Twin Cities Housing Market: March - 2020
The median home price in the Twin Cities exploded to the upside with a 4% gain in February. That is the largest percentage gain for home prices in the month of February since February of 2010 and that signaled a strong and early start to the spring market.
Then the COVID-19 crisis hit.
The Minnesota economy has a significant number of large companies in sectors that were deemed “essential” (medical, medical device, health insurance, pharmaceutical, food, construction, logistics, etc.) along with layers of businesses that directly or indirectly support those sectors, so when you actually break it down, only about 20% of Minnesota's economy is completely shut down by the current “Stay at Home MN” order.
Unlike in other states, real estate transactions in Minnesota are deemed "essential" by Governor Tim Walz under the current order so the housing market will remain open during the two week "shelter in place" period starting Friday, March 27th and ending Friday, April 10th (a timeline that is subject to change) but under a limited scope. Open houses have been cancelled and discontinued. Buyers are being encouraged to fully vet a property by conducting a drive by and through utilization of online resources before requesting a showing, in order to minimize unnecessary social interaction. Buyers who are in the "exploratory phase" of the home buying process are being asked to postpone exploration until after the "shelter in place" phase of the order is lifted.
So far, the high end luxury market (homes above $1 million) has been the Twin Cities' residential market segment most significantly impacted by the COVID-19 crisis with the largest decline in pending sales of any other segment. The brackets for homes priced at $400K and below have held up the best, so far. Pending sales under $400K have leveled off during the crisis but with historically low inventory, prices in those brackets have continued to rise.
We have set up a page on our site where we have uploaded and will continue to upload resources that will help you more specifically track and understand the effects that the COVID-19 crisis is having and will continue to have on the Twin Cities housing market as the situation evolves.
Mortgage Rates: The initial reaction from COVID-19 was a sell-off in risk assets causing mortgage rates to temporarily fall to an all-time low of 3.29% for the average 30-year fixed mortgage. However, the announcement of the $2 trillion stimulus package and the realization that the market is about to be flooded with a massive amount of new long term debt caused a sell off and mortgage rates are now back up to 3.65% as I record this which is where they were as March began.
Home Builder Confidence: The NAHB housing market index in the US fell to 72 in March of 2020 from 74 in the previous month and below market forecasts of 73. It is important to note that half of the builder responses were collected prior to March 4, so the recent stock market declines (including significant declines in builder stock prices) are not fully reflected in this reading. As such, we expect next month's reading to decline significantly.
Closed Sales: We had 3,038 residential closings take place during February. That is up 5%, month over month and up 7% year over year.
The Median Home Price: As previously mentioned, the Twin Cities’ median home price moved up 4% in February to $281,500. That is also up 6% year over year.
New Listings: New listings increased in February as 5,328 homes and condos hit the Twin Cities’ market. That is up 22% month over month and up 21% year over year.
Homes for Sale: The home inventory level in the Twin Cities remained flat in February at just above 8,000 units which is down 10% year over year.
Pending Sales: Pending sales volume moved up 28% in February to 4,277 contracts. That is up 24% year over year.
That concludes my housing market insight for the month of March. Please don’t hesitate to connect with me if you would like to discuss the market conditions in your specific community or market segment and I thank you for taking the time to read this information.
By Nick Leyendecker, Founder | Broker | REALTOR®