Local area stats for those of you who like diving into the
market….
https://www.mplsrealtor.com/market-data/
Plus some answers to frequently asked questions from David Arbit, Director of Research Minneapolis Area REALTORS
Why is this market so hot??
The short answer is that we have a significant gap between supply and demand. Buyers are eager to purchase homes but seller activity has been weak. Many sellers are concerned that they won’t have anywhere to go once their home sells quickly. Motivated by historically low mortgage rates and a desire for more space for tele-work and tele-learning, home buyers were highly determined in 2020 and so far in 2021.
Boomers are living longer and aging in their homes, owners are remodeling and also staying put for longer, millennials are entering their prime home buying years and starting families. The savings rate also increased as we stayed at home and went out less. Plus, there’s a renewed sense of what home means as our homes suddenly became our school, our workplace, our gym, entertainment venue, restaurant and so on.
All this has forced buyers into competitive, multiple-offer scenarios where prices can be bid up above asking price. Despite rising prices, buyers have more purchasing power due to mortgage rates. Today’s buyers need to be patient, but also ready to accept some heartache before finding “the one.”
Why are there so few homes for sale on the market?
Driven by several factors, the housing market has been undersupplied for some time. New development ground to a halt after the supply-driven bubble and the Great Recession and we never made up for it. More recently, sellers were concerned about listing their homes in 2020 due to health concerns and decided to either pull their listing or hesitated to list at all. More sellers have chosen to refinance at these low rates to lower their payment instead of competing in a challenging market. Renters and other first-time buyers put even more pressure on an already undersupplied market, since when they buy they take a listing out of the dwindling inventory without putting another listing on the market.
Hampered by a shortage of lots, labor, lumber, lending and bound by a complex array of laws, builders simply cannot keep up with the demand. Others looking for a healthy return on their capital are also using single family rentals as a lucrative investment vehicle.
When a household does decide to move, some are choosing to rent out their old home instead of selling it outright.