Housing supply

In general, there is slightly less than a month’s supply of single-family homes in the Twin Cities. I can’t find a time when the supply was lower. The supply is the same as an absorption rate which we use to calculate how long it would take to sell all of the houses on the market assuming no more were added. In most parts of the metro area than the number would be less than a month.

We are entering the end of the peak home-selling season.  The number of houses on the market tends to go down in late summer early fall. Most of the home price gains for the year happen during the first and second quarters.

 

Forbes Ave
Houses on Forbes Ave – West 7th neighborhood

June home sales in St. Paul

June was a great month for home sellers in St. Paul. They sold quickly and often for more than the asking price.  The average days on market in St. Paul was just a shade over 14 days.

We are continuing to see multiple offers. We also saw the largest number of new listings to hit the market in a single month since May 2019. The market still strongly favors sellers as the demand is much higher than the supply. It is the high demand that is fueling higher prices.

The numbers used to make the table were extracted from the NorthstarMLS and are deemed reliable but not guaranteed. A very high percentage of all houses sold in June 2021 were listed on the MLS and are included in this data.

table shows average sale prices by neighborhood
June home sales St. Paul, MN

For more local, sometimes called “hyper-local” housing data please see Local market conditions and home prices.

Signs of a shift in the local housing market

I watch the numbers closely, daily even, and have noticed a slight shift in the local real estate market. For the first time in a long time, the number of homes on the market is increasing. It seems to be due to a decrease in pending listings. The number if new listings has been pretty flat.

That means the offers are not coming in as quickly as they were a few weeks ago and as a result, there are more houses on the market. Don’t get me wrong there is still a shortage of homes for sale and we are still in a strong seller’s market. I am also seeing more price reductions and cancelled listings.

Those cancelled listings in most cases will come right back on the market but cancelled listings tell me that there was some sort of an issue in selling the house.

It is possible that housing prices have reached the point where lower interest rates are not enough to make them affordable.

Early next week I’ll have the numbers for June 2021. Traditionally home sales are not as robust during the summer as they are in the spring so I may be seeing a slight seasonal shift.

I really don’t think we will see an end to the seller’s market until 2025 or 2026 and at that point, we will see a more balanced market. Climate change and pandemics could throw my predictions way off.

It is still a wonderful time to sell.

Record breaking real estate prices in Minnesota

According to the Minnesota Realtors Association, the May real estate market in Minnesota stayed strong with closed sales up +14.5% over last May, and pending sales increasing by +9.4% year over year. Demand continued to squeeze available inventory as new listings only inched above last May’s levels at +0.2%. The median price rose to $310,000, up +15.7% from 2020, an all-time high median sales price.

Days on market dropped by -37% to just 29 days, a historic low. Buyers are feeling the pressure and pursuing homes with multiple offers while houses come on and off the market very quickly.

Infographic with May home sales
May 2021 Home sales

Listing agents are looking good

I remember back when I started in real estate some 20 years ago. How quickly we could sell a house was an important part of marketing. If the last 20 years have taught me anything it is that there are many variables that affect how quickly it takes to sell a house.

There are numerous ways that a homeowner can slow down a sale. Sometimes they need to limit when the house can be seen or maybe they have an unrealistic price or maybe the house smells.

These days houses sell very quickly. In fact, I think our company average is less than a day if we include properties that sold while they were still “coming soon”.

Houses are not considered sold until the sale closes so when I say they sell in a day I mean that is how long it takes for the seller to get offers and accept an offer. The only thing that really slows the process is waiting for the owner to give an answer.

This leads me to question if agents should really be taking all of the credit for selling houses quickly.

The median days on market for May 2021 in Ramsey county was 6 and the average was almost 19 days. Those numbers typically include inspection periods.

Buyer’s agents don’t look as good. It is common these days for buyers to make offers on a few houses before an offer is accepted and sometimes the house gets sold before anyone is allowed to tour it. It doesn’t take long to get frustrated with the whole process and your agent too.

The housing market won’t be this way forever. The agent who sold houses in a few days this year probably needed six months to sell a house in 2009.

Higher prices leave buyers out

Over the years I have joked about not being able to afford to buy my own house.  In Minnesota, the household income needed to qualify for a median-priced new home is $85,700.  The median is around 300K and to be honest, in many communities around the metro area 300K is entry-level.

Back when we bought our house we could not have afforded a 300K house. At the time interest rates were more than triple what they are right now. Prices are starting to cancel out those low rates in affordability calculations.

Here is a look at Ramsey county median home sales prices. Granted 2011 was not a stellar year but median prices peaked just before the crash at around $220K in 2006 the county.  It should be noted that home prices may not have reached their high for the year.

Rasey county home prices
Home prices in Ramsey County