Hot Twin Cities home market leads to another price record
Neal Gendler
Star Tribune
Friday, July 13, 2001
June home prices were as hot as the weather. The Twin Cities median climbed to a record of $173,545, a 12 percent increase over last June..
Last month's median -- the point with half of sales above, half below -- was up from $155,000 in June 2000. For the first six months of the year, the median was
$165,380, up 12 percent from $147,430 for the first half of last year.
"It is really simple supply and demand," said Budd Batterson, president of the Minneapolis Area Association of Realtors, which released the data from the Regional
Multiple Listing Service Thursday. The numbers are for single-family homes in the 13-county metropolitan area.
The median price rose 12 percent last year, which Batterson attributed to "a finite amount of housing at the entry and the first move-up level" in an area that
continues to grow. "Even though there are more listings this year, we've seen this strong demand for seven years." He said people want to get in on the appreciation, they
want to own and to build equity, and they expect prices to be even higher the next year.
"The bottom end of the market continues to rise, and there's been more activity in the $200,000-300,000 range, the move-up houses; those have become more
expensive. The $280,000 house last year now is a $315,000 house."
The closed-sale prices show the effect of the spring market, when buyers considerably outnumbered sellers and price-raising multiple bids were common. Home sales
typically close 45 to 60 days after the signing of purchase agreements, and by midsummer, listings typically increase, bringing the buyer-seller ratio more into balance.
In June, 6,693 new listings were processed, a 14 percent increase from 5,865 in June 2000. At the end of June, 17,095 listings were on the market, up 21 percent from
June 2000. For the first six months, 35,326 new listings were processed, up 14 percent from the 2000 period.
"We have seen a buildup of inventory," Batterson said. Last month's growth outpaced a 10 percent increase in closed sales -- 4,557 compared with 4,142 in June 2000
-- which could portend slower price growth and longer market times.
A hint of a slowdown surfaced in purchases not yet closed last month: 4,364, up 6 percent from a year earlier.
"Appreciation happens in the spring," he said. "I'm not saying houses won't tend to appreciate, but appreciation is more like a stock than an escalator: It will rise and
move, but it doesn't necessarily rise evenly over time." It is not unusual for Twin Cities-area closed-sale median prices to peak in midsummer, then fall back a little by
year's end, as the market slows.
Batterson said the increase in listings appears to be coming from two trends. One is "people seeing what kind of price their home might bring in today's market." The
other is that "for the last few years, many people have been 'equity starved' because of second-mortgage borrowing and refinancing out equity to pay for cars, boats,
trips and consolidating debt. They did not have the equity to make the next move up. Now, gangbuster appreciation has created equity for them."
-- Neal Gendler is at ngendler@startribune.com .
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