Minnesota Facing Housing Inventory Shortages, But Help Could Come Soon

Jennifer Gagne

By Jennifer Gagne

Like a lot of major metro areas across the United States, the Twin Cities–and the rest of Minnesota – is facing a huge amount of demand from would-be buyers. However, sellers haven’t really risen to the challenge. Fortunately, builders might soon be able to ease that constricted inventory issue. To that end, Minnesota’s real estate professionals may be able to do a little more to help buyers and sellers alike in today’s market.

The low inventory and slow rate at which new sellers are putting their homes on the market, have been prevalent across the Land of 10,000 Lakes for some time now, and that was certainly the case in July, according to the latest data from the Minneapolis Area Association of REALTORS. Indeed, the number of new listings in and around the Twin Cities slipped 3.9 percent from the same month last year, to approximately 7,200.

Meanwhile, there was an even sharper decline in the total number of homes for sale, which fell 18.3 percent to a bit more than 12,400. Unfortunately for would-be buyers, this marked the single largest year-over-year decline for any single month since the first quarter, and as a result both pending and closed sales took a bit of a step back.

With all this in mind, it should come as no surprise that most homes are likely to have multiple bidders when they go up for sale.

A Closer Look

But even as buyers continue to face headwinds when it comes to getting into the market itself, at least as far as actually finding a home goes, the good news is sellers might soon be enticed to get a little more active. The median home price in Minnesota was up 5.9 percent from July 2016, marking the 65th straight month of increases, and sellers are now getting their homes off the market even more quickly, averaging just 44 days on the market (down 18.5 percent over the same period).

That highlights both the incredible demand any would-be seller is likely to encounter, and the fact that buyers are likely to be able to get deals closed relatively quickly.

Encouraging for Current Owners?

Moreover, because of how significant the demand for just about any home is getting among Minnesota residents, experts believe there’s no real end in sight for further price increases, according to data compiled by Zillow. From June 2016 to the same month this year, home prices jumped 8.4 percent across the whole state, rising to a median of $209,500, and for homes actually up for sale, the median price is nearly $250,000. Only about one in six listings saw any sort of listing price reductions during this period.

This market is currently considered relatively healthy, and is expected to stay that way for some time to come. By June 2018, the median home price is projected to have grown even more; while the rate of that increase will fall to 3.2 percent year-over-year, that will still bump the median home value in the state to nearly $220,000. Here, too, list prices should continue to edge higher.

Price Growth Moderation?

The rate of price growth over the past few years outstrips most historical norms, and experts say inventory issues are the reason why. But now homebuilders across Minnesota are working to put up houses as quickly as they can, according to the Minneapolis Star Tribune. The Builders Association of the Twin Cities recently revealed there had been relatively robust growth – albeit up only slightly in comparison with July 2016 – in homebuilding activity across the region.

In all, permits for more than 1,100 new units were issued in July, but 60 percent of those were for multifamily housing. Single-family construction is still in the doldrums, but builders seem focused on easing demand any way they can.

Why A Home Warranty Could Help

With such a hot market, sellers may be reluctant to include a home warranty, but agents should always encourage selling clients to do so. The level of protection these products provide is significant, because they protect both buyers and sellers (even with a quick close) in the event something goes wrong with a home’s systems or appliances, which can be quite expensive to replace or repair.

The kind of financial certainty a home warranty provides can end up being crucial to ensuring everyone involved is satisfied, potentially long after a sale has been completed.

Contact Jennifer Gagne to learn more about how HMS can help save your clients’ money. Call her at (612) 267-7340 or email her at jgagne@hmsnational.com. Gagne, a seasoned REALTOR, joined HMS Home Warranty in March 2011. A reason for her success as a REALTOR was the inclusion of a home warranty in over 90 percent of her transactions. She enjoys educating brokers and agents on how an HMS Home Warranty increases client satisfaction and builds repeat and referral business.