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By: Brady Erickson | Realtor

Market perception and misconceptions.

It should be no surprise that many of my conversations are real estate conversations. One of the most redeeming qualities of these frequent conversations is hearing what perceptions of the market are floating around in the minds of many. My goal in this article is to shatter some misconceptions and clear the way for a reliable 2020 market forecast.

The market can be understood by what it is not.

Yesterday, I found myself in a conversation with a lady who has lived in Minneapolis for many years. As it came out that I am a realtor, she transitioned into telling me about her perception of the current market. It was fascinating to see how her logical sequence came together based on her experience, both current, and past. Here’s a quick look at her reasoning:

• What has happened before will happen again (market crash).

• Tons of homes are selling. 

Therefore:

• Sellers aren’t going to get top dollar for long, and buying could be a fool’s errand because of the currently inflated prices.

In short, she concluded that because the housing market has shifted before, and because there are plenty of houses for sale in her neighborhood, there must be some sort of market crisis forthcoming. But is this true? We must persist to see the forest for the trees.

Cut to the chase already.

The conclusion that a market crisis or even a downturn is imminent is quite unfounded. Her logical sequence was valid (technical term) but lacked soundness (also a technical term). This means her chain of reasoning made sense (valid), but it’s only sound if all the premises are true, which is not the case in this example. Let’s take a look at the misinformation:

• Market downturn? A book could be written on the nuances of the relationship between downturns, but suffice it to say, past results are not predictors of future success or failure. Take the DOW’s best performers on a given year and compare it to their next year, that or watch the Twins next season…

• Tons of homes are selling? Very few homes are actually for sale. In fact, we are still hovering around record low inventory. There are roughly 11,000 homes for sale in the greater metro; that may sound like plenty of homes, but it pales in comparison to pre-crisis averages above 20,000.

By looking at the hard data and not settling for quick assumptions, we can start to paint a clearer picture for the coming year. Again, past results are not necessarily future predictors, but these charts show us what conditions were and are in place and how they correspond to the 2020 market forecast picture.

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What it tells us: There has indeed been a slight uptick in homes for sale, however, that uptick does not alleviate the demand for housing, making a seller’s market a reality for yet another year.

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What it tells us: Similar to the “Homes for Sale” chart, this chart indicates that there would be no homes left on the market after 2.3 months if no new homes were listed. More confidence for a seller.

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What it tells us: Days on market can be overblown, but the recent increase in DOM is far less than historic norms. Homes are moving fast and will continue to move fast, especially as spring approaches.

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What it tells us: The median sales price is heading in the right direction for sellers. I expect softer appreciation than in recent years, but appreciation nonetheless.

In Summary.

It is fair to assume another year of growth in the Twin Cities housing market. By pairing the housing data above with other economic data, we find no serious kinks in the system. Mpls/St. Paul presents enough upside to inject confidence in any buyer or seller. Notice I said both buyer and seller. But why the buyer you might ask? Simply put, this appreciation projection is not limited to the next year alone, and home bought this year will retain value for the foreseeable future. So here’s to an action-packed 2020!