How the Housing Market Will Fare Under Either Presidential Candidate

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There has not been a lot of talk about the housing market in this year’s election. However, the choice of presidential candidate will affect the housing market directly. So how will the housing market fare under either major party candidate?

“In order to gauge which candidate would favor the U.S. housing market, one has to look at their wider economic policies and see how they would trickle down to housing,” writes CNBC, in “How housing would fare under Clinton, Trump” (November 2).

“What we’ve really gotten is more directional conversation: One party talking about affordable housing, the other party talking about deregulating a financial market that seems to have largely seized up,” said Rick Sharga, executive vice president of Ten-X, an online real estate marketplace for investors.”

Hillary Clinton

“Clinton does have the advantage of building on a framework already in place under the Obama administration,” writes CNBC.

“She has advisors like Jim Parrot and Gene Sperling who have already put out white papers looking at what to do about Fannie and Freddie, there’s already a perspective with what to do about the FHA program, so she is ready to hit the ground on Day One,” said [Jaret Seiberg, managing director at Cowen Group, a financial services company.]

Clinton has also put forth proposals to increase homeownership, which is now hovering near record lows. She has promised to provide down payment assistance to “underserved” communities.

“Specifically, the plan would match up to $10,000 in savings for households who earn less than area median income to put towards a down payment on a first home. On the plus side, that will encourage some households to save more. But we doubt it will be a game changer in terms of getting more people onto the housing ladder,” noted researchers at Capital Economics.

“The focus on down payments ignores the fact that it is the need for a high credit score which is preventing many Americans from buying. And even if the proposals do help more people to buy, the eventual outcome will be higher house prices, benefiting existing rather than potential homeowners.”

Donald Trump

“Republican Donald Trump, a real estate mogul who has invested largely in hotel and multifamily housing development, has said even less about housing than Democrat Hillary Clinton, but the GOP platform is clearer when it comes to the financing side of the business.

“We’re really seeing a lot more discussion about things like reforming or rejecting the Dodd-Frank [financial reform] bill. We’ve seen a lot of discussion about easing regulatory burden on the industry which was put on it by Dodd-Frank and by the CFPB [Consumer Financial Protection Bureau],” said Sharga. “The contention seems to be that some of the rules established in Dodd-Frank and the CFPB make it difficult for qualified borrowers to get a loan and make it difficult for lenders to justify making loans because of the regulatory and litigation risk.”

Given that Trump’s track record is all in multifamily housing, his thoughts on the single-family market, which comprises most of the nation’s housing, is the big unknown.

“But clearly his whole campaign is about growing the economy and smashing through regulations, so I think you could see real upside with Trump, provided the economy and the other parts of his agenda don’t derail it,” said Seiberg.”

*Note: The Grossman Group does not officially endorse either major party candidate. This is for informational purposes only.

Photo courtesy of 123rf.com

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The Spring Market has Kicked Off, with Twin Cities Housing Availability at a 10-year Low

scheffer blog photo
2077 Scheffer: Sold in 3 Days

The real estate spring market has kicked off with record short supply, according to a number of media outlets. “Presidents Day weekend is traditionally seen by real estate agents and homebuilders as the start of the spring housing market — the busiest time of year for home sales. The number of listings always rises, and it will this year as well, but inventory is already so low to begin with that even the new listings will not be nearly enough,” reports CNBC.

The national trend is true locally as well. On Tuesday, a report from the Saint Thomas Real Estate Program has demonstrated that the availability of Twin Cities housing has hit a 10 year low. Additionally, the metro median home price was $215, 000 at year end in 2015, 10.4 percent higher than January 2014.

Says Judy Shields, President of the Minneapolis Area Association of Realtors: “I think there is extra buying pressure right now. There’s a lot of people out there looking and not a lot available, so it just magnifies the problem.”

While promising news for sellers, this is not to discourage buyers. Preparation is the key to winning a dream home. Says Herb Tousley, Director of the University of St. Thomas Real Estate Program, “if you are looking for a home, be ready,” Tousley said. “Get your financing pre-approved. If you find something you like a lot in a good neighborhood be ready to act on it right away.”

Shields and Tousley cite, as reasons for high demand and low supply:

  • the concern of increased interest rates,
  • people looking to buy rather than rent, and
  • businesses recruiting out of state talent.

Mortgage Rates Approach Record Low

The average rate on a 30 year fixed mortgage is in freefall, reports CNBC, despite the recent minor hike in interest rates. They explain: “Mortgage rates are falling because investors are flooding the U.S. bond market. Mortgage rates follow the yield on bonds that loosely follow the 10-year Treasury. Investors are buying bonds as a safety play in a highly volatile and largely negative stock market. Signs of weakness in the U.S. economy, in addition to trouble in overseas markets, pushed the yield on the 10-year Treasury to its lowest level since 2012, and mortgage rates followed south.”

“…investors are looking for safe havens as global stock markets and oil prices nosedive,” writes Lorraine Woellert, contributor to Forbes. “Money is pouring into Treasury bonds and other safe investments, which helps drive down mortgage rates.”

Companies Flocking to the Heart of the Twin Cities

Companies, not just residents, are flocking to the urban hearts of the Twin Cities, reports the Minnesota Real Estate Journal.  Both residents and tenants are drawn to live-work-play areas, like the one expected to come to the Ford Plant site in Highland Park, Saint Paul.  “Tenants are focused today on downtown CBDs or suburban markets that have a lot of amenities. They are going after these live-work-play environments. There is a lot of that in downtown [Minneapolis/St. Paul], so companies are migrating toward that market. They want to attract the best employees, and to do that they need a presence in the downtown.”

In Cold Weather – A Hot Market

wordsworth sold image

The Grossman Group’s listing at 1836 Wordsworth Avenue in Highland Park has now been sold (sale pending) in under a week. As previously mentioned, we are seeing a lot of activity and interest in our listing on 2077 Scheffer Avenue, also in Highland Park, in this past week. Inventory is low, reducing the competition, and sales prices are high. The market, especially in our local area, is booming, despite the cold weather and snow. Like the groundhogs, we’re seeing signs of an early spring!

Here are some of the factors contributing to the hot market in Minneapolis, Saint Paul, and Highland Park.

Minnesota’s economy is booming, fueling relocation to the area and higher sales prices

Gallup’s annual job creation report has ranked Minnesota number one in the nation for job creation, and recently, CNBC ranked Minnesota best in the nation for business. (Kare11, January 31). Last August, Forbes ranked Minnesota the fastest growing state for technology jobs. Says Charlie Weaver, executive director of the Minnesota Business Partnership, “The business outlook in Minnesota for 2016 is pretty strong because we are blessed with several large corporations, a lot of different industries.” Currently, he reported, Minnesota has more jobs than employees, making Minnesota a hotbed for relocation.

Economists predict further growth in housing

Economists see more growth for US economy and housing in 2016, reports the Star Tribune (January 19). Says David Crowe, chief economist for the National Association of Home Builders, “There are a number of positive indicators out there that make me believe … this will be a good year for the economy and for housing. Not only is housing finally driving some of that, housing is finally moving at a much faster pace than the economy.”

With today’s announcement that unemployment has fallen below 5% with wages rising, (New York Times, February 5) we will continue to see gains in the housing market as buyers have more to spend and take advantage of historically low mortgage rates. Says Diane Swonk, an independent economist in Chicago, “We are likely to have to two rate hikes this year, probably in June and December, but the wage gains are important, so March can’t be ruled out.”

Twin Cities home sales activity has hit a 10 year high

Reports the Minneapolis/St. Paul Business Journal (January 20). The number of homes sold in the Twin Cities is up 13.7% from 2014, and the median sales price increased by 7%. “As sales hit a 10-year high,” said Judy Shields, President of the Minneapolis Area Association of Realtors, “Attractive rates, rising rents, job growth, wage increases and the lowest unemployment rate of any major metro area will continue to be positive factors for real estate.”

2015 ended with the highest existing home sales since 2006, reports Forbes and the Star Tribune (January 22). “Sales of previously-owned homes surged 14.7% in December in the largest monthly increase the National Association of Realtors has ever recorded, the trade group said Friday.

Thanks to the robust finish, 2015 ended with 5.26 million existing-home sales, the highest figure since 2006, when annual sales were 6.48 million… Existing-home sales prices have now increased on a year-over-year basis for 46 consecutive months.”

 

The Real Estate market is peaking

Reports the Minneapolis/St. Paul Business Journal (February 5), according to a panel of experts at a forum hosted by the business journal. “The Twin Cities real estate market is peaking from an investment and expansion standpoint in almost every sector.”

In Pictures

Accolades for Twin Cities high schools, small cities

Real Estate Week in Review
Newsweek released its top 500 high schools in the nation, and 10 Minnesota schools have made the list (“10 Minnesota High Schools Make Newsweek’s Top 500,” WCCO, Aug 19). Based on their rankings and criteria, Edina High School is the top school in Minnesota and #71 nationally. Other cities include Orono (#101) with 100% graduation rate and 95% of those students attending college, Wayzata at 150 and Eagan at 197, and Minnetonka (292), Stillwater (326), Mound-Westonka (400), St. Anthony Village (403), Lakeville North (417) and Prior Lake (463).

Money Magazine also released its list, of Best Small Cities to live, with Chanhassen coming in at #7 (“Minnesota cities rank high on Money magazine’s best small places to live” Minneapolis-Saint Paul Business Journal, Aug 19). Other cities on the list include Rosemount and Edina (at #12 and #15).

US rental costs continue to rise, reports the Associated Press (“US home rents surge 4.2 percent from a year ago; apartment demand shows shift from ownership,” Fox Business, Aug 26).  Minneapolis was named as one city in which rents are rising, along with home affordability, creating an ideal time for renters to consider purchasing.

New Listings
New Listings

In the Twin Cities region, new listings are up from one year ago, while pending sales continue to trend above this time last year. Both are up this past week, while overall inventory is down, indicating a great time to list your home.

Pending Sales
Pending Sales

Existing Home Sales at Highest Level Since 2007: Real Estate Week in Review

Residential News

WIR piggy bankExisting home sales have risen 3.2 percent in June, to the highest level since 2007, reports The Minneapolis/St. Paul Business Journal. The median sale price of existing homes also hit an all time high, making now a great time to list your home (“Existing home sales at highest level since 2007; prices hit all-time high,” July 22). The rate is nearly 10 percent higher than it was a year ago, reports the National Association of Realtors.

“Buyers have come back in force, leading to the strongest past two months in sales since early 2007,” says Lawrence Yun, Chief economist for the National Association of Realtors. “This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.”

“The demand for buying has really heated up this summer, leading to multiple bidders and homes selling at or above asking price,” said NAR President Chris Polychron.

The median sale price of new homes is $281,800 – lower than the median price in June 2014.
Renters in the Minneapolis/St. Paul metro area are still facing stiff competition, reports the Star Tribune (“Competition for Twin Cities rentals is still tight,” July 27). “Since 2013 more than 10,000 apartments have been built in the Twin Cities metro, but competition for rentals is still tight. The average vacancy rate for market rate apartments in the region was 2.5 percent at the end of the second quarter – almost exactly as it was last year.”

In Other News

WIR SoccerSaint Paul Mayor Chris Coleman has invited members of Major League Soccer to tour the 34.5 acre site at University-Snelling, reports the Highland Villager. The Midway site is the former location of Metro Transit’s bus barn and adjacent properties. Representatives from Minnesota United FC are also expected to attend.

Along with its development near US Bank Stadium, Radisson Red will be opening its second Twin Cities area hotel in Downtown St. Paul (“New Radisson Concept to Open in St Paul,” Minneapolis/St. Paul Business Journal, July 27). The site is next to the Xcel Energy Center, and the hotel will feature a bar and deli. Says St. Paul City Council member Dave Thune, “We are … crying out for more hotels. You look at the market around the Twin Cities and we are sadly behind the curve. That’s the kind of thing we need to attract business, corporations, trade shows” (“Radisson RED planned for site across from Xcel Energy Center,” Pioneer Press, July 27).

Photos courtesy of 123rf.com

Twin Cities Home Prices Within 6.3% of Record High

Real Estate Week in Review

Average long term US mortgage rates are back down after hitting their highest levels this year (Average US rate on 30-year mortgage eases to 4 percent; 15-year rate at 3.23 percent, Star Tribune Your Money, June 18). On Wednesday, the Federal Reserve appeared ready to raise interest rates for the first time in nearly a decade, due in part to Tuesday’s government report that home construction rates remain significantly higher than a year ago. Many hold “the belief that the economy no longer needs the stimulus of near-zero rates.” Nonetheless, the housing market has been “bolstered [by] the economic improvement and stronger employment picture,” and remains strong for both buyers and sellers.

An analysis of the Twin Cities home prices provided by MAAR reports that home prices are within 6.3% of their record high seen in June 2006 (Twin Cities Home Price Analysis, Minneapolis Area Association of REALTORS, June 18).  Prices have a long term trend of increasing 5% yearly (nominal, not adjusted for inflation). “This market is not fueled by irrational, unjustified speculation and exuberance—a leading cause of bubble-itus,” MAAR reports, “rather, it is fueled by low interest rates, rising rents, job growth, a diverse and robust local economy and slowly rising incomes.”

6.23 price graph

In area developments, the Timberwolves and Minneapolis have signed a redevelopment agreement for the $129 million renovation of the Target Center (Timberwolves, Minneapolis sign Target Center redevelopment pact, Minneapolis / St. Paul Business Journal, June 19). Detailed design work will begin, with the bulk of the project expected to start in 2016 and wrap in 2017, said the Timberwolves and the Minnesota Lynx in a statement on Thursday. The Target Center is said to be the 6th busiest building in the nation and the 17th busiest in the world, hosting 200 events and a million visitors annually.