|
Based on several measures, residential real estate just had its
<br />best year since 2005. Buyer activity reached levels not seen
<br />since 2005; seller activity reached its highest level since 2010.
<br />The median sales price rose for a fourth consecutive year to
<br />the highest figure since 2007. Days on market fell for a fourth
<br />straight year and reached a 10 -year low. Sellers accepted
<br />offers that were close to their list price—and in some
<br />instances, above.
<br />Interest rates were a story throughout the year, as every
<br />syllable from Chairwoman Yellen was scrutinized for clues.
<br />After a few head fakes, the Fed finally raised the Federal Funds
<br />rate target in December and more incremental increases are
<br />likely in 2016. That move may dishearten some, but any
<br />outrage should be muted for a multitude of reasons.
<br />First, raising rates too quickly can threaten the recovery, so
<br />expect a gradual and incremental normalization process.
<br />Second, leaving interest rates this low for this long comes with
<br />its own set of risks. Third, the Fed now has some wiggle room
<br />to move rates down if conditions change—an ace in the hole in
<br />the face of global challenges. Fourth, most forecasts call for 30 -
<br />year mortgage rates to touch 4.5 or 4.6 percent in 2016—still
<br />roughly half their long-term average of over 8.0 percent. That
<br />means it will be a historically attractive time to finance a home
<br />for years to come. Fifth, other factors aside from monetary
<br />policy affect the 30 -year rate, which is partly why mortgage
<br />rates fell in the weeks following the Fed announcement.
<br />ales: Despite several looming rate hikes—only one of which
<br />materialized at year-end—buyers were out in force taking
<br />advantage of low rates, pushing sales levels to 10 -year record
<br />highs. Closed sales increased 13.7 percent to 56,390 for the
<br />year. And more of those tended to be traditional, previously -
<br />owned, single family homes than in past years.
<br />Listings: Sellers struggled to keep up with all those buyers
<br />They listed 77,380 properties on the market, 5.1 percent more
<br />than 2014, but only a 5 -year high. There were 10,166 active
<br />listings at the end of 2015, down 21.8 percent from 2014. But
<br />most buyers don't "experience" inventory in December. April
<br />2015 inventory levels increased 3.8 percent compared to April
<br />2014. Inventory should rise in 2016, but that depends on
<br />confident builders and motivated sellers.
<br />Distressed Properties: Foreclosures and short sales made
<br />up a smaller share of activity. Low supply and high demand are
<br />typically credited for price gains, but a product mix shifting
<br />from lower-priced foreclosures and back toward higher -priced
<br />traditional homes is also helping prices recover. In the metro
<br />area, the percentage of activity that was either foreclosure or
<br />short sale fell to 10.6 percent of sales but only 8.8 percent of
<br />new listings.
<br />U 7
<br />MINNEAPOII-15 AREA Association
<br />ofREALTORS'
<br />Prices: Home prices rose across the board in 2015. The metro
<br />wide median sales price was up 7.0 percent to $220,000, an 8 -
<br />year high and just 4.5 percent below its peak. Home prices
<br />should continue to rise in 2016 but perhaps at a tempered pace
<br />as the market approaches equilibrium. Price gains should
<br />better reflect historical norms moving forward. Single family
<br />home prices were up 5.6 percent compared to last year, and
<br />Townhouse -Condo home prices were up 3.8 percent.
<br />List PriceReceived: Sellers accepted offers at an average of
<br />96.6 percent of their original list price, a year -over -year
<br />increase of 0.9 percent. That reflects a mix of market recovery,
<br />robust demand and significant supply constraints. This figure
<br />should continue to rise in 2016.
<br />It's easy to love housing data, but housing doesn't live in a
<br />vacuum. It's affected by a wide array of economic, political and
<br />social forces. For instance, at 2.7 percent, the Twin Cities has
<br />the lowest unemployment rate of any major metro in the U.S.,
<br />and Minnesota has more Fortune 500 companies per capita
<br />than all but one other state. Thus, our local and state economic
<br />landscapes have been conducive to a strong labor market,
<br />improving family finances and widespread housing recovery.
<br />Other developments from 2015 are also worth reflection, as is
<br />the year that lies ahead. Some of those topics are as familiar as
<br />sales, inventory, prices, and market times. Other subjects may
<br />be indirectly related to housing but just as important to
<br />sustained recovery. That includes a presidential election, the
<br />cost of energy, student loan debt, housing starts, savings rates,
<br />the Canadian and Chinese economies, geo-politics overseas,
<br />climate change and understanding the housing preferences of
<br />Millennials and Boomers.
<br />The stage is set for ongoing improvement in 2016. Here's to
<br />another successful year!
<br />Quick Facts
<br />Property Type Review
<br />Distressed Homes Review
<br />New Construction Review
<br />Area Overviews
<br />17 Area Historical Prices
<br />26 Historical Review
<br />0 IW I, W, I I. ?W(I , A r,,, V/iI I ,(, 1 ), , io IOP l
<br />
|