Average Home Price In Minnesota Rises In October
Low mortgage rates and a shrinking level of unemployment (which hit a 15-year low in Minnesota) factored into the rise in U.S. home prices in October.
As reported in the Standard & Poor’s/Case-Shiller 20-city home price index on Tuesday, the average price of a house around the nation has risen 5.5 percent in the 12 months ending October. Last month’s index found a similar year-to-year growth of 5.4 percent ending September.
Minneapolis experienced one-year growth of 4 percent ending October after seasonal adjustments. Over the same span of time, Denver, Portland and San Francisco were the only cities to rise by double digits, each with an annual increase of 10.9 percent. None of the 20 cities listed had its rate of average home prices diminish from last year.
“Generally good economic conditions continue to support gains in home prices,” David Blitzer, managing director of the Index Committee at S&P Dow Jones Indices, said in a statement. “Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction including single family housing starts.”
Blitzer noted that inventories of existing homes have averaged around a five-month supply in the last 12 months, which suggests a “fairly tight market with limited supplies.”
This December, after the Federal Reserve raised a short-term interest rate for the first time in nearly a decade, expectations have spread that further increases in 2016 may cause mortgage interest rates to rise. “Typically, increases in short-term interest rates lead to smaller increases in long-term interest rates,” said Blitzer, implying that potential homebuyers probably don’t need to worry. From May 2004 to July 2007, the federal funds rate leaped from 1 percent to 5.25 percent, yet mortgage rates rose meagerly – only 0.75 percent.
“The latest economic projections published by the Fed following the recent rate increase suggest that the Fed funds rate will be around 2.6 percent in September 2017 compared to a current rate of about 0.5 percent,” said Blitzer, adding “that potential home buyers need not fear runaway mortgage interest rates.”
For more on how the Federal Reserve’s rate hike affects Minnesotans and the housing market, read here.