- Median sale price declines for the first time this year.
- New home construction continues to improve
- Condo market showing early signs of recovery
Is the decline in the median sale price from June to July a cause for concern?
Probably not, 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. In his analysis for the month of July, Herb Tousley, director of real estate programs at the university, said that while the median sale price did decline and the volume of closed sales was flat, we are still well ahead of last year’s prices and sales levels. The decline in the median sale price is part of the normal seasonal cycle as we move through the summer towards fall.
There are other indications that the housing market in the Twin Cities continues to improve. Part of the recent rise in median sale prices can be explained by examining the prices of the homes being sold. The mix of home prices has changed over the past year. There are now a greater percentage of higher priced homes being sold compared to this time a year ago (see attached chart). This is another sign of the market’s return to good health since it indicates that there are fewer lower priced distressed properties being sold.
The proportion of distressed sales (foreclosures and short sales) continues to decline. In July, only 20 percent of closed sales were distressed; that’s the lowest percentage since January 2008.
Overall, the median sale price for a Twin Cities home decreased 2.7 percent from June to July, marking the first monthly decrease of the year. The median price of a nondistressed home in July 2013 was $224,950; that’s up 3.66 percent over July of 2012 and is only 6.2 percent less than the all-time high of $239,900 that was recorded in June 2006, prior the burst of the housing bubble.
“It appears that the inventory of homes for sale, while still historically low, is slowly improving. It bottomed out in January 2013, at 12, 919,” Tousley said. “It has increased every month since then, ending in July at 15,768 homes for sale.”
New condominium development is showing early signs of a comeback. After 5 years of declining values, excess units, and no new construction there are the beginnings of new condo development activity in certain areas. The successful presale of a few early projects will likely encourage more development that will test the depth of the market. Increasing home prices, relatively low interest rates, and rising rental rates are causing more people to consider a condo purchase.
Minneapolis / St. Paul was one of the top 20 markets in 2012 for new housing starts in the nation. – The low inventory of existing homes for sale continues to create favorable conditions for new home builders. According to the Keystone Report, construction permits for new single-family homes in the metro area are up 30 percent year to date over the same period a year ago. While permits are running far behind levels seen in 2005 and 2006, homebuilders are in the midst of a third year of steady growth.
The St. Thomas’ real estate index uses nine data elements to measure the health of the market. In July it showed year-to-year increases for the three categories of sales. For traditional sales, the July index is up 7.98 percent over last year; for short sales, the index is up 11.31 percent; and for foreclosure sales, the index is up 14.02 percent.
Research for the monthly reports is conducted by Tousley and Dr. Thomas Hamilton, associate professor of real estate at the university. See the entire report at:
The index is also available free via email from Tousley at firstname.lastname@example.org.