SUMMER 2018
SUMMER 2018
PRICES WILL CONTINUE TO RISE THROUGH 2018 KEY TERM
AFFORDABILITY INDEX While home prices continue to rise at a steady clip, buyers’ ability to afford those higher prices is quickly eroding. The Housing Affordability Index dropped to a nearly 10 year low in May.
KEY GRAPH
MEDIAN HOME VALUE $260K
$240K
$220K
$200K
$180K
$160K
$140K 1-2008
1-2009
1-2010
1-2011
1-2012
1-2013
1-2014
1-2015
1-2016
1-2017
1-2018
KEY NUMBERS
WHAT WE’RE WATCHING
+8.2%
19
Median sales prices are up YOY 8.2% in the 16 county metro area to $265,000.
That’s the average number of showings until a home is sold.
52 DAYS
1.6%
Homes are selling in a record average of 52 days, down 13.3% YTD.
Foreclosures are virtually gone, only making up 1.6% of the market.
-15.8%
+13.1%
The inventory of available homes for sale is down 15.8% YOY.
Homes priced between $500,000 and 1,000,000 have had a 13.3% increase in sales YOY
SUMMER 2018
IN DEPTH
AFFORDABILITY INDEX The Housing Affordability Index measures a median income household’s ability to afford a median priced home. This is examined on both national and regional levels based on the most recent price and income data. An index value of 100 means that a median income household has exactly enough capacity to afford a median priced home. In May, the Twin Cities Housing Affordability Index dropped to 144. Therefore, the financial capacity to purchase was slightly less than 1.5X what was necessary. Without any context, that number might sound great. To put that in perspective though, in 2012, at the peak of housing affordability, the Twin Cities Housing Affordability Index was at 280 (nearly double what it is now), meaning that same buyer would have had nearly 3X the necessary income to purchase the same home. We expect affordability to continue to decline until the market reaches a balance point with respect to housing inventory vs. active buyers. We believe this will happen within 1-2 years which is healthy for the market and not an indication of a “bubble.” For the remainder of the year we expect to see a continuation of recent years trend of a downward seasonal price adjustment through the Summer. After a very competitive Spring, Summer will provide some much needed breathing room for buyers to act in a slightly less aggressive market. The Fall should be competitive again (not quite as crazy as the Spring) followed by the Winter slowdown. Best Months to be a Seller in 2018: September & October Best Months to be a Buyer in 2018: August & November
All info is provided by the North Star MLS.
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