We’ve talked a lot about seasonal patterns in these pages recently and the latest numbers from the Twin Cities real estate market really hammers some of these ideas home. This month our look into the Minneapolis/St. Paul area focuses on two things: inventory and prices.
Typically, we just look at the past twelve months to get a sense of how the Twin Cities real estate market behaves. There were a few interesting things when we pulled the data this month so we’re going to go back a bit further for some of our analysis as well.
Twin Cities Real Estate Inventory
It’s always helpful to look at the months of inventory in a market to get a sense for how hot real estate is. Are we talking about a buyer’s market or a seller’s market?
Even with the caveat that February is only half over, the jump in inventory is a bit eye popping. There’s still plenty of time for this number to regress to normal. But this got us thinking, what exactly is normal?
So, we expanded our search just a bit and looked at all of 2017. You’ll notice the chart above starts in March 2017. But what about January and February? Well, when we went back and looked, the data told us that the months of inventory was between 4 and 5 for both months in 2017. You can see that that number dropped significantly in March 2017 and stayed low. The highest it’s been since then is last month.
This suggests that this isn’t the time to panic if you’re looking to sell your home. Clearly, the heart of winter isn’t an optimal time to house hunting in the Twin Cities, at least compared to the rest of the year.
The number of active listings confirms this hypothesis. The decline in listings isn’t too drastic, but there’s definitely a shift in November. Then, in December, listings decrease quite significantly and stay low through the winter months.
Part of the reason for this, as the chart above shows, is that homes are sitting on the market longer. Again, notice the major drop in cumulative days on market (CDOM) from March to April last year. The area doesn’t top 50 days again until November.
Minneapolis/St. Paul Real Estate Prices
So, given what we know about inventory and the length of the sales process in the Twin Cities area during the winter, how are prices affected?
With fewer homes on the market, and fewer people looking to buy, the total number of sales decreased, although not as sharply as the listing side.
The above chart is fascinating because it seems counter-intuitive. We know that the number of listings and sales decreased in the winter months, but all of a sudden in January the average listing price jumped from $307,000 to $345,000, approximately.
Remember, list price doesn’t mean that’s what seller’s got for their homes. There’s a difference between asking price and market value, which we’ve covered previously. Is this an attempt by sellers in the slow season to artificially increase the value of their homes? That’d be the case if it worked.
However, as the latest data shows, average sale price actually decreased from December 2017 to January 2018 from $285,000 to $243,000. The average median sale price dropped $5,000 in that same period, from $235,000 to $230,000.
All these numbers suggest that sellers that can afford to wait a few more weeks to get their homes listed may be able to fetch a higher net sale price.
If you have any questions about these data or would like a free consultation regarding your home sale, feel free to contact us. We’re here to help.