Housing Market Remains Sluggish,
Prices & Affordability Up
September housing activity finished the 3rd quarter with some sluggish yet promising numbers. Most housing statistics remain level with either small increases or modest growth being more likely than losses. This is a typical model for most market recoveries where prices move slightly up or down until the recovery is fully underway. it is also a promising sign for an industry which has weathered almost 4 years of declining activity.
"Although we're not moving up in all markets, we are seeing an increasing number of communities maintaining values or moving up slightly," said Russ Portele, President of the Minnesota Association of REALTORS®. "After a string of consecutive property losses, residential values have been stabilizing and showing positive movement as we approach 2011."
Affordability is the most positive indicator for the upcoming 2011 residential marketplace. Historically low interest rates, moderated home values and improving wages make home ownership a very affordable option.
"Minnesota homes have not been this affordable since the Housing Affordability Index (HAI) was created in 1971," said Portele. "Low interest rates and stabilizing home prices have given qualified buyers more opportunities to own real estate than at any time during the past 50 years."
HAI measures the amount of household income necessary to qualify for a median priced home. In most Minnesota markets, households have more than twice the annual income required to purchase a median priced home. Median priced home means the mid-point with as many homes selling above as below that price point.
Economists consider an HAI of 120 - meaning a household has 120% of the income necessary to qualify for a median priced home - an affordable housing market. In Minnesota's largest housing markets, the HAI is above 200, meaning that household income is twice as high as it needs to be to qualify for a median priced home.
"Home prices are once again in line with household incomes. Historically low interest rates are making housing opportunities very affordable for many who thought home ownership was not possible," said Portele. "For those interested in buying a home for their family, we now appear to be at the bottom of this housing cycle and future increases to the interest rate will make housing opportunities much more difficult in the future."
From the Minneapolis Association of Realtors