Shrinking Housing Inventory in MSP Continues to Eat Away at Sales
As the list of homes for sale in the Twin Cities continues to shrink, so is sales activity in the region, according to figures released Monday by the Minneapolis Area Association of Realtors (MAAR).
The local housing inventory, particularly of single-family homes, has for years now been pinched. Overall, the number of homes on the market fell nearly 17 percent in August over the year-ago inventory. With just over 12,500 homes still for sale in the 13-county metro area—roughly half of the housing supply needed to make up “a balanced market,” MAAR said—buyers are buying less frequently.
Closed sales dipped 1.4 percent in August—only the second consecutive monthly sales drop to occur in years.
Meanwhile, the price for a home in the Twin Cities continues to skyrocket. The median sales price of a house jumped about 7 percent last month to $252,000, which was a monthly record for August and the first occurrence ever of the median price rising above the quarter-of-a-million dollars mark for three-straight months.
“The shortage of homes for sale is still driving this market,” Cotty Lowry, president of MAAR, said in a statement. “It’s been the story for years, and it continues to influence prices, sales, market times and other indicators.”
Months of supply, a real estate industry term used to describe the number of months an inventory would last if no new houses were listed but buying tendencies remained steady, is tightest locally among entry-level homes.
According to MAAR, homes priced between $150,000 and $190,000 have just under a month-and-a-half of supply remaining. (Five to six months supply is considered ideal.) Meanwhile, homes priced between $500,000 and $1 million have six months of supply, while homes over $1 million have over a year’s worth of supply.
“We’re always impressed by how determined buyers are, despite the supply hurdle,” said Kath Hammerseng, president-elect of MAAR, in a statement. “That said, prices are rising faster than incomes and builders are focusing on higher-end product further out while the demand is strongest for affordable product closer in.”
A primary driver to the rising prices and lack of supply of Twin Cities homes has been the area’s strong employment force and economy.
“A thriving and diverse economy has been conducive to housing recovery, as job and wage growth are key to new household formations and therefore housing demand,” MAAR said in a release. “The Minneapolis-St. Paul region has a resilient economy with a global reach, a talented workforce, top-notch schools, exposure to the growing technology and health care fields, and a quality of life that’s enabled one of the highest ownership rates in the country.”