The Rochester housing market is on fire.
Home prices in the Rochester area increased by 9.7 percent in November compared with November 2016, according to CoreLogic’s November Home Price Index, released Tuesday. From October to November, prices actually decreased 0.3 percent.
That is compared with a 4.6 percent gain in the St. Cloud area, a 6.1 percent gain in the Twin Cities metro and a 7.6 percent gain in Duluth.
”We are seeing strong growth and demand overall,” said Shawn Buryska, an associate broker in the Coldwell Banker Burnet real estate office in Rochester.
He said the CoreLogic report is consistent with what he is seeing firsthand in the area, which is home to the Mayo Clinic and the Destination Medical Center (DMC) initiative, a public-private partnership that is expected to create upward of 35,000 to 45,000 new jobs and generate an estimated $5 billion or more in private investment over the next couple decades.
“The DMC initiative is generating more investment-property demand, which is pushing up prices dramatically in the starter-home price ranges,” said Buryska. The increases start to diminish a bit for more expensive homes.
Appreciation across Minnesota has generally been in line with national averages. Across the country, prices increased 7 percent from November 2016 to November 2017, and 1 percent from October to November. That was the fourth consecutive month of annual gains of more than 6 percent.
The CoreLogic report uses public records to track repeat sales of the same single-family property. That is in contrast to other reports that track all sales during a particular period.
During November, the median price of all sales that closed during the month in the Twin Cities metro was $245,000, a 6.5 percent annual increase, according the latest data from the Minneapolis Area Association of Realtors.
CoreLogic’s HPI Forecast says that home prices will increase by 4.2 percent on a year-over-year basis from November 2017 to November 2018, and on a month-over-month basis home prices are expected to decrease by 0.4 percent from November 2017 to December 2017.
“Rising home prices are good news for home sellers, but add to the challenges that home buyers face,” said Frank Nothaft, chief economist for CoreLogic. “Growing numbers of first-time buyers find limited for-sale inventory for lower-priced homes, leading to both higher rates of price growth for ‘starter’ homes and further erosion of affordability.”
Rochester was among a small group of areas that saw nearly double-digit gains. The states with the biggest gains were Washington, Nevada, Utah and Idaho, all of which posted 12-month price gains of 10 percent or more in November.
Of the country’s 100 largest metropolitan areas based on the number of housing units, 37 percent were considered overvalued based on local market fundamentals.
A market is considered overvalued when home prices are at least 10 percent higher than the long-term, sustainable level.
An undervalued housing market is one in which home prices are at least 10 percent below the sustainable level.
In a statement, Frank Martell, president and CEO of CoreLogic, said that without a significant surge in new building and affordable housing stock, the relatively high level of growth in home prices of recent years will continue in most markets.
“Although policymakers are increasingly looking for ways to address the lack of affordable housing,” he said, “Much more needs to be done soon to see a significant improvement over the medium term.”