Housing market stats for 2012 are still rolling in and I have a few more that are specific to the Twin Cities area from Herb Tousley of the University of St. Thomas.  In 2012, the average price of a sold home in the Twin Cities went up about 10%. In the height of the housing crisis there were about 20,000 homes on the market in the Twin Cities, but at the end of 2012, there ware only about 14,000.  The other positive number is that of distressed properties which made up some 55-60% of homes sold on the market in the height of the housing crisis and now make up about 40%.  While this number is still high, it is significantly lower than it was and is continuing on its downward trend.  The signs are all pointing to a good year in real estate in 2013.

According to the Wall Street Journal there are 5 reasons why home prices are rising.  It is not just here in the Twin Cities that we have seen a turn around in the housing market, but rather across the United States.  What are the main causes of this turn around in the housing market?

• Good housing affordability – because home prices have fallen so low and mortgage rates are also at record lows a house payment is much more affordable to people. The average monthly house payment in the US last month was $720 – at the end of 2005 it was $1270.
• Increase in household formation – it is estimated that the US will add about 1 million new households this year – the average over the past 5 years is about 570,000. Add this to the pent up demand that is coming back to the market and we are looking at close to 1.2 million new households this year looking for homes.
• Rents are increasing – rental properties are hard to find and rents are increasing rapidly so it makes sense to buy a home if you can swing the down payment and qualify for a mortgage.
• The number of distressed properties is on the decline – distressed properties drove down the price of homes in traditional sale situations, so with these properties on the decline, traditional sellers can ask for more money for their homes.
• Very low home inventory – new home inventory is at a low point equal to about 50 years ago, existing homes are at a 10 year low point.  With the decrease in inventory and increase in buying pool, sellers are finding themselves in multiple offer situations which drive up prices.

Twin Cities home price gains have beaten the national average!  According to Corelogic, US home prices are at a 6 year high, rising 5 percent from last year but in the Twin Cities prices were up 6.6%!  From August to September home prices in the Twin Cities were up .9% compared to a .3% decline nationwide. The numbers include traditional and distressed home sales.

One of the main reasons suggested for this is that the Twin Cities has an unemployment level that is below the national average.  The housing market is still not considered a healthy market as sales levels are below that of a healthy housing market and there are still many distressed properties on the market but we are working in that direction.  Buyers are faced with a very limited housing inventory and many are having problems qualifying for mortgages because of the higher required down payments.