Saturday, September 15, 2012

2012: The Year of the Housing Recovery; Exhibit A: The Minneapolis-St. Paul Housing Market is HOT

The chart above provides evidence of the significant recovery going on in the Minneapolis Area real estate market, based on new data for market activity there in August:

1. Closed home sales during the month of August in the Twin Cities increased by 12.3% above last year, and by 45.6% above two years ago. On a year-to-date basis, the 27,413 homes sold so far this year is the highest for any January-August period since 2006


2. Pending home sales in August (4,877) were 19.5% higher than the same month last year, and 36.3% higher than August 2010.  

3. The average marketing time for houses sold in August was 107 days, down from 141 days last year and 131 days in 2010, and was the shortest average marketing time since at least 2006 (except for the 106 days in July of this year).    

4. The median sales price in July was $179,000, a 15.5% increase over last year and a five-year high for the month of August.  The median price increase in August was the largest year-over-year gain since January 2004 and the sixth straight month of year-over-year increases.

5. The average sale price as a percent of list price in the Minneapolis area was 95.1% in August, the highest percentage for an August since 2007, and above the 91.2% average for the months of August in 2010 and 2011.  

6. The "months supply of inventory" in August was down to only 4.1 months, the lowest level in almost 7 years, since the fall of 2005.  

7. The inventory of Twin Cities homes for sale in August was only 16,806, the lowest inventory level since December 2003.   

MP: By every relevant measure (double-digit increases in median sales price, closed sales and pending sales; ongoing decreases in average marketing time and increases in the percent of list price received, etc.), the real estate market in the Minneapolis-St. Paul Area is experiencing a strong and robust recovery this year, and the housing market conditions there are reflected very closely in many other metro areas around the country.  To quote Brian Wesbury et al. at First Trust, "This is what a housing recovery looks like."  

In fact, with the home inventory level in the Twin Cities currently at a nine-year low and the months supply of homes at a seven-year low, the biggest challenge for the Minneapolis-area real estate market is now a shortage of homes for sale relative to the increasing demand as rents rise and interest rates remain near historically low levels.  With the tight supply of homes listed for sale and more buyers coming into the market, we can expect multiple offers and further increases in home prices going forward in the Minneapolis area.  Continued increases in home prices will eventually result in more homes being put on the market for sale, which will boost inventory levels and contribute to a sustainable cycle of recovery for the Twin Cities housing market.

Here's how the Minneapolis Area Association of Realtors concludes its comments on the August sales report:

"There's reason for optimism going into the last third of 2012 and even into 2013, and housing is actually playing a large role in that positive outlook."

7 Comments:

At 9/15/2012 11:45 AM, Blogger Unknown said...

But this housing recovery is being manifested by the artificially low interest rates created by the FED. They are purchasing 40+% of all mortgages (ie printing money out of thin air to buy those mortgages with). And 90% of all mortgages have some sort of GOV guarantee.

There is nothing rational about the increase of values. It is an effort to disguise the losses created by the last bubble through inflation. While destroying the dollar.

This is more of the same nonsense that created the housing bubble in the first place. It can not end well.

 
At 9/15/2012 7:53 PM, Anonymous Anonymous said...

^
The Fed has had low interest rates since at least 2008, but there was no housing recovery back then. In fact it was *crashing* back then. Hard to claim low interest rates are fueling the recovery when we've had both a crash and a recovery under the same interest rate regime.

 
At 9/16/2012 11:45 AM, Blogger VangelV said...

The federal government is the major purchaser of mortgages and FHA is guaranteeing 3% down purchasers. The Fed sees such a weak economy that it is willing to TRY to set short term rates low for many years and buy as many long dated tresuries as it can to keep the long end of the curve in a range favourable to homeowners. Why is this manipulation a good example of a 'hot' market? You would think that a healthy market did not need all that much help from the government.

 
At 9/17/2012 10:26 AM, Blogger morganovich said...

mark-

i think you are really misusing these median price figures.

they are showing mix shifts, not gains on a given house.

the indexes that account for neighborhood, size, amenities, etc (like CS) are not showing gains anyhting like this.

i do not think they are measuring what you think they are measuring.

 
At 9/17/2012 10:34 AM, Blogger morganovich said...

according to truila, the number of neighborhoods in Minneapolis with price per square foot increasing yoy for jul-aug 2012 vs a year ago were outnumbered 3:1 by those posting declines.

http://www.trulia.com/home_prices/Minnesota/Minneapolis-heat_map/

median sale prices are showing a much stronger trend with most going up.

put these 2 together and the conclusion is that bigger homes are selling but mostly at lower per square foot prices.

this would seem to argue that like to like, prices are still pretty soft and that, as i said, the big gains in median price are due to mix of house and size of house as opposed to being representative of gains on any given property.

this is the danger of using median home price as a metric.

 
At 9/17/2012 10:48 AM, Blogger morganovich said...

so, price per ft2 in mineappolis was $110 for jun-aug. that is down 18% yoy.

http://www.trulia.com/real_estate/Minneapolis-Minnesota/market-trends/

(near the bottom)

in light of that, i think this median number needs to be viewed quite skeptically in terms of being a sign that the market is hot. if price per foot is still falling yoy, it's hard to argue that a strong recovery is in place. this is being driven by a shift in the size of homes, not appreciation of a home when compared to itself.

 
At 9/17/2012 11:11 AM, Blogger bart said...

morganovich said...

so, price per ft2 in mineappolis was $110 for jun-aug. that is down 18% yoy.

http://www.trulia.com/real_estate/Minneapolis-Minnesota/market-trends/

(near the bottom)

in light of that, i think this median number needs to be viewed quite skeptically in terms of being a sign that the market is hot. if price per foot is still falling yoy, it's hard to argue that a strong recovery is in place. this is being driven by a shift in the size of homes, not appreciation of a home when compared to itself.



Very much agreed.

 

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