Housing market conditions in the Twin Cities, Minn., metro area remain positive, and home-price appreciation is expected to continue at a healthy rate, according to the four Twin Cities Realtor associations.

A bubble in local housing prices is highly improbable, the associations reported, although the rate of price growth could slow if local job market conditions unexpectedly weaken.

The healthy gains in median sales price of existing homes over the last five years can be correlated to mortgage rates hitting 45-year lows and the 23,400 payroll jobs added in the last year, the associations reported. These factors will continue to drive strong demand for home ownership in the future. Most credible forecasts predict the Twin Cities region will create at least 40,000 jobs over next the 24 months and mortgage rates will hover around 7 percent by the end of 2006. The supply of homes available for sale has climbed to a healthy level, partially due to the addition of 95,000 new single-family homes over the past five years.

These market fundamentals mean there are both strong demand from buyers and an ample supply of homes on the market in the Twin Cities region. “A five- to six-month supply of homes available on the market typifies a balanced market between home buyers and sellers. Over the last 18 months, our supply has grown 25 percent to just over a 4.5-month supply of homes available for purchase,” said Gregg Roeglin, president of the Minneapolis Area Association of Realtors.

Recently, much ‘bubble’ buzz has been present in the media. “Prices fluctuate, but the value of real estate is the measure of a collection of factors, including job and population growth and the forecast for both is healthy,” said Jim Reiter, president of the Saint Paul Area Association of Realtors.

Although home prices have risen faster than income in recent years, a more relevant measure is the mortgage servicing cost relative to income, which has been well within historic norms. “This implies no widespread buyer financial overstretching to purchase a home in the Twin Cities,” said Pam Westlund, president of the North Metro Realtors Association.

Locally, the housing supply is catching up with demand, which means the housing market will remain sustainable and healthy, the associations reported.

“The housing forecast is for mortgage interest rates to rise slowly over the next year, which will have a minor breaking effect on home sales,” said Colleen Ratzlaff LaBeau, president of the Southern Twin Cities Association of Realtors. “The good news is that will help inventory levels to recover and allow the market to come into a close balance between buyers and sellers.”

The four Twin Cities-area Realtor associations are compromised of 19,000 members representing all aspects of the real estate industry. Statistics include single-family detached, condominiums, townhouses and twin homes, based on existing homes sales reported by the Regional Multiple Listing Service of Minnesota Inc.


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