MINNEAPOLIS (WCCO) — Of all the things for sale in the Twin Cities, nothing might be more in demand than a home. And that’s made for a stressful market for buyers.
Supply for starter homes is low and that trend is showing no signs of stopping.
“A balanced market in the Twin Cities is about four to four-and-a-half months of supply, meaning if we stopped selling homes today it would take 4-and-a-half months to sell off inventory. This morning we were at 2.4 months,” said Kevin Knudsen, Branch VP of Coldwell Banker Burnet Edina.
He said there’s currently about 11,000 houses in the Twin Cities market, a little more than half of what a healthy market should have. But low inventory isn’t the only hurdle for those looking to put down roots.
“Right now we have historically low interest rates– rates below four percent with down payments below five percent– so a lot of people qualify. And until we have higher interest rates and more new construction, I think we’re gonna be in this for quite a while,” he said.
Tipping the scales in favor of the buyer starts with increasing supply, which can happen if new homes are built or people decide to sell. But Herb Tousley, Director of the Real Estate Program and the University St. Thomas, said homeowners aren’t so eager to move out.
“You run into the problem is like, ‘Okay, I put my house on the sale, I get a really good price for it but now what do I do? Now I’m a buyer, you know, going into that market.’ And so some people just are staying put because of that,” Tousley said.
In the late 2000s, the housing crisis made home values plummet, some to the point of foreclosure. Tousley said buyers shouldn’t hope nor expect that to happen again. “I think we may see a gradual shift over the winter months,” he said.
Historically, as the calendar turns to fall and winter the volume of sales goes down, giving buyers a small amount of relief. Tousley said prices will increase, but only slightly.
According to the Minneapolis Area Realtors, 7,192 homes were sold in June 2018. It went down to 5,184 in September 2018. But a drop in sales doesn’t necessarily mean a drop in demand.
“In the last couple years it’s really maintained a pretty even keel throughout the summer market because those people that couldn’t buy in the spring, they’re still there in the fall,” Knudsen said. “The last two years we’ve actually seen really the market just kind of continue into the year end.”
So if buyers are hoping for a shift in the near future, don’t hold your breath.
“Next spring we’re gonna be looking at the same thing as this spring,” said Tousley. “It’s not as bad here as it is in other cities if that’s any consolation.”
Rather than wait and hope for a shift in the market, experts say buyers should instead be persistent and continue to make offers.