Supply & Demand Highlights
Many people look for new market trends as the season changes, so now is a perfect time to take an in-depth look at our local market for the Twin Cities. Supply has continued to decrease month-over-month leading to an increase in home prices far above typical rates of 3%. The current median sales price for a home in the Twin Cities is $315,000. To increase our supply of homes, new homes must be either listed or constructed, however, a dramatic increase of 160% in lumber costs has seriously affected the rate of inventory replacement in the affordable range. This hike in prices has increased building costs to roughly $16,000 per home.
As far as demand goes, we have experienced an increased number of showings as buyer demand remained strong, outpacing the rate of new listings. Extremely low interest rates have influenced the demand of consumers to “right-size”. The market is expected to stay strong through more of the fall, leading many people to wonder if this fall will be the new spring market.
Daily showings have decreased, however, it is common to see a drop in showings around Labor Day. Most families are on vacation or taking time off from work, so we generally see a drop in showings during this time of the year. Although there has been a drop, daily showings are still higher than this time last year in 2019. Last year, activity continued to drop through the end of the year, bottoming out at just over 1,000 showings in the metro area in late December.
If we look at showing activity by price range, we can see that the middle market and luxury buyer demands have remained strong week-over-week. There are consistent gains in the showings of homes that are $250,000 and up. Luxury homes have increased gains as well and have actually remained far stronger than previous years. Roughly 60% of showing activity is in homes that are between $200,000-$500,000. We can see a big decrease in buyer activity in homes $199K and below.
The Twin Cities metro area is down 19.7% as a whole for new listings. Almost all segments of the market had a substantial pullback due to the holiday weekend, however, the middle market has had the greatest increase in new listings that is now starting to match buyer demand. New listings decreased substantially over the weekend due to the holiday, which is normal. New listings have remained above previous years and follow a similar trend. With that, we can expect new listings to pick up for the next week and then drop off slowly towards the end of the year as we get into colder weather.
Pending sales demonstrate the quantity of buyers that commit to a purchase. For the entire region, this is up 31.4% compared to last year, which is significant. We believe that pending sales have remained steadily higher than in previous years due to the late market start because of COVID-19. According to annual trends, pending sales will eventually trend downwards, but as of right now show no indication of decreasing.
Pending sales have increased most dramatically in the middle and luxury markets. The highest increase is between the $500K-$750K range. Affordable homes have suffered from lower buyer demand, which has resulted in the greatest pullback in pending sale activity.
The market has continued on the trend of low housing inventory and high buyer demand. In the past week, pending sales have increased by 31.4% in the local market due to increased buyer demand. Along with an increase in demand, we also see the driving up of the median home price. The average number of days a listed home is on the market has decreased to about 15 days. This combined with a decrease in the month’s supply of homes leads to our current intensely competitive market.