Home Prices Take Small Seasonal Dip in July

For the third year in a row, the median sale price for a Twin Cities home took a seasonal dip in July after peaking in June. That, and a pronounced lack of homes available in the sub-$200,000 range, were among the findings in the monthly housing-market analysis of the 13-county Twin Cities region conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business.

Each month the center tracks the median price for three types of sales: nondistressed or traditional; foreclosures; and short sales (when a home is sold for less than the outstanding mortgage balance). Here’s what the center found:

Key numbers for July

The median sale price of a traditional home in July 2015 was $231,000. That is down 1.91 percent from $235,500 in June 2015 but up 2.67 percent from $225,000 in July 2014.

“So far in 2015, the traditional median sale price has been running a relatively stable 2.5 percent to 3.5 percent increase over 2014 levels,” said Herb Tousley, director of real estate programs at the university. “We continue to expect a 4 percent to 6 percent overall median sale price increase for 2015. However, our outlook could change to the extent that interest rates increase this fall.”

In the two distressed categories: The median price for short sales dropped 10.2 percent, from $171,500 in June 2015 to $154,000 in July 2015; the median price for foreclosure sales increased 1.75 percent, from $137,591 in June 2015 to $140,00 in July 2015.

The distressed-type sales are comprising a progressively smaller portion of all sales as the housing market returns to pre-crash health. The short sales in July represented just 2 percent of all home sales in the Twin Cities and foreclosures were 5.4 percent.

Low inventory

The Twin Cities housing market saw 6,301 closed sales in July 2015. That’s down slightly from June 2015 but up 19.2 percent from July 2014. In addition, there were 5,736 pending sales at the end of July 2015; that’s up 12.5 percent over July 2014. The 16,998 homes on the market at the end of July 2015 remains historically low.

“Before the market crash of 2005 to 2007, there were many more new listings coming into the market than there were closed sales leaving the market,” Tousley said. “In 2015 the number of closed sales is rebounding to pre-crash levels, yet the number of new listings has not recovered.”

He said that for inventory levels to return to more normal levels, the number of new listings will need to increase to at least 10,000 per month in the peak selling months.

“Until that happens the low levels of homes available for sale will persist. In the meantime, the low number of homes for sale and the high volume of closed sales are being reflected in the higher number of multiple offers and sale prices at more than the original asking price.

“Good news for sellers; bad news for buyers looking for a deal,” he said.

Supply and demand of modest homes

The Shenehon Center examined the median sale price of the homes that actually sold in July (the demand) and compared that with the prices of homes that were for sale in July (the supply).

“We found that in July 40 percent of the homes that were sold were less than $200,000. Yet only 27 percent of the homes available for sale fell into that range,” Tousley said. “That means that in comparison, as a percentage, there were more buyers wanting to purchase a home under $200,000 than there were homes available for sale in that price range.”

For more expensive homes, those selling for $400,000 or more, there were many more homes available for prospective buyers to choose from.

“The conclusion is that there are more buyers chasing a relatively smaller percentage of low- to moderately priced homes available for sale and that is another reason why we are seeing a very active market for moderately priced homes in the Twin Cities market.”

The St. Thomas indexes

As part of its monthly analysis, the Shenehon Center creates a monthly composite index score by tracking nine data elements for those three types of sales (traditional, short sales and foreclosures). The data categories include things like the number of closed sales, how many days that homes are on the market, and what percent of the asking price sellers receive. The center started the index at January 2005 and for that month gave each of the three indexes a value of 1,000.

July’s composite score for traditional sales was 1,128, which is the highest since the index began in 2005.

“We expect increases in the index to moderate as summer moves into fall,” Tousley said. “However, the continued increase of the traditional-sale index is an indicator of expected ongoing improvement in the health and resurgence of the Twin Cities housing market.”

The short-sale index was up a few points, from 971 in June to 974 in July. The foreclosure index was up a couple, from 817 in June to 819 in July.

More information online

The Shenehon Center’s charts and report for July can be found here.

The index is available free via email from Tousley at hwtousley1@stthomas.edu.