodeling contractors in our area. Many are booked ahead with work well into the fall.”

The St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for June 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 June 2016 index score for traditional sales was 1,188, up 2.1 percent from May 2016 and up 6.3 percent from June 2015.

The June 2016 index score for short sales was 1,010, up 2.8 percent from May 2016 and up 4.2 percent from June 2015.

The June 2016 index score for foreclosures was 875, up 1.86 from May 2016 and up 7.86 from June 2015.

The score for traditional sales hit record highs in May and June. “It is a result of a continuing tight supply situation and high sales activity indicating the ongoing health a resurgence of the Twin Cities housing market,” Tousley said in Shenehon Center’s June report.

Index Chart June 2016

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

Best of Real Estate Matters, Commercial Real Estate, Development, Green Building, Historic Tax Credits, Housing Trends, Investment Real Estate, Minneapolis / St. Paul Housing, Minnesota Real Estate Hall of Fame, Minnesota Real Estate Journal, Real Estate Programs, Real Estate Trends, Think Outside The Box, Twin Cities Real Estate, Urban Planning, UST Real Estate in the News

New Members of Minnesota Real Estate Hall of Fame Announced

The Minnesota Real Estate Hall of Fame, established in 2010 by the Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business, will add three new members in a morning ceremony Thursday, Nov. 5th, at the Golden Valley Golf and Country Club.

Members of the Minnesota Real Estate Hall of Fame are chosen for their outstanding business performance, high standards of ethics and community activities. The three new members

Dan DolanWells Fargo

For more than 50 years, Dan Dolan has pursued a career in real estate. He was a leader in improving the professional and ethical standards in real estate and was an early promoter and employer of women in real estate sales. His real estate developments include the Evergreen Community, an upscale residential development in Woodbury; and the Oakdale Crossing Business Park.

Throughout his career, Dolan has been actively involved in boards and fundraising, including the merger of Cretin and Durham high schools, fund raising for the University of St. Thomas, and serving as King Boreas XLII in the 1978 St. Paul Winter Carnival. He may be eligible for retirement, but Dolan is just as passionate as ever about real estate development and continues to receive offers of employment in the industry.

Larry Laukka  

Since 1962, Larry Laukka has actively served in all  aspects of the real estate industry, but primarily in the building and development business. Laukka’s experience has included the design, development, financing, construction and marketing of more than 6,000 dwelling units and home sites throughout the greater Twin Cities community, and the management of approximately 3,000 owner-occupied townhomes and condominiums. His leadership roles include president and director of the Minneapolis Builders Association (MBA), senior life director of the National Association of Home Builders (NAHB) and founder of the Minnesota Housing Institute (MHI), which served the real estate industry’s state-wide needs to commercially promote home ownership and legislative action.

In the 1960s, Laukka worked with The Near Northside Re-Development Agency, a community based organization established to guide the redevelopment of the near north side of Minneapolis. The agency focused on the growing need for market rate housing and led to the development of single-family housing, hailed as “The Suburb in the City.”  After being approached by Governer Wendell Anderson, Laukka helped develop the State Housing Finance Agency and chaired the Minnesota State Housing Code Advisory Board until a state-wide building code was in place. Most recently, he served on the Fairview Southdale Hospital board of trustees and chaired the development of its new Carl N. Platou Emergency Center opened August 2015.

James Solem

For more than 40 years, James Solem provided outstanding leadership and tireless work in real estate finance and public policy, supporting the development of rental and ownership housing for low and moderate income households. He was the executive director of the Minnesota State Planning Agency from 1970 to 1978, and served as commissioner of the Minnesota Housing Finance Agency from 1978 to 1994 – a position he was appointed to five times by three Minnesota governors. From 1994 to 2000, Solem was the regional administrator for the Metropolitan Council, leading the long-range planning for transit, wastewater, parks and community development in the seven-county metropolitan area.  From 2000 – 2006, at the University of Minnesota’s Center for Urban and Regional Affairs (CURA), he led a project to bring new ideas to the issues of affordable housing and regional growth.

Now retired from the Metropolitan Council, Solem is active with consulting and volunteer service. He is chairman of the board of the Community Reinvestment Fund and of the boards of Common Bond Housing Corporation and the Greater Minnesota Housing Fund. Throughout his career, Solem demonstrated an exceptional knowledge of operations and governmental polices, brought a high level of ethical standards to the real estate industry and championed those most in need.

The program is open to the public and the cost is $60. More information is available at http://www.stthomas.edu/centers/shenehon/minnesota-real-estate-hall-of-fame/

To register use the following link:    https://webapp.stthomas.edu/eventregistration/ust/register.jsp?eventcrn=B1973

The Minnesota Real Estate Hall of Fame now has 30 members. Previously named were:

  • 2010: Tony Bernardi, Lloyd Engelsma, Gerald Rauenhorst, William Reiling, Jim Ryan and Sam Thorpe Sr.
  • 2011: Robert Hoffman, Darrel Holt, Bernard Rice, Emma Rovick and five members of the Dayton family: Bruce and the late Douglas, Donald, Kenneth and Wallace.
  • 2012: David Bell, Robert Boblett Sr., Philip Smaby and Boyd Stofer.
  • 2013: Leonard Bisanz, Helen Brooks, Thomas Crowley, M.A. Mortenson Sr. and Kenneth Stensby.
  • 2014: George Karvel Ph.D., Cyril “Cy” Kuefler Sr., Jim Stanton

 

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

St. Thomas Real Estate Analysis: Twin Cities Remains One of the Most Affordable Housing Markets in the Nation

The 13-county Twin Cities region compares favorably to other metro areas thanks to wages and strong housing-market fundamentals.

The Twin Cities remains near the top of the list of affordable housing markets in the United States, according to an 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 in the 13-county Twin Cities region: nondistressed 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, credits “continuing strong housing-market fundamentals and above-average wage growth thus far in 2015” for keeping the Twin Cities near the top of affordable-housing lists “According to Forbes, household income growth in the Twin Cities in 2014 was 1.9 percent. Based on our improving local economy and low unemployment rate, we are expecting household income to grow 2 percent to 2.5 percent in 2015,” Tousley said. “That means that household incomes and median home sale prices are increasing at nearly the same rate so in terms of real dollars home prices are keeping up with inflation.

Aug Housing Report - Image 3

“This is not the case in many major metro areas around the country. In May 2015 the average apartment rent in the Twin Cities market had increased to just over $1,200. Home ownership in the Twin Cities remains an affordable option for many since a household that is earning the median annual household income can afford to purchase a home selling at the median sale price in our market.” Here are five examples of single-family-home affordability from around the country (details are available on the Shenehon Center website):

Single Family Home Affordability

Twin Cities Denver San Francisco Chicago Atlanta
Median Sale Price $224,900 $329,000 $656,000 $242,600 $157,700
10% Down Payment $22,490 $32,900 $65,600 $24,260 $15,770
Finance Amount – 30 years @ 4% $202,410 $296,100 $590,400 $218,340 $141,930
Monthly Payment $966 $1,414 $2,819 $1,042 $678
Monthly Property Taxes $375 $548 $1,093 $404 $263
Monthly Insurance $100 $125 $200 $100 $100
Monthly Total Payment $1,441 $2,087 $4,112 $1,547 $1,040
Annual Total Payment $17,294 $25,044 $49,344 $18,561 $12,485
Area Median Household Income $66,940 $62,760 $79,624 $60,564 $55,733
% of Household Income Required 25.84% 39.90% 61.97% 30.65% 22.40%

 

Key numbers for August.

The median sale price of traditional-sale home in August 2015 was $229,900; that’s down .48 percent from July 2015’s $231,000 and up .83 percent from August 2014’s $228,000. The median sale price of a short-sale home in August 2015 was $163,500; that’s up 6.2 percent from July 2015’s $153,950 and up 2.19 percent from August 2014’s $160,000. The median sale price of foreclosure-sale home in August 2015 was $149,900; that’s up 8.62 percent from July 2015’s $138,000 and down 1.07 percent from August 2014’s $151,525. In August 2015, 7.68 percent of sales were “distressed” (foreclosures or short sales). That compares to 10.57 percent in August 2014.

Closed sales and low inventory.

The number of closed sales in August was 5,836, down from July’s 6,363. “This decrease is part of normal market seasonality as sales activity slows down as we move into fall,” Tousley said. “The encouraging part of this is that despite the decrease it represents an 8.1 percent increase over the August 2014 closed-sales volume.” The number of homes for sale remains historically low. In August 2015 there were 2.8 homes available for sale for every home sold. In August of 2014 there were 3.5 homes available for sale for every home sold. And in August 2006 there were 6.3 homes for sale for every home sold. There were 6,923 new listings in August 2015, down 13 percent from July and unchanged from the level recorded in August 2014. “That tells us that low levels of homes available for sale will persist in the short run. In the meantime, the low number of homes for sale and the higher volume of closed sales are being reflected in lower time on the market, a higher number of multiple offers and sale prices at more than the original asking price,” Tousley said.

Continued Lag in New-Home Construction

A source of additional single-family housing is the construction of new homes, but so far this year, Tousley said, “the number of single-family housing starts has failed to live up to many homebuilder’s expectations.” Based on the number of construction permits issued through August (3,202), the Twin Cities is on track to have about 5,000 new homes built or under construction in 2015. That’s about the level of new construction in 2014, but less than in 2013. That compares to the early 2000s, when the number of building permits was running at 8,000 to 10,000 per year. “The level of new-housing starts is going to have to increase considerably to make a significant contribution toward increasing the number of homes available for sale in our market,” Tousley said. The cost of new single-family homes is clearly on the rise in the Twin Cities. In the late 1990s and early 2000s, before the market crash, nearly half the new homes sold for less than $250,000. In the last two years, less than 20 percent of the new homes sold for less than $250,000. Much of this increase, Tousley said, is due to higher land prices, development costs and building materials. The average price of a new home is running about $100,000 more than the median price of an existing home. For example, in 2012 the median price of an existing Twin Cities home was $177,900, while the average price of a new home was $287,352. So far this year, the median price of an existing home has been $224,900 and the average price of a new home is $330,466.

The St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for August 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 August 2015 index score for traditional sales was 1,129, up one point from July 2015. The August score is the highest since the index began in 2005 and is up 4.06 percent from August 2014. The August 2015 index score for short sales was 979, up five points from July 2015 and up 4.71 percent since August 2014. The August 2015 index score for foreclosures was 820. That’s unchanged from July 2015 and up 1.23 percent since August 2014.

More information online

The full report and additional charts for August can be found at http://www.stthomas.edu/business/centers/shenehon/research/default.html.

 

 

 

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 for August: Big drop in foreclosures and strong demand for moderate-priced homes

 Market ReportThe percent of foreclosure and short sales is back to 2007, pre-crash levels;

it’s more evidence that the Twin Cities housing market has recovered.

 Minneapolis, Minn. —     An analysis of the 13-county Twin Cities real estate market for August found a healthy decrease in the number of foreclosures along with a stronger demand for moderately priced homes than for higher-priced homes.

 Each month the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business looks for real estate trends in the Twin Cities and tracks the median price for three types of sales: nondistressed or traditional-type sales, foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance).

 “During the early part of this year the percentage of distressed sales was hovering near 30 percent,” said Herb Tousley, director of real estate programs at the university. “In August, the percent of distressed sales was 10.6 percent, a level not seen since mid-2007. More importantly, the number of new foreclosures continues to drop; that means there should be even fewer distressed sales in the next 12 to 18 months.”

mortgages After a persistent period of l0w inventory, the number of homes available to purchase has increased to 18,205. That compares to 16,747 in August 2013 and is now near pre-housing-crash levels.

 “The increase in the number of homes for sale will result in a better balance between buyers and sellers,” Tousley said. “Buyers will have more choices as the market moves from a seller’s market to a normal equilibrium.”

 Another trend the Shenehon Center follows is the number of homes available in different price brackets. By comparing the asking price of homes in the Twin Cities and how many were sold, the Shenehon Center found a stronger demand for homes priced under $140,000 than homes listed at $300,000 or higher.

Home prices in August

 Median sale prices for the Twin Cities recovered in August from a slight decline observed in July. The median price of a traditional (nondistressed) home increased to $228,000 in August, close to the high-water mark for the year set in June at $229,900. Compared to August of last year, the sale price for a traditional home is up 5.3 percent in 2014.

 Overall, the number of closed sales in August was down 7.3 percent compared to the same month a year ago, but it’s not all bad news because most of the decrease was due to a sharp decline in the number of distressed sales. Compared to last year, August saw a 4.6 percent increase in traditional sales, a 58 percent decrease in short sales, and a 50 percent decrease in foreclosure sales.

The UST composite indexes

Each month the Shenehon Center tracks nine housing-market data elements, including the median price for three types of sales, and creates an index for each: nondistressed or traditional-type sales, foreclosures, and short sales.

 The composite index for traditional sales moved up just one point in August, to 1086, but it’s a new yearly high and reflects the strong market for traditional sales seen in 2014. 

 The composite index for short sales was 936 in August, up 14 points from July. It also is up 5.3 percent compared to one year ago. “Look for the short sale index to play a less significant role in our analysis as the number of short sales drops below 3 percent of the total monthly sales,” Tousley said. 

 The composite index for the foreclosure market moved from 804 in July to 810 in August. The index is 2.3 per cent higher when compared to August 2013.

 

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

St. Thomas real estate analysis for March: Indicators Flashing Yellow – Caution Ahead

Market ReportResearchers at the university’s Shenehon Center for Real Estate are looking for signs of a robust recovery in the Twin Cities housing market this spring, but the signs are not quite there. 

 
 After a particularly cold and snowy winter, researchers at the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business were expecting to find indications of a robust spring recovery in the 13-county Twin Cities housing market. “The numbers we analyzed for March were not bad, but not as good as we expected,” said Herb Tousley, director of real estate programs at the university. “We will be closely watching the nine categories of housing data that we track each month to see what direction they take.”
 
Here is what they found in the March data:
 
Existing-home sales
 
“As the weather began to warm in March, the housing market in the Twin Cities began to thaw as well,” Tousley said.
 The Shenehon Center tracks the median price for three types of sales: nondistressed or traditional-type sales, foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance). All three were up in March. For a traditional-sale home, the median price increased from $210,000 in February to $215,900 in March.
 “Although this represents a 2.9 percent increase over March 2013, it is less than the 4 percent to 6 percent increase we are expecting in 2014,” Tousley said. “We will be watching year-over-year increases very closely as the spring and summer selling season unfolds.”
 
HouseforsaleTousley said another statistic that came in l0wer than expected is that the number of nondistressed homes sold in March 2014 was slightly less than in March 2013. He said it’s not a serious problem in itself, but “is another area that bears continued examination in the coming months.”
 
The number of homes available to purchase improved slightly in March but remains at a historic-low level with 13,188 properties on the market. “We will keep a close eye on the inventory as the year proceeds because the number of homes for sale will have a direct impact on the percentage of increase in median sale prices during 2014,” Tousley said. “We have been expecting an increase in the number of homes for sale in the 15 percent to 20 percent range as we move into the spring and summer selling seasons due to the healthy increase in sale prices over the past year and generally improved economic conditions in the region.”
 
The percentage of distressed home sales (foreclosures and short sales) in March was 26.7 percent, an improvement over the levels seen in January and February. “We expect the percentage of distressed sales to fall below 20 percent in the second quarter of 2014,” Tousley said. “It that does not happen, it will be another cause for concern about the continuing sustainability of the housing-market recovery.”
 
New-Home Construction
 
According to the Keystone Report, in the first quarter of 2014 the 1,097 single-family home permits issued was up 4.1 percent over the first quarter of 2013. Tousley noted that the extremely cold weather in January and February had an impact on new-home construction, but that the number of permits in March 2014 was up 50 percent over March 2013. “With the warmer weather, construction is snapping back to pre-winter levels.”
 
“The number of new permits issued in the next two months will merit close attention as they will set the tone for construction activity for the rest of the year,” he said. “The expectation is that the spring construction season will see a flurry of new construction as home builders seek to make up for time lost in January and February. If construction activity does not return to levels that are at least 20 percent to 25 percent higher than last year, it will be a cause for concern about the sustainability of the continued recovery.”
 
Interest Rates and Affordability
 
Mortgage rates have declined slightly with a 30-year fixed rate near 4.25 percent. If the economic recovery continues, Tousley expects the rate to increase to around 5 percent by year end, but if the recovery begins to falter, the rates might not increase that much. A year ago the 30-year fixed rate was about 3.5 percent and, Tousley said, “there is ongoing concern about higher mortgage rates hurting the recovery, but home buyers are finding ways to compensate.” Some homeowners, he said, are opting for hybrid and adjustable-rate mortgages that start out at lower rates. “If interest rates increase moderately in 2014, we believe the rate of recovery in the housing market may slow down, but we don’t believe that it would derail the recovery.”
 
The Federal Reserve Bank, he said, is going to have to maintain perfect balance between keeping mortgage rates at a low-enough level to maintain the housing-market recovery and a more robust general economic recovery that would result in somewhat higher interest rates.
 
The UST indexes
 
Each month the Shenehon Center tracks nine housing-market data elements for three types of sales: nondistressed or traditional-type sales, foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance).
 
The St. Thomas Traditional Sale Composite Market Health Index registered its first increase of the year in March 2014, moving from 995 in February to 1006 in March, a 1.1 percent increase. The index for March 2014 is 2.65 percent higher than for March 2013.
 
 
The St. Thomas Short Sale Composite Market Health Index was 865 in March 2014. That’s up 10 points from February 2014 and up 10.3 percent from March 2013.
 
The St. Thomas Foreclosure Sale Composite Market Health Index was 739 in March 2014. That’s up 2.5 percent over February 2014 and up 4.23 percent over March 2013.
 
More information online
 
The Shenehon Center’s charts and report for March can be found at http://www.stthomas.edu/business/centers/shenehon/research/default.html.
 
Research for the monthly reports is conducted by Tousley and Dr. Thomas Hamilton, associate professor of real estate at the university. The index is available free via email from Tousley at hwtousley1@stthomas.edu.
Economics, Home Prices, Housing, Housing Trends, Industry News, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

St. Thomas Report Links Extremely Cold Weather to Downturn in January Real Estate Activity

House for Sale Sales volume dropped last month, but researchers say it doesn’t indicate a long-term weakness in the Twin Cities housing market. 

  Minneapolis, Minn.  —   A January slowdown in Twin Cities real estate activity was likely the result of bitter cold weather and does not indicate a long-term weakness in the market, according to the Residential Real Estate Price Report Index, a monthly analysis of the 13-county metro area prepared by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business. Each month the Shenehon Center tracks nine housing-market data elements, including the median price for three types of sales: nondistressed or traditional-type sales, foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance).

 “Sales volume, new listings, and pending sales were all victims of the polar vortex and the extremely cold weather as they recorded levels below what occurred in January 2013,” according to Herb Tousley, director of real estate programs at the university. “The January data and the likelihood of subdued results in February should not be interpreted as an indicator of a long-term weakness in the Twin Cities housing market,” he added. “The underlying fundamentals of the local economy and the arrival of the spring and summer selling season will show the true long-term strength of the market. He predicts that “2014 will be another year of solid gains for the Twin Cities market.”

Traditional Home Median While some aspects of the market suffered from the weather, the median sale price of all categories of homes (traditional, foreclosure and short sale) continues to remain above last year’s levels. The median sale price of a traditional home in the Twin Cities in January was $212,500, up from $199,900 a year ago. The low inventory of homes 0n the market continues to be an issue. There were 11,843 homes for sale in January 2014 compared to 13,070 in January 2013.

 A new look at the need for new-home construction

 The number of building permits issued for single family homes in January indicates that new-home construction is off to a good start in 2014 after making solid gains in 2013. “Despite the bad weather, the number of permits for new single-family homes issued in January was 15 percent ahead of the number recorded at the same time last year, and the dollar value was 22 percent higher than last year,” Tousley said. “Look for a flurry of housing starts as the weather improves and builders, whose production was delayed by snow and cold weather, scramble to build homes in time for the spring and summer selling season.” There are short-term and long-term reasons to expect greater demand for new-home construction.

 In the short-term, Tousley said, the housing industry “has some catching up to do” after years of low construction activity. A second reason has to do with employment.“The key driver for new residential construction is household formation,” he said. “And household formation is largely driven by jobs.” In 2013, the Twin Cities area added approximately 33,000 new jobs. Those new jobs, coupled with a chronic shortage of existing homes for sale, will continue to drive demand for new-home construction. 

The St. Thomas real estate researchers have been looking at a third but long-term reason to be optimistic about the need for new housing: demographics. In the decade from 1994 through 2003, the Bureau of Labor Statistics (BLS) reported the number of people “55 and over” and “not in the labor force” increased by 4.3 million.  Between January 2004 and February 2013, however, the BLS reports the number of people over 55 and not in the labor force increased by 8.1 million. That means more older people are leaving the labor force. According to the Census Bureau, older people tend to live in smaller households and this has pushed down the overall household size, even with some people doubling up. The overall mean household size in America is 2.55, but that falls to 2.29 for householders in the 55-to-59 age group, and 2.07 in the 60-to-64 age group, 1.91 in the 65-to-74 age group, and to 1.60 for those 75 and older. “This increase in the number of retired Americans with smaller household sizes means the relationship between jobs and households has changed over time,” Tousley said. “Models of the relationship of number of households to jobs need to be modified to reflect the changing demographics. This is another reason why the United States, including Minnesota, will continue to need more housing.”

The St. Thomas Indexes

 The St. Thomas Traditional Sale Composite Index, the one that tracks nine data elements, continued to decrease in January, moving from 1022 in December to 1006 in January. Despite the monthly decrease, the index remains 3.4 percent above the level recorded in the previous year.

The short sale index was 860 in January, down 23 points from the 883 recorded in December; however it was a 10 percent increase compared to one year ago.

The foreclosure index decreased in January, moving from 731 in December to 726 in January, a decrease of .7 percent. The index is up 4.6 percent compared to January 2013.

 More information online

 The Shenehon Center’s report for December (found at http://www.stthomas.edu/business/centers/shenehon/research/default.html) includes charts showing the median sale price of homes, household formation and building permits, and indexes for the traditional, foreclosure and short-sale markets.

 Research for the monthly reports is conducted by Tousley and Dr. Thomas Hamilton, associate professor of real estate at the university. The index is available free via email from Tousley at hwtousley1@stthomas.edu.

Economics, Industry News, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

UST Minneapolis / St. Paul Housing Report – More Good News in August

home-for-saleSt. Thomas real estate analysis: increase in traditional (non-distressed) home prices moderate as median price approaches pre-housing-crash levels in the Twin Cities market

 The improving local economy and job creation will keep demand strong for both existing and new homes. Expect the supply to remain tight through next spring, and a shortage of vacant developed lots in the metro area could be an issue.    

The monthly increases seen in the price of traditional homes (those not under threat of foreclosure) in the Twin Cities real estate market are beginning to moderate as recent sale prices approach the pre-housing-crash prices recorded back in 2006. According to the Residential Real Estate Price Report Index, a monthly analysis of the 13-county metro area prepared by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business, the August median sale price for a home not affected by foreclosure was $228,000. That’s up 1.38 percent from July and is approaching the pre-crash peak of $239,900 in June 2006.

Each month the Shenehon Center tracks nine housing-market data elements, including the median price for three types of sales: nondistressed or traditional-type sales, foreclosures, and short sales (when a home is sold for less than the outstanding mortgage balance). In his analysis for the month of August, Herb Tousley, director of real estate programs at the university, said that “we are also continuing to see the median price of short sales and foreclosed sales close the gap with traditional, nondistressed sale prices. This is a healthy trend as the price gap between foreclosed sales and traditional sales has returned closer to pre-crash levels.” Overall in the Twin Cities, distressed sales represented 20.68 percent of homes sold in August 2013. Compared with the same period in previous years, that’s far higher than the 1.17 percent in August 2005 but less than half the 44.96 percent recorded in August 2011.

August-2013-Chart

The St. Thomas Traditional Sale Composite Index, the one that tracks nine data elements, now has reached 1,090; that tops its previous highest recorded level of 1084 that was set in August 2005. “This is a reflection of the sustained recovery of traditional home median sale prices and a number of other favorable market factors including low levels of inventory, the decreasing percentage of distressed sales and historically low interest rates,” Tousley said. Composite indexes for the distressed sales also are improving. The foreclosure index for August 2013 of 792 is up 12.8 percent from August 2012. The short sale index for August 2013 of 889 is up 13.2 percent from August 2012.

Continue Reading

Commercial Real Estate, Contest, Development, Economics, Industry News, Real Estate Trends, Residential Real Estate, Retail Real Estate, Think Outside The Box, Urban Planning, UST Program News, UST Real Estate in the News

UST Team to Compete in the Gerald D. Hines / ULI Student Urban Design Competition

photo source: Minnesota Vikings

The 2013 Hines Competition is underway!

One hundred sixty teams from 70 universities in the United States and Canada are currently developing solutions for a site in Minneapolis’s Downtown East neighborhood, near the site of the new Minnesota Vikings stadium

The ULI/Gerald D. Hines Student Urban Design Competition, now in its 11th year, is an urban design and development challenge for graduate students. The Hines Competition challenges multidisciplinary student teams to devise a comprehensive development program for a real, large-scale site. Teams of five students representing at least three disciplines have two weeks to develop solutions that include drawings, site plans, tables, and market-feasible financial data.

The University of St Thomas team members are  Thomas McElroy, full time MBA student; Thomas Strohm, MSRE student, Michael Richardson, Master of Urban and Regional Planning  student at the University of Minnesota; Amber Hill, Master of Landscape Architecture student at the University of Minnesota; and John Briel, Master of Urban and Regional Planning  student at the University of Minnesota.

This is an ideas competition; there is no expectation that any of the submitted schemes will be applied to the site. The winning team will receive $50,000 and the finalist teams $10,000 each.

The ULI/Gerald D. Hines Student Urban Design Competition is part of the Institute’s ongoing effort to raise interest among young people in creating better communities, improving development patterns, and increasing awareness of the need for multidisciplinary solutions to development and design challenges. This competition is an ideas competition; there is no expectation that any of the submitted schemes will be applied to the site. The winning team will receive $50,000 and the finalist teams $10,000 each. Winners that will advance to the next round of the competition will be announced by the end of February.

UST Class Profile, UST Program News

UST Real Estate Class Profile: International Real Estate Development

Interested in what the UST Real Estate program has to offer? Students (both undergraduate and graduate) interested in International Real Estate Development have the opportunity to study in Grand Cayman (while escaping January in Minnesota!) Read on to learn what graduate student, Tim Lawrence, had to say about his experience studying International RE Development in Grand Cayman.

Can you provide a little background on what the overall course goals/objectives are?

We have been studying a large planned-use development on Grand Cayman called Camana Bay.  The project is being developed by Dart Realty (Cayman) Ltd., which is a subsidiary of Dart Enterprises.  So far, only a very small portion of the planned development is completed.  Dart plans to continue development in phases over several years.

Camana Bay, photo source: Dart Realty

Can you explain what your typical work-day is like when in the Cayman Islands?

Most of our time in the Cayman Islands was spent exploring.  We were trying to gain an understanding of the Island’s unique political, business and geographic circumstances.  Specifically, we were interested in the similarities and differences between the Cayman Island and other markets (both domestic and global) and the effect this has on Real Estate and Development.  We met with representatives of both Dart and The Cayman Islands Planning Department.

Continue Reading