By Nick Leyendecker, Co-Founder | Broker | REALTOR®
The Twin Cities housing market continues to follow the prototypical winter consolidation cycle by all measurable data points which points to a set up for another year of significant housing price inflation during 2022.
The Median Home Price: The median home price in the Twin Cities fell marginally (.2%) in November as we continue the normal cycle of winter contraction. Home prices will likely continue to fall through December and January, as demand continues to soften through the slowest months of the year with a likely turn around for prices in February.
Note: This doesn't mean that all home prices fell in November. There are some Twin Cities segments where prices are actually continuing to rise marginally through the winter contraction because inventory has fallen faster than demand.
Home Inventory: Home inventory fell 22% in November to about 6,200 units which is typical of the winter market contraction. If that trend continues as we expect it to through December and January, we will likely be setting a new all-time-low for housing inventory in the Twin Cities. 5,372 units would be a new record low but we are forecasting to be below 5,000 units for the first time which, if accurate, would be especially bullish for home prices in 2022.
Pending Home Sales: Pending sales fell 18% in November to about 4,700 units which is almost identical year over year and which falls in line with a typical winter contraction cycle. We expect demand to continue to fall over December and January before it turns around in February.
Mortgage Rates: Mortgage rates are flat month over month at 3.12% for the average 30-year fixed conventional mortgage in the U.S. which is up about 17% from the record low rates of last December.
Lumber Prices: Commodity price inflation seems to have cooled off for the time being with an exception of lumber prices which exploded to the upside in November, up 45% month over month and up 3X from their 2020 lows. I do not know enough about the lumber market to forecast future lumber prices but I want to report what happens with lumber as rising construction costs have an impact on future existing home prices.
Home Builder Confidence: The NAHB housing market index in the US edged up 1 point to 84 in December of 2021, the highest since February and beating market forecasts of 83 with builders citing strong demand met with scarce inventory as their primary reason for optimism.
This concludes my Twin Cities housing market insight for December of 2021. Please don't hesitate to call us at 952-222-SOLD if you would like to go more in depth on a particular market segment or dive into the current fair market value of a property that you currently own or manage.