Market Update - May 2013

The real estate market continues to perform strongly as we make our way further into 2013.  After several very tough years, the market has dramatically turned around - to the delight of sellers, and to the frustration of buyers. 

Compared to a year ago (May 2012), the numbers for May 2013 are somewhat shocking.  The main statistic most people look at, median sales price, increased nearly 15%.  The median sales price in the Twin Cities area is now up to $194,000. 

Connected to the increase in median sales price is the dramatic drop in inventory we have seen.  Compared to a year ago, months supply of inventory (tracks the flow of houses coming on the market versus houses sold) has dropped approximately 31%, to 3.4 months of inventory.  To translate, if no new listings came on the market, we would burn through all the current houses for sale in 3.4 months.  Historically, this number is roughly 5-6 months. 

Finally, another statistic that is easily understood - Percentage of Listing Price Received.  Compared to a year ago, this number has risen 2.5%, and now sits at 97%.  To demonstrate, homes listed at $200,000 should expect to get, on average, $194,000 for their home.

Brooklyn Park Abandons Point-of-Sale Inpection Program

As you probably know, there are several cities in the Twin Cities that require city inspections when homes are sold.  The names (Point of Sale, Truth in Housing, Truth in Sale of Housing, etc..) and details differ from city to city, but the underlying idea is the same - cities want some way to assure that their housing stock stays in decent shape, and so they require sellers to have the home inspected prior to closing on the sale.

My thoughts on this have always been that more and more cities would adopt similar programs.  There are already quite a few cities that require Time of Sale inspections (Crystal, Golden Valley, Minneapolis, St. Paul, Richfield, Bloomington, etc..), but my expectation was that this would continue to grow.

However, at least in the very short-term, my assumption has been wrong.  Just last week the City of Brooklyn Park voted to repeal their Time of Sale program.  As of June 3, sellers are no longer required to have their homes inspected.

For buyers and sellers in Brooklyn Park, this is probably welcome news.  Although their are certainly benefits to such a program, many buyers and sellers look at them as invasive, time-consuming, and a waste of money - particularly by sellers, who are responsible for making any repairs required as a result of the inspection.

Ultimately, it will be quite interesting to see which city makes the next move on this front.  Will a new city adopt such a program, or will we see Time of Sale inspections continue to get the axe?  Stay tuned to find out!

Mortgage Rates Start to Climb

Screenshot from Zillow, showing jump in mortgage rates over the past 7 days

Well, we all knew the day was coming.  For several years now, mortgage rates have been at all-time historic lows.  Fueled by the Federal Reserve's decision to keep the overnight fund rate at or near zero, buyers have had access to extremely cheap mortgage funds.  However, it appears as those the days of record-low rates is rapidly coming to an end.  Or, at the very least, shifting upwards towards where rates normally are.

Although the recent jump in rates is some reason for concern in a market still working to find it's footing, there is little reason to believe they will climb significantly higher.  The Federal Reserve has already pledged to artificially keep rates low into the near future.  However, only time will tell where the market goes from here.