Key Market findings for the Twin Cities
The Minnesota housing market has certainly cooled off as summer winds down. All indicators are pointing to shrinking housing demand and an increase in supply. The one positive indicator as of 9-7-10 is housing affordability. This key stat looks at the affordability of the average home, and its at level not seen for many years.
Lower Pending Sales
The running three month average for pending homes was down 42% for period ending Aug 28th. This is obviously more of a decline than most predicted after the expiration of the tax credit. Fewer buyers are transacting in the market place due to many of those buyers purchasing ahead of their normal timeline to take advantage of the tax credit.
For month end there were nearly 8 buyers available for every active home on the market. This is a 56% increase over the same period in 2009. This is increasing in part because of the amount of sellers bringing their home on the market that are forced to sell due to foreclosure or potential foreclosure. In order for the supply demand ratio to starting heading back the other direction employment levels will have to start improving. The amount of new home buyers entering the market is certainly not as strong as it would be if we were in period of significant job creation.
4th Quarter Outlook
The overall outlook for the 4th quarter is mixed. As we approach the election buyers are more likely to sit on the fence than they would be in a non election year. What will drive our local market will be the diverse economy that we are blessed with here in the Minneapolis -St. Paul metro area. There are companies bringing people in fairly regularly, although at a slower pace than in previous years. The challenge remains dealing with a post stimulus housing market. It most likely will take another 6 months or so to find what our normal supply demand ratio will look like. It will take this long to see buyers coming back into the market that werent borrowed ahead during the stimulus. The major damage caused by the stimulus is the false demand it created.
We all need to remember why people move in the first place. New Job, divorce, empty Nestor’s,expanding family, corporate relocation, and marriage are the natural forces that create movement in the market. People will not stop having kids, companies will not stop moving around key people, couples will not stop getting married and divorced, and people will not stop pursuing the American Dream. This in a nut shell will always insure houses will be bought and sold even in the most uncertain times economically. Just don’t expect a housing boom anytime soon with the amount of distressed loans that still remain.