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."