3 Reasons Why Minnesota Home Prices are Rising
If you haven’t been in the market for a new home in the past few years, you may be surprised at how much Minnesota home prices have been rising. According to the Minnesota Area Association of Realtors, the median price of a home in the Twin Cities has jumped from $157,500 in July of 2011 to roughly $208,000 in July of 2013, an increase of roughly 32%. While there are always multiple reasons to explain changes in real estate prices, today’s rising Minnesota home prices can largely be attributed to three factors.
Inventory of Minnesota Homes for Sale
The inventory of available homes for sale in the Twin Cities metro area is down nearly 35%. In July of 2011 there were 24,342 homes for sale in the Minneapolis – St. Paul metro area. Compare that to July of this year and the number of homes for sale drops to 15,778.
Simple economics tells us that when the supply of a product goes down, the price goes up so as you can see, this is clearly one of the main contributing causes of rising Minneapolis home prices.
Minnesota Mortgage Rates are Rising
Mortgage rates have remained at historic lows for the past few years and so many Minnesota home buyers, because they felt that mortgages rates would stay low indefinitely, decided to sit on the sidelines and see just how low home prices would go before jumping in.
This was a tricky business for Minnesota home buyers as they were trying to time both the bottom of the mortgage rates and the bottom of home prices. The people who purchased their home roughly 12 months, in July of 2012 did a pretty good job of getting in on both low home prices and low interest rates.
In July of 2013, the average 30 year fixed mortgage rate was 3.55% and the median sale price of a home in the Twin Cities was around $178,000, almost 17% lower than it is today.
The average 30 year fixed mortgage rate in July of 2013 was 4.37% and rising so it’s no surprise the a lot of people waiting to buy real estate in Minnesota are now rushing in before mortgage rates and home prices go any higher. Rising mortgage rates are also wreaking havoc on housing markets all over the U.S.
Fewer Minnesota Foreclosures and Short Sales
Foreclosures and short sales tend to bring down the median price of MN home sales because they are sold at below market prices. This has an unfortunate effect on people in the Twin Cites who are trying to legitimately sell their homes because if a home buyer can find a distressed home seller with comparable home for sale, most home buyers will go with the less expensive home.
The number of Minnesota foreclosure listings has fallen 56% from July 2011 to July 2013. The number of Minnesota short sale listings has fallen by almost 70% over the same period. As you can see by the change in the median price mentioned in the first paragraph, drastic drops like this can play a big role in Minneapolis home prices.
So there you have it, 3 reasons why home prices are rising in the Minneapolis – St. Paul metro area. If you are thinking of buying a home in the Twin Cities sometime soon, I would recommend you speed up your time line because based on the data; there is a very good chance that both home prices and mortgage rates will continue to rise.
Click here to access the MN MLS and see the complete inventory of homes for sale in the Twin Cites metro area. Happy house hunting!