Relief is on its way for home buyers in the Twin Cities and beyond who are frustrated by a lack of house listings and lightning-fast sales, according to a survey of housing experts.
But they will have to wait until at least 2020. That’s when experts see key indicators in the housing market tilting toward buyers.
“Conditions are starting to show signs of easing up, but the effects of years of limited construction still linger,” said Zillow senior economist Aaron Terrazas, cautioning that any shift will be modest. “Inventory is still falling on an annual basis, and home values are growing well above their historic pace.”
In Zillow’s quarterly Home Price Expectations Survey, 76 percent of the respondents expect that it won’t be until at least 2020 when home sellers across the country will begin ceding negotiating power to buyers.
While those same economists said that the Midwest is likely to become a buyers’ market a year earlier, Terrazas sees the Twin Cities as an outlier that’s likely to follow the more moderate national trend. He points to a slowdown in annual house-price appreciation as the primary evidence.
In July, for example, house values in the Twin Cities were 6.9 percent higher than a year ago, according to Zillow’s home-value estimates. That compares with July 2017, when house values had appreciated 7.4 percent.
“Home-value appreciation hasn’t gotten as crazy as some of the hot spots, and that suggests that growth is more sustainable and that’s it’s less of a boom/bust cycle,” he said. “It is a bellwether in some respects for the national numbers.”
In fact, the housing market in the Twin Cities has always been moderate in just about every respect. The S&P CoreLogic Case-Shiller index shows that home values in the Twin Cities metro are increasing nearly in step with the national average. In June, the S&P CoreLogic Case-Shiller index increased 6.2 percent in the metro compared with a 6.4 percent national increase.
Pat Paulson, a sales agent with EXIT Realty Metro and past president of the Minneapolis Area Association of Realtors, said that while rising house prices will eventually limit the number of buyers who can afford them, he expects rising prices to draw more sellers into the market, increasing options for buyers.
“There is a good chance we start to see more price resistance from buyers and more enthusiasm from sellers at around that time,” said Paulson, who expects the median price of all sales to top $300,000 by 2020.
The quarterly Zillow survey, which was conducted by Pulsenomics, asked more than 100 real estate economists and experts for their predictions about the U.S. housing market. Those economists noted that home-value growth is slowing in more than half of the nation’s 35 largest metro areas, and price cuts are becoming more common. But even in markets where appreciation has slowed, it remains above its historic average and sellers continue to have the upper hand, particularly at the most affordable price points.
Terrazas expects home values across the country to continue to show strong appreciation through the remainder of the year with an annual price increase of 5.9 percent.