Twin Cities Housing Market – More Good News in March – Real Estate Matters
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Twin Cities Housing Market – More Good News in March

Market ReportMarch 2013   The Market is Building – New Home Construction Picks Up

 Prices are up and the Inventory of Homes for Sale Remains Low

Housing data in March continues to show improvement compared to the same period last year. The median price of a traditional (non-distressed) home sale was $209,900, an increase of 2.4% over the $205,000 reported in February and a 6.04% increase over the March 2012 median price of $197,950. The median price of $209,900 is the highest median price seen since last summer. The volume of closed sales in March 2013 was 3,732, up considerably from the 2,839 recorded in February 2013 and close to the same as the 3,692 recorded in March 2012.  The number of existing homes available for sale remains at historically low levels. In March of 2013 there were 12,941 homes available for sale. This compares to 18,291 in March 2012 and 23,467 in March 2011. See the table below for previous year’s March inventory levels. In March of 2013 there were only 3.47 homes for sale for every closed sale. Since the beginning of 2012 the inventory level of homes for sale has been consistently running 25% – 30% below the previous year’s level.

Inventory of Homes For Sale in March

2013

2012

2011

2010

2009

2008

2007

2006

12,941

18,291

23,467

26,608

27,462

31,836

30,605

30,309

Ratio of Number of Homes For Sale to Number of Homes Sold

2013

2012

2011

2010

2009

2008

2007

2006

3.47

4.85

6.93

7.37

8.63

11.10

8.66

6.13

 

 New Construction Continues to Surge

While the number of new housing starts is a long way from the levels seen in the mid-2000’s, activity in the first quarter of 2013 is substantially improved. The low number of homes for sale along with a continued improvement in general economic conditions are creating opportunities for new home builders as they are able to add to the supply of homes available to potential buyers. The data shows that the construction and sale of new homes continues to play a larger role in the Minneapolis / St. Paul housing market. Year to date through April 11 of 2013 there were 1,177 building permits issued for single family home construction. This is a 54% increase compared to the 763 permits issued during the same period in 2012. The closed sales data in March shows a similar trend. The sale of newly constructed homes in March is up 12.2% compared to March of 2012.

 Employment plays a major role in household formation.  As employment increases more people will be moving into places of their own. The unemployment rate in Minnesota is well below the national average at 5.5%. The state added 50,800 new jobs in the last 6 months. These positive employment indicators will increase the rate of household formation, requiring additional housing units. Since the inventory of existing homes for sale is expected to remain at historically low levels in the near term future, look for continued growth in the number of new homes built in 2013.  The increase in the construction of new homes is beginning to create a shortage of finished lots. The number of vacant developed lots in Minneapolis / St. Paul has been decreasing over the last several years. At the end of the first quarter of 2012 there were 24,559 vacant developed lots in the Twin Cities metro area (a 101 month supply). That number had decreased to 24,559 (a 58 month supply) by the end of the first quarter of 2013. As the shortage continues home builders are finding they have to pay premium prices for desirable lots.

 The Percent of Distressed Sales Continues to Moderate

 When comparing the total number of closed sales from year-to-year there is one important difference: the growth of traditional sales. In March of 2012 there were 1,885 traditional, non-distressed sales (51.8% of the total sales); in March 2013 there were 2,318 traditional sales (62.1% of the total sales), an increase in the percentage on non-distressed sales of nearly 20%. The past few months of traditional sales totaling at least 50% of all sales is an encouraging sign that distressed properties are becoming less numerous. As we move into the spring and summer of this year we should see a stronger housing market dominated by traditional sales. Look for the percentage of distressed sales to continue to moderate as we move into the summer selling season. As the economy continues to improve there will be fewer foreclosures and short sales on the.  Increasing median sale prices means that fewer homeowners will be “underwater” and an improving employment situation will lead to fewer borrowers becoming seriously delinquent on their mortgages.

 The UST Traditional Sale Composite Index decreased again for in March (down 1.7%), moving from 990 in February to 973 in March. The decline is a reflection of a combination of several factors. The first is that the index is based on a 3 month moving average. Even though the median sale price of a traditional home increased in March, the index is being influenced by the declines that occurred in January and February. Secondly, the index has also been influenced by the very low number of homes available for sale. That being said, it should be noted that despite the fact the index has been declining for the last several months, throughout that period it has remained well above the levels recorded in the previous year. March’s Traditional Sale Composite Index of 990 is 6.8 % higher than the 911 recorded in March 2012.

The UST Residential Real Estate Short Sale Composite Market Health Index was 779 in March, a 3.6 increase compared to one year ago.

The foreclosure market’s health as represented by the UST Residential Real Estate Foreclosure Composite Index increased slightly in March, moving from 701 in January to 703. This increase was driven by an over $18,000 increase in the median sale price of foreclosed homes between February at $116,500 and March at $134,900.The index is up 14.7% compared to March 2012 and has recorded year over year increases for each month of the preceding year.

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