The Spring Real Estate Market Looks Like it's Going to Bump Up Prices in the Twin Cities Again
I won't bury the lead here - the spring housing market is probably going to add another 4-6% bump in median prices and I don't think it will slow down in the summer either. I base this hunch on a few trends. First, Inventory is tight. Second, mortgage rates are still terrific and the Fed is gun shy. Third, new construction is still relatively anemic, mostly due to the lack of new construction options under $400,000 (the upper middle class market of $400,000 to $800,000 has actually made an almost full recovery across the Twin Cities region).
A brief history of the Spring Real Estate market in the Twin Cities
Let's look at the spring housing market over the past few years. When I talk about seasons I divide them up into 4 equal parts (even though we really have like 2 and a half, amirite? Sorry). So December through February is winter (if we can agree that the winner of the Superbowl played in 2019 is really the 2018 season champion, then January and February can be a part of the previous year's winter season). Next comes Spring from March through May, then Summer is June through August. Lastly, Fall is September through November. Most of the numbers I cite will be the three month rolling average of the season, new construction excluded. I'll try to be clear when I'm quoting monthly or 12 month rolling average numbers. Still awake? Let's fix that!
To review in the Twin Cities Region:
- Spring of 2015: 5.16% gain over Winter of 2014, 4.63% gain over Spring of 2014
- Spring of 2016: 6.16% gain over Winter of 2015 as well as Spring of 2015
- Spring of 2017: 7.5% gain over Winter of 2016 as well as Spring of 2016
- Spring of 2018: 4.62% gain over Winter of 2017, 5.43% gain over Spring of 2017
Twin Cities Spring 2019 prediction: a 5.5% YOY Gain in Median Price per Square Foot
Once again, hopeful home buyers are competing for limited inventory. Even though listings are up over this time last year ( 3,419 new listings in January, up 8.2% YOY) you have to remember that last year saw the lowest inventory levels we'd had in decades. Thus, the greater Twin Cities market is still very tight with a minuscule 1.2 months supply. In fact, that's the same reading we had last year for January. Consequently when the supply is this low (5-6 months is considered balanced), the sellers are in control. Competition couples with a still favorable mortgage landscape, and prices go up. Last year, the spring market (March - through May, don't @ me about it starting after the Superbowl, it doesn't) saw a 4.62% bump over the previous spring in the Median PPSQFT metric ($136 vs. $129 in spring 2017). 2019 will offer more of the same.
What about the other big markets? we can run those down quick!
Minneapolis Spring Housing Market 2019 Prediction - A 7% Gain in Median Price per Square Foot
The mini apple briefly flirted with a median PPSQFT of over $200 in the summer of 2018, before a soft Fall brought the market down to $188 per square foot. The first thing to know: Springs have been ultra hot in Minneapolis the past few years. So let's look at a quick run down of the Spring housing market gains in Minneapolis since 2015:
- Spring of 2015: 7.48% gain over Winter of 2014, 6.76% gain over Spring of 2014
- Spring of 2016: 9.27% gain over Winter of 2015, 4.43% gain over Spring of 2015
- Spring of 2017: 8.38% gain over Winter of 2016, 9.7% gain over Spring of 2016
- Spring of 2018: 13.53% gain over Winter of 2017, 6.63% gain over Spring of 2017
As you can plainly see, Minneapolis has helped power the Twin Cities Spring housing market gain of the past few years. January's months supply number was 1.4, up from last year's record low of 1.1. New listings from November through January were up 14%, although January saw activity accelerate even faster at a 30% increase in new listings. Even with an injection of new inventory, it's hard not to think that the market is going to keep climbing. One data point of caution: Minneapolis median days on market has been trending upwards over the past quarter plus. Another question I have is if there is an affordability threshold that will put a cap on prices? Is there enough inventory available in more affordable neighborhoods to sustain this number? We'll see next year!
Saint Paul Spring Housing Market 2019 Prediction - A 10% Gain in Median Price per Square Foot
The other twin city is coming off of a strong 2018 and is set for another record 2019. Saint Paul's residential real estate market reached a record $161 median PPSQFT in the summer, then softened in the fall to $151. A brief history of St. Paul spring real estate markets through the lens of median PPSQFT:
- Spring of 2015: 12.26% gain over Winter of 2014, 11.21% gain over Spring of 2014
- Spring of 2016: 8.55% gain over Winter of 2015, 6.72% gain over Spring of 2015
- Spring of 2017: 13.22% gain over Winter of 2016, 7.87% gain over Spring of 2016
- Spring of 2018: 6.62% gain over Winter of 2017, 5.84% gain over Spring of 2017
Something tells me that St. Paul's relative affordability, burgeoning downtown and West Seventh neighborhood developments, and proximity to major job centers have it poised for another huge Spring. Currently, St. Paul sits at a 1.2 months supply (lower than Minneapolis or the Twin Cities region in general). Aso of note, new listings in January are up 12.7% off of last year's record low. All signs point to big appreciation in the St. Paul Spring housing market.
Lake Minnetonka Spring Housing Market 2019 Prediction - A 4% Gain in Median Price per Square Foot
What about fabulous Lake Minnetonka? Curiously, the Lake Minnetonka spring housing market does not always start with the fireworks we've seen from other major markets in the Twin Cities.
- Spring of 2015: 8.5% LOSS over Winter of 2014, 4.76% LOSS over Spring of 2014
- Spring of 2016: 2.68% LOSS over Winter of 2015, 3.57% gain over Spring of 2015
- Spring of 2017: .65% gain over Winter of 2016, 7.59% gain over Spring of 2016
- Spring of 2018: 1.2% gain over Winter of 2017, 8.77% gain over Spring of 2017
New listings are up 10.9% in January YOY, and the November through January three month average is up 26% from a year ago. Months supply in January is 2.9 around Lake Minnetonka, and that's up slightly from last year's 2.6 at this time. Days on market are down, inventory is tight, listings are up. I think a moderate gain is coming for our favorite aquatic destination.
Want to know what you could get for your home this Spring? Reach out and we'll talk!
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