The Twin Cities regional housing market started 2015 on an enthusiastic but not overly dramatic note. Both seller activity and pending buyer activity increased relative to January 2014. Sellers introduced 4,497 new listings to the marketplace, 5.9 percent more than last year. Buyers entered into 2,986 purchase agreements, 7.8 percent higher than the pending sales count at this time last year. Inventory levels were lower, down 6.3 percent to 11,926 homes currently on the market. Many in the industry are expecting more inventory as we approach the spring market—both in a month-to-month sense as well as year-over-year.
The median sales price rose 8.5 percent to $195,000, the strongest gain since last February. This increase marks 35 consecutive months of year-over-year median price gains. Price per square foot—perhaps a more telling figure—rose 6.6 percent to $118. Absorption rates were dead-even with last January. Months supply of inventory was flat at 2.9 and still suggests the arc of the market is bending toward sellers. That said, today’s landscape is slightly less competitive than in past months. Partly as a result, days on market until sale rose 7.5 percent to 100 days.
Digging deeper, the trend of less foreclosure and short sale activity continued. Traditional pending sales rose a significant 21.9 percent, while foreclosure and short sale pending sales each fell about 25 percent. That changing mix of product has helped catalyze the nearly three straight years of price gains seen in the region.
“Both buyers and sellers appear confident and energized and the traditional segment enjoyed a strong start to the year,” said Mike Hoffman, President of the Minneapolis Area Association of REALTORS® (MAAR). “The steady, ongoing improvement and normalization we saw in January could be indicative of the year as a whole but only time will tell.”
Surprisingly, interest rates have again sunk below the 4.0 percent mark. Historically and persistently low mortgage rates tend to spur purchase demand. This highly attractive financing environment can potentially offset home price increases and also encourages renters to consider homeownership. The Twin Cities housing affordability index of 206 remained stable. This means that the median household income was 106 percent higher than the necessary income needed to qualify for the median-priced home under current interest rates.
Another factor motivating home buyers is the dramatically improving jobs scene—both locally and nationally. In December, the Bureau of Labor Statistics reported that the Twin Cities again had the lowest unemployment rate of any major metro in the nation at 3.3 percent. At 5.6 percent, the national rate is the lowest it’s been since June 2008. Private job creation is accelerating and figures from past months have been revised upward.
“Consumers seem excited about the upcoming spring market,” said Judy Shields, MAAR President-Elect. “Weather permitting, we’re expecting a strong turnout for both buyers and sellers. It should be an exciting year!”
