Twin Cities Home Prices Rise

The Twin Cities real estate market continues to defy the traditional assumptions of supply and demand as year-on-year home prices rise while supply also increases.

worth_balanceOne reason for this is that so-called distressed properties, short sales and foreclosures, continue to disappear from a market they once dominated. These properties — where the mortgage balance due exceeds the home’s value — artificially depressed home prices. Now, it’s the resurgence of so-called traditional sales that is inflating prices.

St. Paul and Minneapolis Realtors’ associations reported recently that the local median sales price rose 7.2 percent, year-on-year, to $209,000 in October. Inventory rose 4.3 percent. The median was$205,000 in September.

The local trade associations also noted a decline in deal activity, with pending sales down 1.3 percent from last year. This also can result in higher inventory. New listings decreased 2.3 percent.

Traditional new listings rose 6.7 percent, while foreclosure and short-sale new listings were down 42.4 and 31.3 percent, respectively.

Months’ supply of inventory was up 10.8 percent to 4.1 months. Days on market is down 4 percent to 72 days.

Both associations counted the developments as a positive, citing greater inventory for buyers, with better prices for traditional home sellers, super low Minnesota mortgage rates, and plenty of loan programs for first time home buyers.

Percentage of First time home buyers drop

First- time home buyers aren’t buying homes like they used to.

rent-versus-buyThe share of houses bought by first-time owners is at its lowest level in nearly three decades and down sharply from 2013, according to a survey out Monday from the National Association of Realtors.

Just 33 percent of home purchases this year have been by first-time buyers, the trade group said, down from 38 percent last year and well below the long- term average of 40 percent, the trade group said.

According to NAR chief economist Lawrence Yun, would-be buyers are struggling with higher prices, tight lending procedures and a still unsteady job market. Their absence, however, is slowing the overall recovery. NAR predicts home sales will fall this year for the first time since 2010.

As a Loan Officer here in Minnesota, I cry foul… Yes, maybe the percentage of first time home buyers is down, but it appears the home buyer market reality doesn’t match the perception.  Home prices are incredibly affordable all across MN, WI, IA, ND, SD. Mortgage programs and lending may require a few more documents, but it is not really difficult at all (unless you have bad credit).

I heard again this morning on a national news program that you need 20% down payment.  Really?  Since when?  There are many first time home buyer programs in MN that can be combined with down payment assistance programs, so you only need a small amount for down payment.  FHA loans are only 3.5% down payment, and Fannie Mae just announced they are coming out with a 3% down program shortly.

I keep reading many articles about student loans keeping people from buying homes, yet I approve people all day long with student loans.vaflag2

Maybe there is a changing market, but the reality is that a home of your own is still the American Dream, and there is no reason for most people not to buy a home.