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.

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Hear from Realogy, Pacaso, SERHANT., Spotify, Redfin, Douglas Elliman, and 100+ more leaders at ICNY.Register now×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription